Ford Motor Company

Ford finally finds its place in China

October 25, 2013: 5:00 AM ET

Just five years ago, Ford was thought to be hopelessly behind in China. But sales in the country so far this year have reached 647,849, an eye-popping 51% higher than a year ago.

By Doron Levin

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FORTUNE -- After a slow start, Ford (F) has finally found its footing in China. Alan Mulally ought to count such a feat among his signal achievements as CEO at the auto giant.

Sales so far this year have reached 647,849, an eye-popping 51% higher than a year ago. Just five years ago, Ford was barely selling 250,000 vehicles a year and thought to be hopelessly behind. The last few months have been trending toward an annual sales rate of 1 million vehicles.

In 2006, when Mulally arrived at Ford from Boeing (BA), the automaker was rudderless on many fronts, including Asia. Bill Ford Jr. turned over the reins to Mulally, who sent a new team to China in 2009 led by Joe Hinrichs. Hinrichs now leads Ford's operations in the western hemisphere. Ford has said it is spending $4.9 billion to increase the number of cars and double production capacity.

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"Ford is definitely on the move in China," says Marco Gerrits, an automotive consulting partner with Boston Consulting Group's Beijing office. Gerrits noted that Ford's Escape compact SUV has become a hip alternative to Tiguan, Volkwagen's big seller there. VW is the market leader in China.

Ford's top seller in China is Focus, a compact car the Chinese pronounce "FO-kuh-suh," according to Trevor Hale, a Ford spokesman there.

Mulally has been touring Ford's operations in Asia for the past week. He was in the region to promote the introduction of the automaker's Transit Connect small van, which may be outfitted as a taxi. (During his Asian tour, Mulally, 68, brushed off questions about reports that he is considering leaving Ford to become chief executive officer at Microsoft.)

Hong Kong currently has about 18,000 taxis, virtually all of them Toyotas (TM), with a sprinkling of Nissans. The Transit Connect will need approval from Hong Kong authorities before taxi operators can even consider them.

On Thursday, Ford posted strong third-quarter net income of $1.27 billion or 31 cents a share on 12% higher revenue of $36 billion. Factored into the results were narrowed losses in Europe, a trouble spot for Ford, and $126 million in profit from Asian/Africa, which includes, China -- nearly triple the level of a year ago.

Ford's market share in China at the end of Mulally's first year on the job was 2%. It's now approaching 4%, even as China's overall auto market continues to grow. Ford aims to have a 6% share of the Chinese auto market by 2015.

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There's a hint of historical irony in Ford's push in China. Back in 1924, Sun Yat-sen, China's first president, wrote to Henry Ford inviting him to bring his industrial empire to the country. An assistant in Ford's office wrote back, indicating that the automaker's founder had no plans to visit.

With the possibility of rapid auto market growth in Europe and the U.S. just about impossible, the rest of the world, and particularly China, holds lots of near-term potential for Ford and other global automakers. In Ford's case, the company has swiftly turned around what could have been a blown opportunity.

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