By Tony D’Altorio
As most people know, the 2009 winter was troublesome for the U.S. automobile industry.
A perfect storm of high fuel prices, the global financial mess and the disappearance of consumer confidence struck it dead during that year. In response, vehicle sales plunged to a three-decade low.
For a while there, it didn’t even look like the Big Three would survive. Fortunately for Ford (NYSE: F), it had raised $23.5 billion beforehand. So it had enough cash to avoid tapping into the government’s emergency loans or a temporary takeover. Still, the company worried that its competition might fold, taking the teetering supply base down and Ford along with it.
Yet CEO Alan Mulally guided it through the icy conditions to safety. Now, two years later, Ford has repositioned itself as one of the industry’s most respected – and feared – competitors…
Ford’s Latest Sales Figures
After 13 straight years of market-share losses, Ford actually gained a full percentage point both in 2009 and 2010.
It recorded a 2006 loss of $12.7 billion, but last year, it earned $6.6 billion after taxes. That was its biggest profit since 1999… and that momentum has continued into 2011.
Last month, Ford overtook General Motors (NYSE: GM) as North America’s top-selling automaker.
- It recorded a 19% gain in U.S. sales, compared with GM’s 9.6% advance.
- Ford also pulled ahead of its competitor last February, the first time since 1998.
- And the company placed first in Canada last month, rounding out its best January through March quarter in eight years.
Meanwhile, rising fuel prices are steering North American consumers toward smaller, more fuel-efficient cars. Such a shift has helped the company, which is well positioned in that segment.
Admittedly, it still has a much larger chunk of truck sales. But George Pipas, Ford’s Sales Analyst, estimated that small cars made up 25% of the total retail market last month, up from 19% in December.
The company also benefited from GM’s sharp drop in discounts and other incentives. According to Edmunds.com, GM trimmed its incentives by an average of $700 per vehicle in March on top of recent aggressive price-cutting.
General Motors’ heavy reliance on incentives contributes to its recent financial woes and will continue to do so in the future. Tactics like that boost short-term demand, but also depress trade-in values and harm brand image. They also discourage the closing down of factories to remove excess capacity.
Ford’s Different Road
GM continues traveling the road to failure, as it has done so before, but not so much for Ford.
Mulally told his colleagues back in 2006 that, “You’ve been going out of business for 60 years – you just didn’t realize it.” And he’s been making changes to the company ever since.
- Seventeen plants were closed and 54,500 jobs – or 43% of the workforce at the time – cut.
- Mulally also began focusing on the Ford brand, which made up 85% of company sales.
- Mercury, the company’s slowest-selling U.S. brand, was shut down.
- Volvo was sold to China’s Geely Auto ADR (OTC: GELYY.PK).
- Jaguar Land Rover was sold to India’s Tata Motors Ltd. (NYSE: TTM).
Finally, Mulally organized Ford’s engineers and designers to work together on globally similar cars. Previously, different country’s plants operated separately, often doubling costs.
But when the new Fiesta launched in 2008, it was essentially the same car wherever it sold. And it was all designed and engineered in Germany.
Ford has since pursued this method with its new Focus. No matter where it’s sold, the vehicle will have 80% of its parts in common with other Focuses around the globe.
So it’s no wonder that Ford’s stock price has shot from a low of $2 in 2009 to over $15, or that morale remains high at the company across the board – with blue-collar staff expecting an average $5,000 bonus this year.
More than likely, the auto industry will hit another downturn eventually. But Ford and Mulally look set to weather whatever may come their way.
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