October 26, 2008 Strategy is paying off for Ford BY MARK PHELAN FREE PRESS COLUMNIST A local automaker is working a financial deal that appears not to be driven by desperation or a sense of impending doom. Now that's a horse of a different color, and it suggests that Ford's global product-development strategy is paying off. Padding the rainy day fund by a billion dollars or so as the industry lurches into what looks like a cash-burning inferno in 2009 doesn't hurt any, either. Ford's pending stock sale looks as safe as buying T-bills, compared to goings-on at Chrysler and GM. Cerberus is scouring the bushes for somebody -- anybody with a checkbook can apply -- to take Chrysler off its hands. In stark contrast, Ford's probable sale of some of its 33.4% stake in Mazda looks like a well-considered plan with little or no downside. Admittedly, a global economic downturn is not the time to sell auto stocks for top dollar, but Ford no longer needs a controlling interest in Mazda. Who's to argue if Ford CEO Alan Mulally believes you can never have too much cash or too many small vehicles? The vehicles are the heart of the deal. Ford has learned from Mazda's product-development expertise, improving to the point that the Japanese company is now at least as dependent on Ford as vice versa. This was not the case a few years ago, when Ford announced that its entire lineup of upcoming midsize vehicles would be based on the platform Mazda developed for its Mazda 6 midsize sedan. The Ford Fusion and Edge, Mercury Milan and Lincoln MKZ and MKX -- which account for nearly one in five of Ford's U.S. sales this year -- would not exist, if not for Mazda. Ford didn't just lift the blueprints for the platform, though. It internalized Mazda's engineering system, employing it at engineering centers in Europe and Dearborn. Ford's European tech center has now developed the underpinnings for the 2010 Mazda 3 that is to debut at the Los Angeles auto show next month and the Ford Focus compact and Fiesta subcompact due to go on sale in America in 2010. The Fiesta and Focus will be the basis for other small vehicles -- likely to range from sedans, hatchbacks and coupes to compact minivans and crossover SUVs -- for Ford's U.S. brands. The Mazda 3 is by far Mazda's best-selling vehicle around the world. The global production volume it generates for Ford and Mazda reduces the cost of all the compact models, benefiting both companies. It makes sense for Mazda and Ford to keep working together on projects like this, even if Ford no longer calls the shots in Hiroshima. Ford's European team has the lead in developing the next generation of the midsize Fusion and its siblings, too. They'll come from the team that developed the outstanding Mondeo midsize sedan, but with input from all the regions where the vehicles will be sold. Ford gains from Mazda's development of 4-cylinder engines, and both companies profit by spreading the cost of engine production over a large number of vehicles built and sold around the world. Ford and Mazda also share output from the Flat Rock assembly plant that builds the 6 and the Mustang and from other plants around the world. Neither company would gain from ending these alliances. Their relationship has matured to a sustainable level of mutual benefit. If a couple of nice, stable Japanese financial institutions buy some of Ford's Mazda stock -- as appears likely -- there's no reason they shouldn't continue to cooperate fruitfully around the world. Contact MARK PHELAN at phelan@freepress.com or 313-222-6731.