Ford making money but challenges ahead

Apr 26, 2011

Ford announced its biggest first quarter profit since 1998.  The company made 2.6 billion dollars, and predicts it will remain profitable for the rest of the year despite some economic headwinds. 

But Ford also faces some unique challenges if it wants to keep growing.

Company CEO Alan Mulally likes to joke about the “small home improvement loan” of $23-billion the company took out in 2006.   That money paid for the company to improve its products and avoid bankruptcy. 

But the debt has to be repaid as quickly as possible for Ford to remain competitive.    Mulally says that’s exactly what Ford is doing.

"Since the first of last year 2010, we have now repaid nearly 17 billion dollars of our debt."

Ford also must revitalize its luxury brand, Lincoln.  Mulally says customers will begin to see a new spate of Lincoln models in the next year or two. 

But Ford’s biggest challenge is probably catching up in China, now the world’s largest car market.  Gerald Meyers is a University of Michigan business school professor.   

" The competition is fierce," says Meyers.  "Volkswagen is crowding everybody, GM is working the Buick line, but Ford is determined to be a factor there and it’s possible they could still do it."

Mulally says Ford is adding 200 dealerships in China every year.  And with most Chinese customers researching their next car on the Internet, it’s not difficult to reach out to them.  And, there are just so many potential customers.

"And we’re not trying to take markets away from other competitors because the market’s growing so much," he says.

One thing Ford may not have to worry about is being a strike target for the United Auto Workers in upcoming contract talks.  UAW President Bob King says the union may not choose a strike target this year and instead work on a contract with all three Detroit automakers simultaneously.