• by Karl Greenberg , May 14, 2007

Ford Motor CEO's comments to shareholders at last week's annual meeting were upbeat, as he trumpeted Ford's sales gains in markets outside North America, highlighted how Ford's product mix reflects today's market and laid out a four-pronged strategy for returning the company to profitability, partly by getting leaner and meaner.

If there's a silver lining for Ford, it's that the company's first-quarter losses--$282 million--were far less injurious than in the first quarter last year, when the company lost $1.4 billion.

"Our financial results in the first quarter were better than expected," said CEO Alan Mulally, "thanks to cost-cutting in North America and greater strength around the world, especially at Ford of Europe and PAG [Premier Automotive Group]. Again, we're not where we need to be, but we are making progress."

He said the priorities for 2007 are earning more money by changing the product mix toward cars and selling at lower volumes; putting more money into product development, and saving money by reducing "complexity," meaning product variation; and finding money from financing. The fourth point: teamwork and accountability.

Mulally replaced Bill Ford as CEO last September, and began an effort to accelerate a turnaround, "The Way Forward," begun by his predecessor in 2006. He also realigned global operations in December so that Ford's American, European, and Asian operations now report directly to him. He said the move also integrates the company's far-flung product development teams, both at Ford's "Blue Oval" divisions and at partly or wholly owned subsidiaries like Mazda, Jaguar, and Land Rover.

"By sharing vehicle architectures, components and best practices from around the world, and maximizing economies of scale, we are taking full advantage of our global resources for the greater good of the entire company," he said.

He said the company has made moves to solve its biggest problem-making Ford's North American operations competitive. He said Ford will slice $5 billion in annual operating costs from its ledger by 2008 by idling 16 plants, and cutting the workforce.

He also noted that Ford has $23.5 billion in new funding to pay for restructuring and to accelerate product development." By the end of next year, 70% of our Ford, Lincoln and Mercury lineup will be all-new or significantly freshened, and we'll speed up our product development time by 30 to 50%," he said during his presentation, adding that Ford's goal is operational profitability by 2009.

Ford has suffered for the same reason it prospered in the late 90s: its product mix has been weighted toward trucks and SUVs. Mulally said that will change.

"Our North American sales are under continuing pressure. But we've made great progress in building products consumers want to buy. Just three years ago, 70% of our U.S. retail sales were trucks and SUVs, and 30% were cars and crossovers. With the success of new products like Ford Fusion and Edge, today almost 50% of our retail sales are cars and crossovers," he told stakeholders.

He also trumpeted Ford's sales in China and India last year, saying deliveries there hit record volumes, and that Ford Europe saw a 5% sales increase last year and in the first quarter.

Mulally also pointed to a recent Ford-run consumer survey that suggested Ford, Lincoln and Mercury vehicles are on parity with Toyota and Nissan in terms of product quality.