How Mulally Got Ford Back in The Black
Reporters and editors are already calling Ford's third quarter earnings surprising. And yes, it is surprising when analysts are expecting a company to lose 12 cents a share, and it earns 26 cents/share. But make no mistake; the blue oval has been going from red (losing money) to black (making money) for some time.
So how did Ford CEO Alan Mulally do it?
It's been well documented how he pushed Ford to get rid of the non-core brands like Jaguar and how he was fortunate to leverage almost all of Ford's assets before the credit markets closed up.
While those, and other steps, have been critical in helping Ford, what doesn't get as much attention are other moves by Mulally that are finally paying off.
New models, new models, new models.
While other auto companies pulled back their product plans when the global economy started sliding, Ford kept the pedal to the medal. The result? Ford had the freshest line-up in showrooms during the clunkers rush and will have the product in place as the market recovers.
Dropping production to meeting lower demand.
Mulally and his lieutenants correctly surmised the base demand in the U.S. would be around 10 million vehicles, so they cut plants and shifts to hit that level. Instead of falling into the trap of incremental production cuts during a downturn, Ford was aggressive in establishing a lower base and then making cost cuts to ensure profitability at that level.
Upgrading the content in Ford models.
Remember when Mulally took over as CEO and he told reporters he drove a Lexus before getting the call from Ford? Who could blame him? The content in Ford cars was marginal. Mulally quickly identified the value of having better interiors and functionality in Ford models. Since then, Ford models have hit a point where they are increasingly competitive with Asian models and are well ahead most other American models.
After Ford reported earnings this morning, Mulally told me, "We still have work to do." He's right. Ford may be back in the black, but to stay there it will need to take the next step on the balance sheet and in the showroom.
Program Alert: CEO Alan Mulally will be on CNBC with Phil Lebeau at 12:10 ET today
Click on Ticker to Track Corporate News:
- Ford Motor
- Toyota Motor
- Honda Motor
Questions? Comments? BehindTheWheel@cnbc.com