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Ford's Turnaround Picks up Steam

Thursday, 24 Apr 2008 | 10:45 AM ET
Alan Mulally
AP
Alan Mulally

This is getting to be a habit for Ford Motor Chief Executive Alan Mulally.

Once again, his company has posted better-than-expected quarterly earnings. This time, the company turned a $100 million profit when Wall Street was forecasting a loss of roughly $300 million. While total revenue in the company's auto business dropped compared to last year, Ford's North American business showed substantial improvement.

Ford's North American operations are not yet back in the black, but it won't be long until they are. In fact, the folks in Dearborn are starting to see the light at the end of the tunnel -- which is projected to be next year, when Mulally has targeted the company to be profitable again.

All of this brings up a question: Why is Mulally's turnaround plan working where past efforts have failed?

A major part of the improvement comes from Ford cutting its costs by laying off and buying out thousands of workers. But even more important is Mulally finally getting Ford to streamline operations. That's lead to better operating performance and a more focused company. And something tells me he's not done.

I wouldn't be surprised to see Mulally push Ford to sell its Volvo line. He says that's not being considered, but people inside the company and who work with Ford say Mulally is not married to the idea of keeping Volvo.

There's also the question of what to do with Mercury. It's been drifting for years. Knowing how Mulally is a fan of the "Toyota business model," which calls for fewer but stronger brands, Mercury seems ripe to be shut down.

The question now: When will investors start to buy into Ford's rebound? There remains a sizable number of people shorting or betting against the company. And given the weak economy and outlook for auto sales, you can't blame them. But at some point, Mulally's record of posting better-than-expected earnings has to filter through into investor confidence.

Questions? Comments? BehindTheWheel@cnbc.com

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  • Phil LeBeau is a CNBC auto and airline industry reporter based in the Chicago bureau and editor of the Behind the Wheel section on CNBC.com.

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