Are things really that bad at Ford? You'd think so, given that after Ford (F) reported its third-quarter earnings Wednesday morning, the stock market responded by driving the company's share price down sharply -- as much as 6% in early trading.

Maybe investors are disappointed by the headline profit number -- $1.65 billion, a bit lower than the $1.69 billion posted by the company in the third quarter of 2010. Perhaps they're concerned by a small decline in the company's pre-tax operating profit, though it still beat analyst estimates.

But considering the tough economic conditions Ford faces in markets around the world, those are quibbles that overlook the larger story: This company has become very strong, thanks to its relentless focus on a surprisingly simple plan.

And given where it was just a few years ago, that's a huge change.

An Exceptionally Solid Foundation for Growth

As recently as a couple of years ago the company remained in a precarious state: It was just barely profitable and was carrying a truly staggering debt load that peaked at more than $34 billion -- not far below its market cap at the time.

Just under the hood, however, things were changing profoundly: Ford's newest products weren't just decent, they were excellent -- good enough, finally, to compete with the best from Toyota (TM) and Honda (HMC) on their own terms.

Ford CEO Alan Mulally, hired away from Boeing (BA) by the Ford family in 2006 and charged with nothing less than saving the company their grandfather Henry had founded, was promising big results -- and overdelivering, quarter after quarter. Wall Street was starting to notice, as were consumers: Ford's strong new products drove big sales gains as archrival General Motors (GM) struggled to overcome the stigma of bankruptcy.

The Plan That Changed Everything

Mulally's plan to revive the Blue Oval, called "One Ford," was deceptively simple: unify Ford's far-flung divisions and fiefdoms into one company, working in sync, with one set of products. It sounds easy, even no-brainer obvious. But the details turned out to be fiendishly complicated.

For example, most of the Ford models sold in Europe had nothing in common mechanically with the models sold here in the United States. Even cars with the same name and market niche, like the Focus, were built on completely different underpinnings.

Creating two different versions of cars like the Focus required two different, separate development programs -- each costing hundreds of millions of dollars and tying up hundreds of employees for as long as three years. Ford did it that way because it was the way Ford had always done it. But the need to squeeze costs from two different development programs meant -- again, to take just one example -- that the compact car Ford sold in the U.S. wasn't really competitive with the best of the imports. It also wasn't particularly profitable, which is why Ford depended so much on its more profitable trucks and SUVs, and why the company, like its Detroit counterparts, suffered so badly when gas prices rose and SUV sales stalled.

The Key to Ford's Remarkable Success

It took awhile to bear visible fruit, but Mulally's plan changed all that. Ford still makes plenty of money on its trucks and SUVs here in the U.S., but it's no longer dependent on them.

Unlike in the old days, it has excellent small cars, developed by its engineers in Germany and built and sold here in North America, where they generate substantial profits.

By reducing the number of products it had to develop around the world, Ford is able to lavish more time, money, and care on each one. The new Focus, for instance, is built in Russia, in Germany, and in Michigan. Those factories each build the same car, with minor changes to meet different countries' safety rules -- but it's the same car, engineered by the same team, using parts that are the same around the world.

That has given Ford the ability to make inroads in emerging markets like Russia, China, and India, as well as renewed strength in Europe and Latin America. And those strong products have driven strong profits in the U.S., which Ford is reinvesting in the next generation of strong products -- as well as in factories in those emerging markets that could drive substantial new growth for the company in coming years.

Poised for Future Success

Ford may be facing some economic headwinds at the moment, and factors like rising commodity prices could squeeze its profits a bit in coming quarters.

But put simply, automakers live and die by the strength of their products. Mulally's "One Ford" plan has given the Blue Oval brand something that it arguably hasn't had since Henry's day -- a lineup of no-excuses products that can compete well around the world. That, plus the company's ongoing (and relentless) focus on containing costs, should ensure that Ford's string of profitable quarters continues -- even if the world's economies start to head south again.

At the time of publication, Fool contributor John Rosevear owned shares of Ford and General Motors. You can follow his auto-related musings on Twitter, where he goes by @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford and General Motors.

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may be alan mulally could teach the over paid fed gov how to manage money

October 28 2011 at 12:18 PM Report abuse rate up rate down Reply
you knucklehead

GM is still building boring crap. They have yet to color outside the lines like FORD has. GM is still being run by the same bean counters and talentless design departments. Still using cheap materials just like they did 20 years ago. There will never be a GM product in my driveway newer than 1967. That's the year GM truly died. Thanks a million UAW and EPA.

October 27 2011 at 3:23 PM Report abuse -1 rate up rate down Reply
2 replies to you knucklehead's comment

Well look at their sales . They seem to be selling a lot ! Just like Ford and Chrysler.

October 27 2011 at 3:47 PM Report abuse +1 rate up rate down Reply
1 reply to milofilomay's comment

milo, knucklehead, doesn't look at WSJ monthly sales report. GM is number 1 in U.S. market share and in China. In fact, they are the world's largest vehicle manufacturer again.

October 29 2011 at 10:33 AM Report abuse +1 rate up rate down

You definitely are a knucklehead. GM has always been known for using the best sheet metal, premium materials in the interior, and great motors and transmissions. I look at most cars, and GM's quality is one of the best. And, 1967, are you nuts? I can think of many cars built after 1967 that were high quality and still bringing big bucks at auctions. How about 1969 Camarao SS, 1970 Chevy Chevelle SS, 1969 Pontiac GTO, and all of the Camaros, Corvettes, Firebirds, and TransAms throughout the 1970s? It wasn't the UAW that messed it up. It was complacency and greed at the top. Also, I do place some blame on the government with CAFE standards, not the EPA. If you look at the GM lineup these days, I will put them up there with any brand or make. In 2013, Chevy is remodeling the Impala and Malibu. From early press releases, they look great. Also, Buick and Cadillac have very sharp looking cars and crossovers now. I like most of the GMC lineup, as well. You are being bias.

October 29 2011 at 10:31 AM Report abuse +1 rate up rate down Reply
Justin's Mom

The problem with all the Lib/Dems is they have a condition called Anosognosia, which is The total unawareness of ones own disease,disability or defect!

October 27 2011 at 3:06 PM Report abuse -1 rate up rate down Reply
2 replies to Justin's Mom's comment

The problem with republicans is that like the DEMs they are all full of garbage!And their answer to every problem with the USA is tax cuts LOL Nothing ever more . Thats the best they can do .

October 27 2011 at 3:51 PM Report abuse +1 rate up rate down Reply

Hey Justin's Mom, It's funny...I think that about cons, neocons, teabaggers, theocrats, and neoNazis. The problem with conservatives is they have a very narrow world view and cannot put themselves in one's shoes. Most of them are judgemental, hypocrtical, and self centered.

October 29 2011 at 10:38 AM Report abuse +1 rate up rate down Reply
Justin's Mom

They are doing it without the GOVERNMENTS HELP!

October 27 2011 at 2:58 PM Report abuse rate up rate down Reply
2 replies to Justin's Mom's comment

Too bad wall street not! The US tax payer still insures them ? Lets see AIG is 180 billion and counting! Most major banks on wall street still owe ! And is getting near zero int money from the fed window. NICE ..

October 27 2011 at 3:50 PM Report abuse +2 rate up rate down Reply

Hey Justin's Mom, you know I feel sorry for Justin. Everyone gets help. Do you help Justin? I am sure you do? Everyone has had government help. When you drive the roads everyday, the government organized and funded it, public schools are funded from property taxes, state taxes, and the federal goverment, your utilities are regulated by state governments, and your food is regulated by the federal government. Also, makes laws to protect it's people. You cons can't see a bigger picture and realize you don't do everything on your own. No one does. You cons are social Darwinists in thinking, but when you need the government's help, you are the first in line for government help. Hypocrites!!!

October 29 2011 at 10:44 AM Report abuse +1 rate up rate down Reply

What Obama bashers, foreign car owners, and rightwingers don't understand is that the auto industry is part of the productive economy, not Wall Street. They actually build stuff instead of extracting wealth like Wall Street banksters. Yes, these were loans to the auto industry, and it will get paid back. Supporting American companies who manufacture here in the U.S. is important for economic and national security.

October 27 2011 at 1:12 PM Report abuse +2 rate up rate down Reply
2 replies to tmachine2's comment
Justin's Mom

What dream world do you live in? The loan will NEVER be paid back!

October 27 2011 at 2:59 PM Report abuse rate up rate down Reply
1 reply to Justin's Mom's comment

Mom...I really don't care if GM or Chrysler pays back their loans because they are American-based companies. The foreign transplants will never pay back their loans and taxpayer subsidies, then why should GM and Chrysler? However, GM and Chrysler will pay back those loans because of union haters like you.

October 29 2011 at 10:52 AM Report abuse +1 rate up rate down

LOL the idiots have no clue wall street does NOT add to the GDP but GM,Ford and Chrysler does NUFF SAID!

October 27 2011 at 3:42 PM Report abuse +2 rate up rate down Reply
1 reply to milofilomay's comment

GM and Chrysler pays twice as much taxes into the Treasury and millions and million more into property taxes. They employ thousands more workers and have real retirees with pensions who spend money to stimulate our economy. They are still part of the backbone of our real economy. The rightwing foreign car buyers don't care of they send their money and support overseas.

October 29 2011 at 10:56 AM Report abuse +1 rate up rate down

OH , and wall street calls this a blip ? LOL THis is coming from a socialist entity that took a true tax payer bailout but yet not a word on that from the idiots who bash Ford GM and Chrysler? LOL < Andd has yet to pay a dime back> I thought investing was a risk ? Not on todays wall street! Banks have government backed mortgages ? They don't lose and never have lost a dime in the meltdown! Its time for the US government to stop backing and insuring anything on wall street! The US government protects companies , farmers who make millions and the corporate welfare out there ! All in the name of subsidies! NICE.... Its all tax payer money doing this ! Brought to you by the best congress money can buy! Any questions? LOL

October 27 2011 at 12:32 PM Report abuse +1 rate up rate down Reply

To all the pin heads , loans are not bailouts ! GM,Chrysler and Ford are hiring people now ? I see almost all companies in the USA are laying off still ! If you want a job in the USA? The Big three will lead and are leading the way ! So to all the jealous little people out there ? Why cry ? If you want a good job ? This is the start for the rest of the country! The UAW made them invest almost all of their cash into American plants for products ! They are in a real good position to weather any storm out there now ! So to you UAW haters shut up . Your rants are as baseless as your congress is ! < and we all know how the US congress is LOL ... But then the haters will still elect them in November and the lobbyist will own them the rest of their terms ! Only in America baby... Republicans or dems it don't matter you fools....

October 27 2011 at 12:24 PM Report abuse -1 rate up rate down Reply

geez,just think........If Ford had taken bailout money they could still be in business....oh wait.

October 27 2011 at 12:05 PM Report abuse -1 rate up rate down Reply

We have always bought American with the exception of one very hot Infiniti Q45 back in the early 90's--and we mostly have bought Ford. I like Ford products and I wish the company success.

October 27 2011 at 11:41 AM Report abuse +2 rate up rate down Reply

Ford keeps on keeping on, despite the best efforts of the Obama administration to discredit them because they didn't take the "bribe"/bailout. Go FORD! The only complaint I have is that they should look closely at their suppliers. It is possible that the japanese suppliers are providing inferior goods which may be contributing to the recent problems with touch screens, etc. A japanese supplier just pled guilty to doing just that over ten years with wiring harnesses. Guess they figure that's a good way to defeat the competition.

October 27 2011 at 11:37 AM Report abuse rate up rate down Reply
1 reply to rann948's comment

I agree with somethings you said about Japanese quality, but I never heard Obama bash Ford for their success. In fact, Ford got a government loan to export the Ford Explorer overseas.

October 27 2011 at 1:14 PM Report abuse +2 rate up rate down Reply