Ford's Big Bet Going Small And Green


This is for all of you who have complained, groused, wondered, and offered pointed opinions about the Big 3 not being committed to smaller, greener cars. For those of you who have scoffed at the idea of Detroit making money on compact cars built in the U.S., Ford believes it will prove you wrong.

Today the company is announcing it will invest $550 Millioninto converting its Michigan truck plant into a facility that will build the next generation Ford Focusand an electric vehicle coming out in 2011. The plant will keep 3200 jobs in Michigan and is a big bet by Ford. It's big because Ford, which has never made a dime on the Focus, believes it can make a profit building the compact car in the U.S.

Is Ford CEO Alan Mulally wacked?

Or should we actually believe him when he says small cars can be money makers? I don't think he's out of his mind.

Ford has a couple things working in its favor:

First, Ford is using the same architecture and design for the Focus, regardless of where in the world it is built. That economy of scale will drive down the cost of the Focus.

Second, the new UAW contract with lower costs means Ford will have a decent shot at making money building small cars in the states.

We won't know if Fords small car bet pays off for at least a year and a half. Still, given Mulally's track record since taking over as Ford CEO, there's no reason to doubt he will deliver. Ford is on a roll right now. In April, for the first time since early '08, it surpassed Toyota in monthly sales to become #2 in the U.S. And for six straight months, Ford has picked up retail market share.

Look at Ford's overall share growth this year:

  • January - 14.2%
  • February - 14.4 %
  • March - 15.3 %
  • April - 16.3%

Ford is riding this momentum and believes it's strong enough to carry the company to new heights and get the company back in black.

Soon, we will see if Ford can make money building small cars in the U.S.

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Questions? Comments?