Unemployment, fluctuating gas prices and a still shaky economy all make it difficult to predict how the next chapter in the U.S. automotive industry will unfold, says Ford Motor Co.'s North American chief.

“I think volatility is maybe the new norm in the industry,” Mark Fields, president-The Americas, tells Ward's.

The industry next year is likely to fluctuate “maybe not month to month, but quarter to quarter,” he adds, noting the crawl back to conventional vehicle sales won't be a smooth journey.

It will come in “fits and starts,” and depend largely on the economy and consumer confidence.

Fields hesitates to predict light-vehicle volumes for 2010 but says Ford expects a “modest improvement” to about 12.2 million-12.3 million units in the U.S., outpacing this year's projected 10.2 million and exceeding forecasts made by other auto makers.

Fields cannot afford to be overly optimistic, even though Ford recently posted a third-quarter pre-tax profit of $357 million in the key North American market, its first quarterly black ink since early 2005.

In his two decades in the automotive industry, Fields cannot recall a period of such economic devastation, punctuated by the downfall of several storied Wall Street firms and the bankruptcies of General Motors Corp. and Chrysler LLC.

But while others hang their heads, Fields views this convergence of dire circumstances as an opportunity. “We're living through history right now, and I personally view that as very energizing. Others may view it as paralysis, but I think we've embraced it.”

Fields says the ability to look beyond the negativity stems from the “One Ford” plan initiated by CEO Alan Mulally. At its crux is a disciplined approach to all aspects of the business, the guidelines of which have become a mantra to Ford employees.

“As you can see from our products, our strategy is best-in-class fuel economy, world-class quality, smart technologies and safety,” he says.

The strategy is starting to pay off. Even in a down market, Ford has gradually increased its U.S. retail market share 12 out of the last 13 months. The auto maker's retail share as of October was slightly more than 15%.

Fields declines to say how much of the market Ford thinks it can capture but offers a hint. “I think when we close the year, this will be the first time since 1995 that we actually have grown our retail and total market share.”

Outright growth is not Ford's goal. Rather, the auto maker wants to gain share only if it can do so profitably and without hefty incentives, he says.

In the past, large trucks and SUVs delivered much of Ford's profits. But those days are gone as consumers have pushed fuel economy near the top of their purchase-consideration list.

In keeping with Mulally's edict of providing car buyers with vehicles they “want and value,” Ford has decided to bring some of its award-winning European products to the U.S., a move enthusiasts long have demanded but, until now, management has resisted.

Ford already has launched the Transit Connect small commercial van in the U.S. and aims to introduce global versions of the Ford Fiesta B-car and Focus C-car next year.

The auto maker previously argued it was not profitable to sell small cars in the U.S. So what is different now?

“We've fundamentally changed the economics of small cars,” Fields says. “First off, we used to be a very regionally operated company. Now through our One Ford strategy, we're using global platforms that give us huge economies of scale on piece cost,” as well as efficiency gains in manufacturing.

Small-car buyers also are loading up on high-tech options, such as Ford's hands-free Sync multimedia system, which is driving up transaction prices.

“We're putting technologies in vehicles that people value and really benefit consumers,” Fields says. “It's not just technology for technology sake.”

Concessions from the United Auto Workers union also are helping drive down labor costs, putting Ford's wage levels in line with transplants such as Toyota Motor Corp. and Honda Motor Co. Ltd.

Fields remains bullish on Ford's relationship with the UAW, despite the rank-and-file's rejection of contract modifications that would have placed the auto maker on equal footing with GM and Chrysler.

“We've worked collaboratively with the UAW to really get to all-in wage rates that make us much more competitive than we've ever been in the past with the transplants,” he says, noting Ford was “disappointed” the modifications were voted down.

“That was really to get the last set of efficiencies some of our competitors were able to get,” he says. Now with a sound business plan in place, Ford is poised to offer consumers the small, fuel-efficient cars they are demanding.

According to George Pipas, Ford's top U.S. sales analyst, small cars in 2003 accounted only for 21% of U.S. industry sales compared with the 39% of the market controlled by larger vehicles.

Fast forward to 2008, and small cars accounted for 31% of sales. That number is expected to reach 36% in 2013, when they are expected to outsell big cars.

Fields says the change in car buyers' preferences is due largely to fluctuating fuel prices. Today's volatile environment has caused a sea change in the way people think.

“When gas prices (jumped) to $4 a gallon a year ago, it was very different for consumers than it was in the 1970s,” he says. “Back then, we kind of viewed it as a spike. There was this external situation with the oil embargo, and we said ‘OK, fine, it's going to be uncertain for a while, but it'll get back to normal.’”

Today, “people realize oil is a non-renewable resource. I think when you look at purchase criteria a year ago, and even today, fuel economy is still right at or near the top of (consumers') purchase criteria.”

Fuel economy is not only important to small-car buyers but also purchasers of large SUVs, cross-utility vehicles and pickups. As such, Ford plans to increase fuel economy across its lineup every year, Fields says, noting there always will be a market for trucks.

However, people who bought SUVs and pickups for personal use, rather than for work, are a dying breed, he says. “The pure image buyer is much less than what it used to be, and we're seeing those folks migrating toward other vehicle choices.”

“We've seen them buy everything from Fusions or Focuses to Edges or Flexes. It's really been interesting to see how they've migrated to other segments. There hasn't been one particular segment they've migrated to.”

Many consumers made the switch during last summer's government-backed “Cash for Clunkers” scheme, during which several Ford models were among the most traded-in vehicles, in exchange for new Fords.

Fields says there was some pull-ahead due to the $3 billion incentive program, but not as much as critics have indicated. He also insists those who argue the initiative was too costly aren't seeing the big picture.

“The government knew when it did the Clunker program it was going to cost some money. It was all about stimulating the economy. So (the cost) shouldn't surprise anybody.”

While Fields calls the program largely successful, he says there is no need to launch another initiative to spur sales. “I think our preference is to let the market do its thing.”

Ford's dealer network continues to back Mulally and his management team and is positioned to take advantage of severe dealership cuts made by GM and Chrysler, especially in rural areas where domestic brands historically have thrived.

Fields is careful not to criticize moves made by domestic competitors, instead stressing Ford brass is concentrating on ensuring the continued success of its own dealer network and not worrying about others.

Over the past several years, the auto maker has worked its own plan to trim its dealer network with the objective of ensuring Blue Oval dealers aren't competing against one another.

“We're working very collaboratively with our dealers and saying, ‘This is what we see as the market potential going forward. This is what we see our share at, and this is what we see this market can potentially support,’” Fields says.

“What's important for us is dealer profitability and making sure they have the throughput they need to earn a good return on their investment.”

Despite appealing to a dealer's business sense and laying out data to indicate why closing down may be the best option, Fields says it often is a very emotional decision for dealers, many of which have operated as family businesses for generations.

In 2005, Ford had some 4,400 U.S. dealers. Today, that number is below 4,000. Fields says there is no set number for dealer reduction, as it's a “bit of a moving target.

“It depends on the industry and how that evolves, and part of it depends on our market share performance,” he says. “We're looking at it market by market.”

Meanwhile, Fields says Ford is focusing on improving its balance sheet. While GM and Chrysler were able to wipe away most of their debt through bankruptcy, Ford still has some $26.9 billion in automotive debt on its books, which carries with it increased interest rates on loans, among other disadvantages.

“Bankruptcy is one way to clean up your balance sheet, but we don't think that's a strategy for us,” he says, a theory that clearly is paying off.

Consumers are responding to Ford products and “the old American way of pulling yourself up by your own bootstraps and getting the job done.”