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The best CEO of a major automaker in North America has been on the job for less than three years. His name is in the headlines far less frequently than his struggling peers at General Motors Corp. and Chrysler LLC.

Alan Mulally, 63, isn’t in the spotlight because, unlike his counterparts at GM and Chrysler, he’s not seeking a taxpayer-funded bailout to stave off bankruptcy at his Ford Motor Co. Which, when you think about it, is why more attention should be paid to Mulally’s Ford tenure.

Ford, to be sure, is hardly the picture of health. It lost $14.6 billion (U.S.) last year. (GM lost $31 billion, and the much smaller Chrysler spilled $8 billion in red ink.) Ford boasts the strongest balance sheet of the Detroit automakers, with $13.4 billion in its treasury. But it also carries $26 billion of debt.

Even a cash reserve of $13.4 billion won’t get Ford through the next two years without a significant reversal of 2008’s calamitous downturn in vehicle sales. In last year’s fourth quarter alone, Ford burned through $5.5 billion in losses, causing it to exhaust the last of its lines of credit.

All that said, Mulally has a knack for seeing around corners. He lost no time on his September 2006 arrival at Ford’s Dearborn, Mich., headquarters in forcing what is now Detroit’s strongest automaker to get religion about the basics of 21st-century automaking.

A prescient Mulally bolstered Ford’s treasury with a stunning $23.4 billion in fresh borrowings and lines of credit in late 2006. The move was questioned at the time because Ford was required to put in hock just about all of its assets, even its hallowed "Blue Oval" trademark.

Mulally joked recently that the fortuitous fundraising wasn’t prescient but a "home improvement loan" to finance his massive restructuring of Ford. And indeed, that is what Mulally began using the money for, along with the costly development of better-built, more fuel-efficient cars with alluring showroom appeal.

But Mulally, alone among his peers, was in fact bracing for a prolonged industry downturn. And he was right.

First came the spectacular jump in fuel prices that cut heavily into sales of Detroit’s chief source of profits, its truck-based SUVs. Then followed the current economic recession, and the gut-wrenching 18 per cent plunge in 2008 vehicle sales. Mulally and other experts now forecast North American sales as low as 10 million vehicles this year, down from the lofty annual 16 million or so vehicles sold earlier this decade.

And that, says Mulally, is close to the new normal.

"We will not return to the peaks of production that we’ve seen in the past," the Ford CEO told the U.K. Financial Times last month. Anticipating the industry’s drastically changed circumstances, Mulally long ago began to shrink Ford. Plants were closed, thousands of employees laid off, model lines discontinued.

It also seemed to Mulally, as it has to many industry experts for a long time, that Detroit diluted its finance, R&D and marketing efforts by supporting too many brands. As he had done in raising $23.4 billion before the global credit market dried up, Mulally unloaded Ford’s niche brands — Jaguar, Land Rover and Aston Martin — while there were still buyers high risk personal loans.

"We had a strategy of mini-brands," Mulally said recently, "and what we’re doing now is focusing mainly on Ford and Ford worldwide." (In its bailout proposal, GM is pledging to shed four of its eight brands.)

With Ford’s engineering, design stylists and marketers focused on one brand, the company, alone among the U.S. domestics, has at last managed to arrest its market-share decline. Indeed, in last year’s fourth quarter, Ford, Toyota and Honda were alone among the top six automakers in increasing their market share. In Canada, Ford took back 1.8 points of market share in January, while GM and Chrysler continued to lose their share. In the past three months, Ford has outsold Toyota in Canada.

Automakers talk of their "conquest rate," the portion of their new-car sales in which a buyer’s trade-in is from another manufacturer. In January, 45 per cent of Ford buyers were converts, up from 38 per cent in August.

The quality improvements Mulally sought have paid off. Consumer Reports noted this month that of the eight new Detroit vehicles it recommends, six are Fords. The latest hybrid version of the Ford Fusion sedan is noteworthy, and not just because it beats the Toyota Camry in fuel efficiency.

Hybrid sales have dived along with fuel prices. What matters is the excited showroom and blogosphere chatter about a hybrid Ford Fusion that is casting an eco-friendly "halo" on Ford’s entire line-up. GM’s Hummer, obviously, has helped give GM the wrong image for the times.

Yet Ford needs to do much better. Its North American sales dropped 40 per cent last month, part of the continued industry downturn. Ford in January slashed another 10 per cent of its U.S. white-collar staff. And this week, Mulally and executive chair Bill Ford Jr. took 30 per cent salary cuts for 2009 and 2010, while scrapping bonuses for all Ford senior executives and salaried employees worldwide.

In the search for cost cuts since Mulally’s arrival, the CEO recently signalled that "non-core" assets such as unused land and buildings may go on the block. Ford also is talking with potential buyers for its Volvo brand and its 33-per-cent stake in Mazda Motor Corp. Even in a buyers’ market these brands have more value than the likes of GM’s Saturn division now bearing a "For Sale" sign.

Ford’s immediate worry is that North American consumers still lump it in with its troubled Detroit rivals. When asked about Ford, GM and Chrysler products, U.S. survey respondents vow to stay clear of them all, given the precarious state of the latter two firms. But when asked about Ford alone, perceptions improve considerably.

So, in one of several moves to break from the Detroit pack, Ford this spring will roll out a marketing campaign that takes on its foreign rather than domestic competition, and emphasizes the firm’s longevity, financial soundness, product quality and new-feature enhancements.

Ford and Detroit go together like salt and pepper. Separating them in the public mind might be the toughest challenge Mulally has faced.

But for at least the next year, it will be Job 1 in Dearborn.

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Filed under: technology by TheDoor