Image: Ford CEO Alan Mulally
Julie Jacobson  /  AP
Ford’s CEO Alan Mulally demonstrates plugging in the Ford Focus Electric to a charging station. The automaker hopes to nearly triple sales of its battery-based vehicles to 100,000 a year by 2013.
Image: Paul A. Eisenstein, contributor
By contributor
updated 6/15/2011 11:43:23 AM ET 2011-06-15T15:43:23

The devastating earthquake that rocked Japan March 11 not only destroyed the land and lives of thousands but also shook up the established order in the global automotive industry.

Toyota — which had ranked No. 1 in global sales in recent years — continues to struggle to resume full production and is all but certain to slip behind long-time rival General Motors, at least for 2011.

But longer-term, the struggle for dominance in the car industry is likely to be more than just a two company shoot-out. Volkswagen has long made it known it’s in the hunt for the global sales crown. And now Ford may also be sniffing the chance to regain the lead it lost more than three-quarters of a century ago when it was still building the Model T.

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Ford CEO Alan Mulally has outlined plans to boost the carmaker’s worldwide sales volumes by more than 50 percent by mid-decade, putting it close to parity with the industry’s two 800-pound gorillas, GM and Toyota.

But Ford won’t find its task an easy one. The carmaker faces a variety of challenges, including the need to revive its long-struggling Lincoln brand and rebuild its European operations, which have been lagging behind some key competitors, notably Volkswagen, for the past decade.

Mulally acknowledges that the new global goal will require the automaker to finally gain some real traction in Asia, a region the CEO expects to account for at least a third of Ford’s volume going forward. Nowhere is Ford’s challenge more apparent than in China, a market it has had little success cracking. While GM now holds a hefty 15 percent market share in China, Ford has been able to capture only 4 percent of what is now the world’s largest automotive market.

Mulally has had little patience with business-as-usual since joining Ford in late 2007. He has shaken up the company’s management structure and transformed its operations from a network of regional fiefdoms into a truly integrated global entity.

Key to that strategy, dubbed “One Ford,” is the consolidation of the Ford product portfolio. Rather than duplicate efforts from one market to another, Ford is focusing on products that can be built and sold around the world, such as the new 2012 Focus. By creating economies of scale, Ford can “can make up” for the lower margins made on vehicles like the Focus, which have traditionally been a drag on the company’s balance sheet, according to Ford’s Chief Financial Officer Lewis Booth.

Ford has counted on sales in North America to generate the lion’s share of its earnings to date, placing emphasis on big, profitable trucks like the full-size F-150 pickup. While those offerings won’t go away, company planners recognize that even the U.S. is on a downsizing path. Worldwide, Mulally’s new growth plan predicts that small cars and crossovers will account for 55 percent of Ford’s sales volume by 2020, up from 48 percent at present.

Standing out in a crowded field won’t be easy for Ford. The carmaker is taking a multi-pronged approach, among other things promising to “democratize technology,” according to global marketing czar Jim Farley. For example, when Ford reintroduced a new Taurus in 2010, the car featured a “cross-traffic alert system,” designed to detect oncoming vehicles when the car was backed out of a parking spot. The technology had only just debuted on the significantly more expensive BMW 7-Series.

Story: Ford to offer new minivan as hybrid-only model

Ford is also putting a premium on fuel efficiency. In fact, global product development chief Derrick Kuzak has proclaimed a goal of “being the best, or at least being among the very best, in terms of fuel economy, in every segment where we compete.”

That goal may gain some traction at a time when fuel prices are again nudging record levels, but Ford isn’t the only carmaker emphasizing mileage. With the launch of its updated Accent, Hyundai now has four different car models delivering highway mileage in excess of 40 miles per gallon.

Meanwhile, Ford has continued to lag as an also-ran in the hybrid segment, well behind Toyota, despite the steady rollout of new models like the Lincoln MKZ, which was notably the first product on the market that allowed buyers to choose either a conventional gasoline engine or an optional gas-electric powertrain at no additional cost.

Ford hopes to break out of the battery ghetto over the next several years by launching five advanced electric vehicles, including a pure battery-electric version of the Focus, as well as both standard and plug-in hybrid versions of the upcoming C-Max microvan.

Story: Ford plans to triple electric vehicle production

“This is our Prius fighter,” said Farley, announcing that the C-Max will become the first dedicated hybrid model in the Ford vehicle line-up. The carmaker is hoping the distinctive shape and attributes of the new “people mover” will yield the same sort of brand halo that Toyota has gotten with its dedicated hybrid.

With the addition of the C-Max Hybrid and plug-in C-Max Energi — as well as the Focus Electric and other new electrified offerings — Ford hopes to nearly triple sales of its battery-based vehicles to 100,000 a year by 2013.

But that’s just a drop in the bucket compared to the global sales increases Mulally has in mind.

Ford’s management team is betting that, like Toyota, its electric vehicle program will burnish the automaker’s corporate image, underscoring its commitment to both technology in general and fuel efficiency in particular.

Indeed, Ford will need to project a clear sense of leadership if it’s to crack the industry’s established order.

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Video: Former exec on decline and rise of US auto industry

  1. Closed captioning of: Former exec on decline and rise of US auto industry

    >> this is.

    >> detroit is back. and we're not talking about the tigers.

    >> joining us now, the former vice chairman of general motors and author of the new book, "car guys versus bean counters," bob lutz , great to see you.

    >> great to be here, thank you.

    >> also the former vice chairman of general motors .

    >> there is that.

    >> so it's a fascinating book. you spent almost five decades in the auto business. i take it you're one of the car guys in this scenario.

    >> well, i like to think so, yeah. i've always been -- to me, being in the car business has always meant doing great vehicles. i enjoyed the business aspect, too. but without great cars, you're no place.

    >> now, who are the bean counters? you use that term kind ofder ricively.

    >> my theory, we made the business more complex than it needed to be, and we overtrained on the highly intellectual, left-brain, analytical side of the business and got to the point where hired extremely intelligent graduates from the best business schools .

    >> right.

    >> who could -- who were whizes with spreadsheets and line item metrics, but didn't really care about the product. the product to them was a transient form of money.

    >> right.

    >> you put money in one end, you create a product at the other end. it's hopefully more money. and if you don't -- i was one of the guys that always cared passionately about that middle segment, the product. because if people aren't captivated by the vehicle, it's not going to sell, or it will have to sell at a discount.

    >> that's the word. mike, it's captivating. listen, how many times have we seen detroit is down, but when detroit comes up is when you stop on the side of the road -- you stop driving and see a car go by, and you go, wow.

    >> right.

    >> or, for instance, you get into an american car that you haven't been in a while and close the door and it sounds good.

    >> right.

    >> and it drives good. and you see that with so many american cars now.

    >> well, clearly, off this book and off your deep belief, we went through a period of 20, 25 years when general motors filed for bankruptcy, american car companies went down. most people, i think, want to buy american, except they want the cup holders and the comfortable seats and the bean counters were looking at the spreadsheets instead of that stuff.

    >> yeah. i mean, the product that was -- picked apart. and materials were reduced in value. paint was taken off plastics. 12-ounce carpeting became 8-ounce carpeting and the whole thing was how much can we take out in order to improve margins before people start to complain. and i'm happy to say i looked at all three companies now. there is an intense focus on product excellence. you were mentioning interiors. the new chrysler grand cherokee or the jeep grand cherokee has a great interior. it's spectacular. the overland edition has an interior -- i defy anyone to show a german car with a better interior. and all three have the focus and the detroit three market share is once again expanding. and the asian share and the german share is declining.

    >> and they're good cars. and it's like you say -- i mean, the thing is, my dad, he -- when he grew up, he bought american cars .

    >> yeah.

    >> when his son started to buy foreign cars -- and i used to always joke -- if there was an american flag embroidered in the back, my dad got angry. we started buying cars, '79, '80, '81, when the handles were falling off. and i said, dad, when they make good cars, i'll buy 'em. 2000 , 2001 , when i could finally afford to buy whatever i wanted to buy, i started buying gm cars. because, you know, i bought a tahoe. four years -- guess what? when it was done, i went straight back to the dealer, i was like, i want another tahoe, another four years. nothing fancy. they drove well! america is making good cars.

    >> i make an interesting point in the book. the truck guys at all three companies never lost the focus on the customer. they knew exactly who their customers were. and they knew exactly who the competition was. and if you talked to a truck guy at chrysler , their next suv and full-size pickup, they're out to do more payload, more torque, more horsepower, more towing capacity than ford or gm, and it's the same thing with the gm guys. they look at ford and chrysler , and with each new vehicle they want to out-do the competition and fuel economy and all other attributes. so the interesting -- senior management never seemed to focus as much on trucks.

    >> right.

    >> there was less mettling. and of course, that's why the japanese truck manufacturers have never even put a dent in american full-size suv and pickup truck sales. they just can't be successful, because the american brands , all three of them, are so good. and willie, you know, you remember the old ad, have you driven a ford lately?

    >> yeah.

    >> i did. i landed in pensacola, and we -- we had to rent an extra car. and they gave us a ford. man, it's so much different than it was --

    >> yeah.

    >> five years ago.

    >> the new ford explorer is great.

    >> yeah, it's a nice vehicle.

    >> beautiful car.

    >> i think, bob, all americans are happy to see the big three car companies doing well.

    >> i hope. so of.

    >> but it has to be said they wouldn't be doing well without the united states government .

    >> absolutely.

    >> what happened to the car industry to get it to the point where without the help of the government they wouldn't exist anymore?

    >> well, we -- the industry was in the process of fixing its problems. and as you know, in '07, under the leadership of rick wagoner , we did negotiate a deal with uaw that was going to get rid of this $7 billion a year health care burden. trouble was that didn't become effective until '10. so there was this three-year lag between signing the deal and getting rid of that burden. if we hadn't had the subprime meltdown in '08, coupled with that sudden doubling of gasoline prices, i think all three companies would have been okay. we would have made it, because we were all in the process of cleaning up you -- cleaning up the mess of the past and the legacy, because all of us were focused -- at least speaking for gm, we were absolutely -- all of the great cars that are coming out now were all -- including the chevrolet volt , were all in the planning and execution phase, way before chapter 11 . so -- but what happened with the subprime meltdown and all of the money being sucked out of the economy, the u.s. car market went from a going rate of about $17.5 million a year to $9.8 million. i mean, the market dropped by 50%.

    >> wow.

    >> and we went into the thing with about $15 billion of cash. we were bleeding $4 billion a quarter. so after, you know, 3 1/2 quarters, we were out of gas. ford, for reasons that had nothing to do with the crisis, had a cash pile of about $33 billion. and they were bleeding about $4 billion a quarter. so they -- chrysler 's was over before they hit the ground. and now they're getting credit for incredible foresight. even allen mulally will tell you, foresight had nothing to do with it, it was sheer luck. and toyota went in with $100 billion in cash, they bled $4 billion a quarter.

    >> right.

    >> so they never even felt it. they were probably slightly worried. but you're right. people now -- there was an op-ed piece in the " wall street journal " the other day by some learned professor of law who said, "this -- it didn't have to happen. the government didn't have to step in. it could have been a normal chapter 11 proceeding, like every other one." people forget. there was no money for debtor in possession financing.

    >> yeah.

    >> we obviously didn't want to be words of the government. so everybody clearly -- and the people who were leading us through chapter 11 also tried every avenue that was possible.

    >> right.

    >> to avoid a government intervention . but there was no money. the banks didn't have any money. the only entity in the united states in '09 that any money was the federal government . and they didn't either.

    >> yeah, exactly.

    >> bob lutz .

    >> it looks like detroit is going to have some money. that is great.

    >> thank you. the book is "car guys versus bean counters" you can read an excerpt on our website,

    >>> standing by in the green


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