What a European Mustang will look like

September 12, 2012, 8:31 PM UTC

Not the European model.

FORTUNE — Since taking over as CEO at Ford in 2006, Alan Mulally hasn’t allowed much grass to grow under his feet or Ford’s. He proved it again on last week in Amsterdam with an outline to rejuvenate Ford’s loss-plagued European operations.

And today, Mulally, 67, takes a step closer to retirement as Ford directors are reportedly discussing the possibility that Mark Fields, currently head of Ford’s operations in the Americas, will be the company’s next CEO. Though Fields appeared to be a sure thing as Mulally’s successor, executive chairman Bill Ford Jr. has said Mulally, can stay as long as he likes.

Reclaiming the European market would certainly be a feat for Mulally before he calls it a day at Ford. The most remarkable feature of his plan is a promise to offer Ford’s iconic Mustang car model to European buyers, something Ford has never tried since the model burst on to the U.S. market in 1964. Mulally was cagey about details, declining to confirm whether the current model may be offered or perhaps a future model that would resemble the U.S. model in name only.

MORE: 8 ill-fated auto deals

Mulally also showed European dealers other future models that Ford intends to build and explained how the automaker intends to streamline operations and upgrade dealerships. A key unexplained aspect of Ford’s strategy is how to reduce factory capacity, which is too large for the continent’s recession-depressed demand.

Ford (F) lost $404 million in Europe in the second quarter. Its losses haven’t been as steep as those of General Motors (GM), whose CEO has acknowledged $12 billion in losses over the past decade. GM has been stymied so far in finding a way to close excess capacity and to rationalize the high capital cost of developing new models.

“Ford isn’t planning to sell Mustang in Europe in any great volume,” says Michelle Krebs, senior analyst for Edmunds.com, an automotive website. Rather “the car symbolizes Ford’s comeback in America.”

Mulally’s six-year tenure has been defined by the slogan “One Ford,” which he uses to lead the effort throughout global operations to make the automaker more nimble, efficient and cost effective. The former Boeing executive also has exerted his authority to correct brand missteps. He reversed the decision to use the Five Hundred name for the company’s large car in the U.S. instead of Taurus.

For the nearly half century of Mustang’s existence, Ford never seriously entertained the idea of selling it in Europe. The model was developed for American tastes and was presumed to be too heavy, crude and inefficient for European consumers. Still, a small number of enthusiasts imported the car through the so-called “gray market,” because it was an unusual model for Europe, epitomizing American styling and taste.

MORE: Roadster rage: 12 fun cars for the ages

Jesse Toprak of TrueCar, an automotive website, said he presumes that export of the Mustang to Europe will begin with the next generation model, which is believed to be scheduled for 2014 as a 2015 model. “The push will be to improve Ford’s volume, but also to enhance its brand image and improve the pricing for all its models,” he said.

The new model most likely will be lighter, more fuel efficient and will contain more advanced mechanical and other features – thus making it more palatable to European consumers. The 3.7-liter V6 and optional 5.0-liter V8 engines offered in today’s Mustang, much larger than the most common engines found in European cars, would be penalized under European tax schedules.

“One would assume they will offer it with the turbo four-cylinder for the obvious fuel economy benefits,” said Joe DeMatio, editor of Automobile magazine. “We know that the next Mustang will definitely have an independent rear suspension, which ought to play better with car enthusiasts on the continent, for whom the idea of an ancient-tech live rear axle must be laughable.”

Whether Mustang catches on among European drivers is a question that won’t be answered for a few years. But Ford’s bold move shows that Mulally is willing to think creatively about solving a business problem – too many automotive plants, not enough automotive revenue – plaguing the entire European industry. Let’s hope he sticks around long enough to see it succeed.