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A Times Editorial

Lessons from an auto rebound

Ford Motor Co. still has a tough road ahead, like the rest of the U.S. auto industry. But the announcement that Ford earned $1 billion last quarter should be an object lesson for American automakers who want to survive in a rapidly changing market.

Ford reported a profit of $997 million for the three-month period, compared to a loss of $161 million over the same time last year. Its North American operations posted the first profit in four years, thanks in part to federally funded vouchers worth up to $4,500 under the Cash for Clunkers program.

Ford appears to be doing many things right. Its decision years ago to start cutting costs and develop new product lines enabled Ford to become the only one of the Big Three domestic automakers to avoid bankruptcy and forgo a government bailout. While Cash for Clunkers helped — several Ford models were among the top 10 new vehicles purchased under the program — Ford's profit came even as revenue was down $800 million from the previous period a year ago. And Ford's sales continued to rise in October, after the federal program ended. The company said it cut $1 billion in costs, thanks to hundreds of millions of dollars worth of concessions from the unions, and had already saved more in the first nine months of 2009 than it had hoped to save all year.

Ford is seeing payback from investing in more appealing and fuel-efficient cars and focusing on its core brands. The company announced Tuesday that its U.S. sales in October were up 3 percent from a year ago and that its market share continued to rise. While Ford can build on this success, it also benefited from events outside its control. The stigma of bankruptcy pushed some GM and Chrysler buyers to Ford. Looking ahead, the unions are balking at new concessions, and the demand for new cars in the U.S. market is weak. There is no honey pot similar to the Cash for Clunkers program on the horizon. Ford's example shows that attention to customer demands, especially as gas prices creep higher, will define which automakers survive. Value — not status symbols on the road — is what Americans stung by the worst recession since the Great Depression are looking for from Detroit.

Lessons from an auto rebound 11/03/09 [Last modified: Tuesday, November 3, 2009 8:17pm]
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