Step one in Mulally’s plan is to reduce the number of factories, workers, and dealers in North America. Ford has already laid off roughly a third of its employees in this decade and has closed seven plants in the past two years. The company has also taken steps to repair its reputation for producing low-quality cars and trucks. In November 2006, executives found last-minute problems with the Edge crossover vehicles they were about to release to dealers, and delivery was halted so the problems could be fixed. Contrast that to prior releases, most notoriously the Escape and Focus models. Both were sent to dealers even though they were riddled with flaws, and both were later panned in quality surveys.

An early sign of progress is the Fusion midsize sedan. The Fusion isn’t exciting, but it got a big credibility boost last year when Consumer Reports named it one of the most reliable cars on the market. The magazine’s annual reliability survey showed that 41 out of 44 Ford, Lincoln, and Mercury models scored average or better on quality. Also coming this year are the Ford Flex—a seven-passenger “crossover utility vehicle”—and a new Lincoln MKS (yes, MKS), which will be the company’s first luxury sedan in years. Finally, the company is learning to develop cars in one region and sell them around the globe, eliminating billions in redundant engineering costs. The Ford Fiesta was developed in Europe, but virtually identical versions will be released in Asia next year and in the U.S. in 2010.

“The key is going through this tough time and coming out with a cost structure and a model lineup that’s competitive,” Mulally says. After agreeing to sell Jaguar and Land Rover to India’s Tata Motors, the company retains a manageable stable of four brands: Ford, Lincoln, Mercury, and Volvo. You get the sense, talking to Ford executives, that they wouldn’t mind letting Mercury die with dignity, and they recently considered selling Volvo. But they’re committed to reviving the company’s core Ford and Lincoln lines.

In my view, Ford has the cleanest, most achievable recovery plan in Detroit. The firm isn’t saddled with the complications that plague G.M., which is why Ford’s market cap was 30 percent bigger in mid-April, even though G.M. sells far more cars. Ford even posted a surprise profit of $100 million for the first quarter of this year. That said, there are further steps the company could take. I’d bring back the Continental name and cooperate more closely with Mazda, which is one-third owned by Ford. Mazda has a solid lineup of cars, yet because of its weak dealer network, it has a tiny market share, just 1.8 percent of U.S. sales. Bringing the two companies closer together would give Mazda broader U.S. distribution and possibly inspire Ford to put a little zing into its models.

Mulally, who grew up in Kansas, has a tendency to punctuate his speech with expressions like “aaabsolutely” and “way cool,” but behind the hokeyness is someone who has convinced Wall Street that he can finally turn Ford around. He’s the only C.E.O. in Detroit to state publicly that his company will become consistently profitable again next year, and I think he’ll get there.

CHRYSLER: Needs More Foreign Revenue

When C.E.O. Bob Nardelli came to Chrysler last ­summer, he brought a reputation for executive arrogance. During his stint as head of Home Depot, he produced record profits but was disdainful of such niceties as investor relations. He famously told the board of directors to skip the company’s 2006 annual meeting, which he ended curtly after just 30 minutes. Seven months later, facing a shareholder revolt, he further infuriated investors by walking out with a diamond-studded, $210 million exit package.

At privately owned Chrysler, Nardelli no longer has to concern himself with annual meetings or public shareholders, and he can make hard decisions quickly. “As the first major automaker to be privately operated in more than 50 years, we have an ideal structure for the work we have to do,” he says via email while traveling in Asia. Before Cerberus bought 80.1 percent of Chrysler last summer, Chrysler had spent a disastrous decade as a division of Germany’s Daimler, which retains the other 19.9 percent. But Nardelli has moved fast—scaling back production, eliminating 10,000 jobs (on top of 13,000 layoffs before he showed up), and killing such slow-selling models as the Dodge Magnum and the Chrysler Crossfire, Pacifica, and PT Cruiser convertible. “We took 100,000 units out of our fourth-quarter production, and we did it in a seven-minute phone call,” says Jim Press, vice chairman and president.