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Yes, Ford Motor Company (F) Is Still a Buy: Honda Motor Co Ltd (ADR) (HMC), General Motors Company (GM)

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Ford Motor Company (F)By now, the remarkable turnaround at Ford Motor Company (NYSE:F) is kind of old news. In the space of just a few years, the long-troubled automaker has become a stable, profitable, investment-grade maker of cars and trucks that are increasingly well regarded around the world.

Here in North America, Ford’s recovery seems like a done deal. Its market share is stable, its cars and trucks are very good, and it’s booking solid profits. The stock has run from less than $2 during the dark days of the economic crisis to more than $12.

A casual observer might think that Ford’s stock might not have much more room to run.

But that observer would be missing a bigger story. In some ways, Ford Motor Company (NYSE:F)’s turnaround is just getting started. And Ford’s stock may well have a lot of room left to run in the next few years.

The key ingredients of Ford’s turnaround
To understand why Ford’s stock may still have significant upside, it’s helpful to understand how Ford’s dramatic turnaround happened. When Alan Mulally took over as Ford’s CEO in 2006, he found a company that was on its last legs — posting huge losses and riven by executive infighting and a disconnect between regional divisions, with a mishmash of a global product line that just wasn’t competitive with the best in the business.

But he was able to rally the whole company behind a simple plan of action, aptly called “One Ford.” Under this plan, Ford would put all of its weight behind a single, streamlined global lineup of products. That would allow the company to lavish each new car and truck with extra attention, and to realize big cost savings and efficiencies from the larger economies of scale that would result.

The result has been tremendous — at least here in North America, where the plan has been most fully implemented. Ford’s products have soared up the comparison rankings, finally becoming competitive with the best cars from the likes of Toyota Motor Corporation (ADR) (NYSE:TM) and Honda Motor Co Ltd (NYSE:HMC). That has allowed Ford to make more sales with fewer discounts — and that, plus the cost efficiencies realized from global economies of scale, have made Ford Motor Company (NYSE:F)’s profit margins in North America among the best in the business.

Overseas, though, Ford still has work to do — and that’s where the investment story starts to get interesting.

Exporting “One Ford” to troubled Europe
Ford, like most of its regional competitors, has been losing a lot of money in Europe: $1.75 billion in 2012, with a similar loss expected in 2013. Auto sales in the region have fallen to lows not seen since the 1990s, as government austerity programs have dragged many European nations into deep recessions.

Ford’s problems are familiar ones: too many factories and a need for more competitive products. Sound familiar? So will the solution: Mulally and his team announced last fall that they’re essentially exporting “One Ford” to Europe. Three factories will close, to bring Ford’s factory utilization in Europe closer to the high levels that have made North America so profitable. Several new products, drawn from Ford’s newly global product lineup, will make their debut. And the company will tweak its marketing and make additional cuts as needed to return to breakeven by mid-decade.

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