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Ford Shifts into a Higher Gear

Ford
CNBC.com
Ford

As Ford prepares to file quarterly earnings that are expected to show the company earned at least a billion dollars in profit for Q1, investors are starting to ask themselves, "Where does Ford go from here?"

Near term, the answer is higher.

Longer term, it remains to be seen. But you can bet Alan Mulally and his team realize the cheers they're enjoying now will fade quickly if Ford fails to build on this turnaround.

So where will Ford's growth come from? Near term it's here in the U.S. while further out the profits will come from leveraging the brand and assets worldwide.

With Ford expected to post its fourth straight quarterly profit (a first since 2005) and the stock enjoying an incredible run (up 189% in the last year) investors have pushed Ford shares to their highest point in roughly five years. They have reason to be optimistic. The current line-up of Ford, Lincoln, Mercury models are the best one Ford has seen in years. No wonder, the company has picked up 2.7% market share in the last year. Americans are embracing the styling and content within the cars, trucks and SUV's. It's the reason Ford is able to have lower incentives than its competitors. That formula for success and profits won't be changing anytime soon.

So investors are piling into Ford stock expecting this run to continue.

But CEO Alan Mulally is increasingly focused on Ford parlaying this turnaround into sustained success. For that, the strategy shifts from rebuilding Ford's business in the U.S. to growing the profits globally. With the new Focus on the way, Ford will have it's first true "world car." Meaning the Focus you see in Dearborn will be very similar to the one you see in England, and the one you see in China. Sure there will small tweaks in each region, but for the most part, there will be a commonality of parts, design, and manufacturing that is far greater than anything Ford has done in the past. In theory, if the strategy works, Ford should benefit from the economies of scale that come with building one car for all the key markets of the world, instead of several different ones in different markets.

In addition, Mulally and his team know that China, India, and developing markets are where Ford can plant the seeds of growth that will hopefully flourish ten years down the road. I often get e-mails from people asking why Ford, GM and other automakers are so focused on China. The answer is because that's where the money will be made in the future.

What investors are betting on now is Alan Mulally's long-term vision for Ford Motor Company. He made all the right moves (for example, mortgaging almost all of the company's assets before the credit market collapsed) to keep Ford from collapsing in '08 and early '09. Now he has to make the right calls to shift Ford into overdrive.

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