Ford Steers Clear of Potholes

DETROIT (TheStreet) -- By now the story of the Ford(F Quote) turnaround has nearly reached business school classic status.

"There is already a classic case on the transformation of Ford, which describes the role of (CEO Donald) Peterson in the 1980s in turning around Ford when they brought out the Taurus and 'Quality Is Job One' became the mantra," says Hugh O'Neil, a professor at the University of North Carolina Kenan-Flagler Business School, who studies corporate turnarounds.

O'Neil says current CEO Alan Mullaly is approaching Peterson's level. "Avoiding bankruptcy in the current environment and minimizing losses as well as he has done ranks near what Peterson did," he says. "We are at the stage where there is going to be a set of worldwide player who will dominate the industry for the next 40 years, and (Mullaly) has to place Ford among them."

Experts agreed that Mullaly faces continued challenges, in particular maintaining and capitalizing on the momentum he has created. In some ways, a key component of that momentum -- consumer support -- arose unexpectedly in November 2008, when top executives from the three U.S. automakers went to Congress to ask for aid. The initial reaction was outrage that they had flown to Washington on corporate jets: so intense was the anger that corporate jet sales dwindled.

Yet something else was going on too. While General Motors and Chrysler begged for federal aid, Ford eschewed it -- and consumers began to view the company differently. "We were there to support our competitors," said Mullaly, at a recent analysts' conference. "Who ever thought that would be a differentiating moment? (But) what everybody learned was 'Whoa, Ford is in a different place."