Ford says it's ready for Chinese competition

Ford Motor Co. is the only major U.S. automaker that avoided bankruptcy this year, declined taxpayer aid and, in the last few weeks, saw two of its models land on the Ten Most Wanted list of new vehicles being snapped up by buyers in the "Cash for Clunkers" program.
 
So, Ford folks should be kicking back and enjoying their victory over the odds, right? Taking a breather after a brutal year of full-throttle distress?

No. Not only is Ford's chief economist cautious in her outlook for a recovery, but during a swing through Philadelphia yesterday she said the same foresight that helped Ford stay out of the crosshairs was keeping it on its toes for the next challenge: the Chinese.

"We've done a lot of work in this decade -- it's been a lot of hard work -- so that we get to the point where we can keep that competitive edge as those new automakers come into the market," Ellen Hughes-Cromwick told economists and financial professionals at the Federal Reserve Bank of Philadelphia.

"I don't think anybody's got their eyes closed," she said of the arrival of Chinese automakers to the United States, which is considered inevitable if not imminent. "That will happen. The question is when -- not if."

Hughes-Cromwick's appearance, at the behest of Philadelphia's Global Interdependence Center, was to discuss investment in Brazil, Russia, China, and India.

But attendees peppered her with questions about the state of the topsy-turvy U.S. auto market -- when it would recover from plummeting sales and the bankruptcies of General Motors Co. and Chrysler Group L.L.C.

Hughes-Cromwick said that the fundamentals of the economy seemed to be improving and that car buying had picked up even before the government stepped in with its rebate program.

She said the supply of new cars was low, which is good for manufacturers; prices of new and used vehicles have firmed up, and a consumer survey this month by the University of Michigan found 70 percent of people felt it was a good time to buy a vehicle.

With the $3,500 to $4,500 "Clunker" rebates that went into effect in late July, to buyers willing to dump their gas-guzzlers for more fuel-efficient wheels, sales only improved, she said.

While unwilling to commit herself to a firm number, she said total U.S. new-vehicle sales by year's end could be somewhere above 10 million -- below the 17 million in recent years, but higher than the 7.3 million pace set in April, when auto sales hit their bottom.

Beyond that, though, automakers are trying to focus on remaining competitive in light of growing foreign competition.

In a sit-down interview with The Inquirer, Hughes-Cromwick said Ford had been cutting costs and restructuring its business since 2006, when former Boeing Co. executive Alan Mulally was hired as chief executive officer by William Ford Jr., executive chairman of the board.

"We have now matched Toyota in terms of quality across our vehicle lines," she said. "We are achieving, over time, best-in-class in terms of fuel economy in every segment. We've totally rebalanced our portfolio products in the U.S. -- small cars, utility, and trucks.

"We had a management team that has just been zooming along and improving on every front," said Hughes-Cromwick, herself with Ford since 1996.

That would brace Ford for any new companies entering the U.S. market, she said.

For now, Ford is picking up steam with "Clunkers." It recently announced it would boost production to meet the surge in customer demand. The Ford Focus and Ford Escape this week were among the 10 most-purchased vehicles under "Clunkers" -- the only vehicles on the list made by a U.S. automaker.

"Very few looked down the road five or six years ago and said we're going to have to redo things in the auto sector," said David R. Kotok, chairman and chief investment officer of Cumberland Advisors Inc., of Vineland, N.J., as he introduced Hughes-Cromwick to the Fed crowd.

And then, turning to Hughes-Cromwick, he pitched a compliment that gave her some credit for Ford's being in a decent situation today.

"She did," he said.