Behind the Wheel with Phil Lebeau

Ford Flexes its Muscle with Better than Expected Earnings

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Overshadowed by all the hoopla surrounding Ford posting much better than expected earnings ($.68 a share vs. Street expectation of $.40) is the story of why Ford is knocking the cover off the ball.

Right now it's all about Ford getting more profit per vehicle.

A testament to Ford having not just the models, but also the content customers are willing to pay extra to include in those cars and trucks.

It's proof that American automakers can win with product, not incentives.

This is exactly what Ford CEO Alan Mulally said Ford would do when he took over the company four years ago. At the time, few outside of Ford headquarters believed him. After all, for years Ford and its fellow Detroit automakers were in the money losing game of throwing out bigger and bigger incentives to win over buyers.

Ford buyers are increasingly paying up for other features like heated seats and navigation systems.
Behind The Wheel, CNBC
Phil LeBeau

Who could blame them?

When Mulally took over Ford, he had the F-Series, the Edge and little else in the barn.

But over the last 4 years, Mulally and his team have stepped up the design and fuel efficiency of the Ford product line-up while also rolling out features people are willing to pay for. Sync, and the ability to route your phone, iPod, etc. through the car was a huge first step. It had buyers saying, I'll pay extra to stay connected in my car. The new MyFord Touch systemshould do just as well.

Beyond Sync, Ford buyers are increasingly paying up for other features like heated seats and navigation systems. Add in the fact, Ford's reliability has improved, and you have an atmosphere where customers are comfortable paying up when buying a particular model.

Making more money per vehicle is what Toyota did so well for so many years. In the late '90's Toyota and Lexus models were nice, but far from the most attractive on the road. Still, customers gladly paid up because of their perceived value. That's exactly what Ford customers are now doing, and it's a big reason Ford keeps beating the street with better than expected earnings.


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