(FORTUNE Magazine) – ALONE AMONG U.S. automakers, Ford Motor Co. is prospering in the face of international competition. Under CEO Donald Petersen, it has revved up car and truck sales 73% in five years, to an estimated $84 billion in 1989. But the engine that powered this performance is starting to wheeze. Ford has shortchanged capital spending, coasted on old technology, and fallen behind schedule in new-model development. When vice chairman Harold Poling replaces Petersen on March 1 next year, he will have to accelerate to stay in the fast lane -- just when industry sales are slipping. Whatever else the quiet, affable Petersen can count among his accomplishments, an orderly succession is not among them. Not until the October 11 board meeting did Petersen first tell noncompany directors that he wanted to leave 18 months before his 65th birthday to, in his quaint phrase, ''repot himself.'' But he did not designate a replacement, leaving the board members ''uncomfortable,'' according to an intimate. The job remained unfilled until October 30, when Petersen persuaded Poling, 64, to postpone his own retirement. By board agreement, Poling will serve only three years. Finance executive Allan Gilmour, 55, who was widely thought to be next in line, will spend the interregnum gaining hands-on experience by running worldwide automotive operations. His chance should come in 1993. Ford's CEOs have particular difficulty arranging their own successions. During the 34-year reign of King Henry II, heirs presumptive were dispatched like so many victims of the Queen of Hearts. By recycling Poling, the company reinforced the suspicion that its ranks of top managers are thin. Half a dozen have left for Chrysler since Lee Iacocca moved over in 1978. Members of the Ford family, who have not all been Petersen fans (FORTUNE, January 16), were mostly kept in the dark. Petersen, along with Gilmour, briefed the family on company plans in September but stayed mum about his own intentions. William Clay Ford, 64, who retired from the company this year but remains on the board and votes the family's 40% stock holdings, found out only when Petersen announced his decision to other noncompany board members. According to director Clifton Wharton Jr., head of the Teachers Insurance & Annuity Association-College Retirement Equities Fund, ''The young Fords ((Edsel II, 40, and William Clay Jr., 32, both directors and mid-level company executives)) were not involved.'' When Petersen retires in March 1990, he will have been Ford's most successful boss since the original Henry in his prime. During his decade-long tenure, first as president and then as CEO, Ford's U.S. market share rose from 17% to 22% and the company bested General Motors in profits two years running. Petersen emphasized teamwork and long-term strategic thinking. By directing development of the jellybean-shaped, front-wheel-drive Taurus, he ignited Ford's recovery. He says Ford's 1989 model quality -- measured by defects that customers notice -- is 66% better than in 1980. He adds that its breakeven point -- the number of cars it needs to sell to make a profit -- has dropped 25%. But the good times at Ford are ending. Earnings fell 44% in the third quarter, when expensive sales-priming rebates produced red ink in U.S. automotive operations for the first time since the end of 1982. Petersen says profits will return in the fourth quarter, but the entire industry is hunkering down. Sales during the first six weeks of the 1990 model year are running some 11% below last year's mediocre level. Ford has its own disappointments. The Taurus and compact Tempo are slipping, and costs are headed back up -- driven by heavy rebates. The company's breakeven point is climbing from 4.2 million vehicles in 1987 to an estimated 5.2 million in 1990. POLING'S biggest challenge will be to restore discipline to product development. At least four new-model programs, costing billions of dollars, are running over budget and behind schedule. ''Yes, we've overrun some of our cost projections,'' Poling told FORTUNE recently. ''I look forward to meeting our projections in the future.'' Says an insider: ''Poling's tough. He really gets mad when something goes wrong.'' The taciturn Poling is renowned for making managers hit their marks. Says he: ''We set objectives, and we ought to meet 'em.'' Known throughout the company as ''Red,'' he made his mark by restructuring Ford's troubled North American operations in the early 1980s. When sales turned up, he resisted the temptation to add capacity and kept such a tight lid on production that hot- selling models were often in short supply. Ford has been stingy in spending on new production equipment and models, and now it is playing catch-up. It budgeted $6.2 billion for 1989 and $6 billion in 1990, vs. only $3.6 billion in 1987. But outlays are growing just when profit margins are shrinking. Analyst Jean-Claude Gruet of UBS Securities in New York estimates that Ford's variable production cost per car will rise from $7,320 in 1987 to $8,829 in 1990, while the profit is expected to decline from $3,178 to $3,009. Once popular brands are aging and need more than a facelift. The Mustang is essentially unchanged since 1978, an eon considering that Japanese competitors bring out new models every four years. The full-size Crown Victoria and Mercury Grand Marquis, which also date from the late 1970s, use body-and-frame construction that is virtually extinct in the industry. All three cars are due for restyling, but totally new versions are a long way off. Under the hood, Ford also lacks spark. General Motors is ramping up production of its two-year-old four-valve engine known as the Quad Four. Customers will have to wait several years for Ford's multivalve answer. Enfeebled Chrysler got to market first with a smooth electronically controlled four-speed transmission called Ultradrive.

Ford has scrimped on some new models by farming out development. That saves money but deprives the automaker of important engineering know-how. Instead of designing a front-wheel-drive minivan for 1992 to compete head-on with Chrysler, Ford handed the job to Nissan. The engine, transmission, and platform for the subcompact 1991 Escort were designed by Mazda, Ford's Japanese partner. The Escort will arrive overweight and over budget, according to analyst Ronald Glantz of Montgomery Securities. Since Mazda uses smaller presses than Ford, the Escort has more stamped parts in its body panels, necessitating more weight-adding welds. Even under its penny-wise management, Ford's once formidable cash hoard of $11 billion will dwindle to $3 billion by next year. Ford paid $2.5 billion for Jaguar, the antique English manufacturer of lush sedans, and may have to spend $1 billion more to get it tuned up. Jaguar is probably the least efficient car manufacturer in the Western world, but Ford thinks it is worth the investment. Says Petersen: ''By combining Jaguar's heritage and technical skills with our resources, we think it can grow substantially in the luxury market.'' FORD'S SIGNAL FAILING has been its inability to get new models out faster. For ten years it has been struggling to yoke design centers in England, West Germany, and Dearborn, Michigan, into a harness that will develop new models for sale worldwide. As Petersen concedes, ''It has been slogging hard work.'' An intricate satellite communications system now allows technical committees to hold simultaneous meetings in three countries. But the fruits of the project, known as Centers of Responsibility, have yet to ripen. A replacement for the Ford Tempo for sale in both Europe and the U.S. won't be ready until 1994. The successor to the Taurus and its European stablemate, the Scorpio, won't be on the market until 1995 -- fully ten years after the first Taurus was sold. Centers of Responsibility has the hallmarks of a Don Petersen project: the creative use of teamwork and long-term strategic thinking. A sales home run would make it worth the wait. But if Ford manages only a single or a double, it will have fallen behind in the late innings. Petersen will not be around to see the results. He is going off, as he vaguely puts it, to ''involve myself in some way in issues facing our country, perhaps in education.'' It is up to Red Poling, and then his successor, to pick up the baton so abruptly dropped and bring the Petersen era at Ford to its proper conclusion.

CHART: NOT AVAILABLE CREDIT: NO CREDIT INVESTOR'S SNAPSHOT FORD MOTOR