Finally, executives at Ford have seen the light -- or so they say.

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In its third big restructuring announcement in three years–and its first under new CEO Alan Mulally–Ford says it plans sweeping changes to make the automaker competitive again and return it to profitability. There will be huge numbers of job cuts, painful downsizing, revamped plans to build hot cars, and the discontinuation of sluggish models.

Nobody disputes that Ford desperately needs some dramatic fixes. The question is, this time, is Ford serious? For the moment, the answer seems to be no.

Immediately after Ford outlined its updated "Way Forward" plan, Merrill Lynch downgraded Ford's stock from a neutral rating to "sell." Analyst John Murphy highlighted several shortcomings in a note to clients: Capacity cuts are too shallow; there was no scheme for dealing with huge losses at Ford's Jaguar subsidiary; there was no major news about speeding the introduction of badly needed new models.

"The details of the accelerated Way Forward fall below expectations," Murphy wrote. "It's missing a lot." In the first hour after the announcement, Ford's stock price fell 12 percent, to below $8.

Investors are getting used to letdowns from Ford. It was only eight months ago, in January, that Ford unveiled, with great fanfare, its initial Way Forward plan to fix the company. But the company never revealed many specific details. Now, in an "update" press conference, the company has admitted that it aimed too low with its initial targets.

"A lot has changed since January," said Mark Fields, Ford's president for North American operations.

Actually, not all that much has changed since the last time Ford insisted it was getting its act together. Fields highlighted a number of factors that have set Ford back recently: rising gas prices, a consumer shift away from big trucks and SUVs, rising prices for steel and other commodities. But all of those trends have been visible inside the industry for at least a year, in some cases much longer.

Analysts have been highlighting Ford and GM's perilous overreliance on large vehicles since early 2005, for one thing. And doesn't everybody in America know that gas prices have been spiking? That it now costs $60 or more to fill up an SUV? That a midsize crossover that averages 25 mpg is a lot more appealing than a lumbering SUV that averages 14?

Fields, who has earned street cred for his role in turning Mazda from an also-ran into an exciting, profitable automaker, has promised more "candor" from Ford. And Mulally–who stayed largely in the background during Friday's announcement–is a turnaround specialist who did lots of heavy lifting to help fix Boeing's commercial airplane unit. If Fields and Mulally want to be totally honest, they might also admit that huge questions remain about whether Ford finally understands its own dilemma and whether it has enough courage in the executive suite to turn itself into a smaller, more efficient automaker.

As before, Ford's specific moves sound significant. Here's another constant: Many analysts doubt it will be enough. A few specifics:

Ford plans to cut $5 billion in annual costs by 2008. But that is $1 billion or so less than some experts think Ford needs.

Fields announced that overall, Ford will return to profitability "not before 2009." This critical milestone has bounced around like a jalopy with a bad suspension, one key reason investors remain skeptical of Ford's pronouncements. In January, Fields said profitability would come no later than 2008. To explain the delay, he said Ford could still meet the 2008 goal if it wanted but feels it must make key investments in products and technologies along the way, which requires pushing profitability out at least another year. Don't be surprised if this target changes again, with fresh "market forces," previously unforeseen, causing further delays.

The company will cut 14,000 white-collar jobs, through attrition, buyout offers, and firings if necessary. It's a sad day at company HQ in Dearborn, but those cuts have to happen.

All of Ford's 75,000 hourly workers will get buyout offers to help slash the manufacturing workforce. Whether that effort hits targets depends on how many workers take the offer. It's worth noting that General Motors made a similar offer earlier this year, and it worked: More workers took the cash than expected.

Finally, Ford acknowledged what analysts have been forecasting for a long time: The company is going to get smaller and soon become America's No.3 automaker, behind GM and Toyota. As Ford cuts capacity by 26 percent and stops selling unprofitable models, market share will fall from about 17 percent now to somewhere between 14 and 15 percent. Even that "does not seem aggressive enough," argues Chris Ceraso of Credit Suisse, in a research note. The closure of two plants, in addition to 14 factory closings announced earlier this year, still may not reduce Ford's capacity enough to match up with diminished demand.

Ford, like GM, still has ample time to make believers out of skeptics. It remains a huge company with lots of talent in the ranks, meaningful brand names, and considerable market muscle. Mulally and Fields still need to demonstrate, however, that they have figured out how to leverage those assets rather than squandering them.

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  • Auto review: Lincoln Zephyr
  • --Rick Newman

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    • Rick Newman

      Rick Newman is the author of Rebounders: How Winners Pivot From Setback to Success and the co-author of two other books. Follow him on Twitter or e-mail him at rnewman@usnews.com.

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