Every week, Forbes magazine editors review a business-related book. The title of this week's entry is "How Ford Bounced Back", and reviews Bryce G. Hoffman's work on how Alan Mulally-- who joined the Ford (F) team in 2006-- has turned the company around in recent years.
Hoffman is a Detroit News reporter, and the company granted him unique access to offer perspectives as to how Mulally has brought back the first titan of American automobiles. The book details Mulally's moves to drop Ford lines like Volvo and Mercury and instead invest in creating one, global Ford name and brand. Mulally has succeeded and the recent Ford headlines have proved that he's not done yet.
Ford will continue its foray into new innovative and progressive techniques to keep that global name alive and in good company. One instance is Ford's new announcement that it will be teaming up with Dow Chemical's (DOW) automotive group in order to cut the weight of its cars significantly by the end of the decade. The measure is being made to reduce energy used, and thus, increase fuel standards. With gas prices on the rise, it's good to see Ford moving toward alternative ideas.
But most importantly, Ford is stepping outside the knowledge box of its own engineers and partnering with a company that knows its way around energy reduction and the manufacturing strategies needed to obtain this ideal. The partnership will only help to improve its line of cars. It will also help Ford comply with the Obama Administration's standards for new fuel economy, and allows it to maintain the look and feel of familiar Ford automobiles, if it so chooses.
But the innovation does not stop there. Ford has decided to invest in a strong social media marketing campaign to put behind its 2012 Ford Focus Electric. I have to applaud the company for its efforts. After all, if you're going to market a 21st century car, why not do it in a 21st century manner? The campaign includes a Facebook game and builds upon its other social media network, Fiesta Movement.
The Ford Focus Electric was rated as one of the most fuel-efficient cars on the market, and Ford seemingly wants to associate that with a new generation of buyers. The difference is slight, but I believe it will be effective. In the past, television and radio marketing was a strong method for getting the Ford name into the minds of youngsters, but today that simply may not cut it. Ford is investing in its future with its turn toward social media devices dominated by a younger generation. Not to mention, these methods are a whole lot cheaper than traditional marketing, which used to dry up as much as 15% of cost just in production.
The new investments are encouraging for Ford, but even more encouraging may be its March sales figures-- the strongest numbers in the last five years. The Ford Fusion posted its best month ever, helping to drive total sale numbers up 9% from last March. I don't need to tell you that the strong sales figures are encouraging for Ford, but I will remind that you the company is not sitting back and cashing in its income. It continues to invest in Mulally's idea of a global brand.
Ford expects the rise in sales to continue, however, it expects to surrender a small piece of its market share. Currently, Ford has about a 16% share of the market and competitor General Motors (GM) has nearly 20%. Ford's limited production capabilities in 2012 will hurt it in relation to competitors like General Motors, but it will continue to profit, which has not always been in the case in recent years. Looking to take a piece of that lost market share will be Toyota (TM), whose line of fuel-efficient cars will help with sales as gasoline prices stay high.
Perhaps the biggest worry for the American car companies is the resurgence of Volkswagen (OTCPK:VLKAF), which posted record high numbers for sales in the United States last quarter up 41%. The German automobile giant is banking on both its line of fuel-efficient cars and its luxury car line, the combination may make it a titanic force to deal with on the international sales stage. Volkswagen has long since dominated other arenas, but its recent success in the United States has to raise flags for Ford, General Motors and Toyota. Volkswagen has also been the most successful of these brands to sell in China, another large red flag, and all of this comes at a time when the European economy, at large, is struggling.
In addition to the fierce competition, Ford has made some fumbles in recent years. Its investment in China is certainly encouraging, but one has to ask if it's coming too late and if it can compete with the established names like Volkswagen. The company's newly branded cars, Focus and Fiesta, have not sold as well as the company hoped. It has yet to make that one giant, post-collapse move that can reestablish the company as a world leader of automobiles. Until that time, the company can grow, and it will, but any outstanding point of profit will have to wait.
But, bounce back it has. After all, this is the same company that lost $14.6 billion in 2008 and has worked to bring the American automobile industry back on track. I like Ford moving forward, if only because its strategies will keep it in the headlines for years to come. As long as that press is good press, car buyers will listen. The Ford name will carry it far, a man named Mulally will carry it even farther, and new strategies for growth will keep it competitive among the other giants in the industry.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.