Autos December 16, 2010, 1:41PM EST

Ford's New Explorer: Better Looks, Smaller Engine

Poor miles per gallon hurt sales of the once-popular Ford Explorer. It now has a car-like ride and a smaller engine, and so far buyers seem interested

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Ford (F) is the world's most profitable carmaker. Not Porsche (POAHY:US), not Toyota (TM), not Honda (HMC). Ford. Through this year's third quarter, Ford earned a somewhat stunning $6.37 billion.

Stunning, perhaps, if one is a financial analyst covering Ford. That is because most analysts have underestimated Ford's progress over the past three years. If any of them actually bothered to drive Ford's splendid, completely revamped, and totally refined 2011 Explorer SUV, they might have revised their earlier opinion.

Ford's is on a hot streak—the company is quite simply making some of the best cars on earth—and probably the best automobiles in its entire history. The new car-based, seven-passenger Explorer is the strongest sign yet that the automaker has completely seized its destiny and is on the right track.

Explorer's Tumble

Not that it will be smooth sailing from here on out, especially in the case of the Explorer. While Explorer generally has a positive image in the public's mind, according to IHS Automotive analyst Aaron Bragman, and, he says, male customers would prefer "SUVish" models to softer-looking minivans and crossovers, Ford's Explorer sales have tanked in recent years.

The once mighty SUV, perhaps the best-known of its breed, sold at a 400,000-plus clip from 1999 to 2002, and more than 6 million were made in its 20-year history. But for 2010, the last year it will be built on a truck-based chassis, not a car-based one, Ford will be lucky to move 60,000. Although 4 million Explorers remain on the road, most of the 140,000 units traded in annually don't convert back into new Explorers. The reason can be summarized with one acronym: mpg.

Recent spikes in gas prices to between $4 and $5 a gallon caused potential SUV buyers (aka parents) to run the other way, toward car-based crossovers that typically return superior fuel economy. (The 2010 Explorer with AWD and V-8 motor gets a weak 13 city/19 highway fuel economy.)

Crossover Trend

This caused carmakers to fatten their crossover offerings. Smaller brands that were never a significant part of the crossover segment just a few years ago, such as Mazda (MZDAY:US), Kia (KIMTF:US), Audi (NSU:GR) and Volvo (VOLVF:US), are now selling tens of thousands of units annually (Kia's Sorrento will top 100,000 units in 2010), and mass brands that were already in crossovers, such as Honda/Acura and General Motors' (GM) Chevy/Buick, have increased their "soft road" model ranges.

All of which means Explorer not only faces stiffer competition, but what buyers wanted back in 1999-2002 is not what they want today.

Ford's own research shows that only 17 percent of Explorer owners drive off-road. Most don't even know that their trucks have off-road-specific features, such as Four-Wheel Low (a secondary gear range), or what such vernacular means.