Ford has "stress-tested" its growth strategy, insists CEO Alan Mulally.
With both sales and market share up for 2011 and Ford likely to post the strongest earnings it has seen in years, the maker’s goal of “growing profitably…is on track,” asserted CEO Alan Mulally.
It has clearly been a good year for the maker, which posted $1.6 billion in earnings for the most recent quarter after landing solidly in the black for the first half of the year. It has slashed debt, seen sales grow by double digits in many months and will finish the year with about a 0.1 point increase in share, which has climbed back to 16.8%, putting it less than three points behind arch-rival General Motors.
That’s not to say Ford doesn’t have its challenges, company officials acknowledged during a series of conversations at a holiday gathering with the media. Japanese makers, sidelined for much of 2011 due to earthquake and flood-related production shortages, are roaring back with a vengeance. And Ford has taken some unexpected hits on the quality charts lately after steady gains in recent years.
Mulally and other Ford officials insist they have addressed issues such as the usability of the MyFordTouch infotainment system and a flawed Focus transmission – both of which were cited in a recent report by Consumer Reports magazine. The big test will come next year with the release of such studies as the closely watched J.D. Power Initial Quality Survey – which will measure buyer response to the first of the 2012 model-year offerings.
Nonetheless, and despite recent problems, Mulally seems comfortable with the direction his company has taken since he joined Ford just over five years ago. And analysts suggest he has reason to be pleased. At that point, Ford was deep in debt and its future was uncertain. It avoided the bankruptcy-and-bailout route taken by GM and Chrysler in 2009 only by saddling itself with even more debt.
But since then, Ford has slashed what it owes by roughly $20 billion. The figure is now down to $12.7 billion, noted Mulally, who added “(we’re) on our way to a $10 billion target.”
Of course, there are a number of what the experts call “external headwinds” that can make a mess of even the best-laid plans. There’s still talk of a double-dip recession here in the U.S. and Europe is far from over its debt crisis. Inflation is out of control in India and China is increasingly worried about a slowdown of a once unshakable economy.
Nonetheless, Ford’s CEO insisted the maker has “stress-tested our business plan” and is comfortable it can work through even the most perfect economic storm.
That will clearly take discipline, suggested Jim Farley, Ford’s global marketing czar. From his point of view, “the most important thing” to ensure the company’s recent growth isn’t a fluke is “maintaining residual values.”
They’re risen sharply in recent years and, significantly, Ford’s Fusion now outperforms the vaunted Toyota Camry on the residuals chart.
But to maintain that trend Ford has to be willing to hold back on the incentive spending it was long too free with in its effort to prop up sales of less popular models. The real measure of that discipline will come if Ford is willing to slow or even idle plants to keep inventories in balance, Farley suggested.
Another test will come with the launch of new products like the next-generation Ford Fusion, the midsize sedan debuting at next month’s Detroit Auto Show.
As part of Mulally’s One Ford strategy, the maker has cut its global model mix from 97 nameplates a half decade ago to just 20. But that means each individual product is now more important than ever.
Perhaps one of the big issues for 2012 will be Mulally himself. There have been numerous reports, in recent weeks, that the 66-year-old executive is reaching the end of his tenure setting a search for his replacement underway. Ford officials acknowledge they’re always considering their options but contend there’s no active succession effort. And, indeed, Mulally made it clear at the media gathering he is in no rush to relinquish his corner office.