Fixing Ford (posted 7/25/2008)
Yesterday, FoMoCo announced big financial losses - $8.7 billion on $85 bil. total sales for the first six months of 2008. North America accounts for slightly over 50% of Ford's total sales and most of the losses. North America lost $7.6 billlion plus $2.4 billion for Ford Credit (most of Ford's Financial Services losses came from North America). Volvo lost $303 million during the period; Mazda lost $62 million. Ford Europe scored a $1.3 billion profit; South America contributed $645 million in profits.
The company said that an "unfavorable" product mix and lower unit sales hurt U.S. results. That inappropriate mix refers to now-lost profits on trucks and SUVs, which aren't selling or are moving slowly with deep discounts. Those profits won't be back anytime soon - if ever. And write-downs on truck/SUV lease residuals are pummeling Ford Credit.
Ford has implemented "a significant acceleration of its transformation plan" and "a realignment of its North American manufacturing." Designers and engineers are working feverishly to revamp Euro offerings and develop new models to suit American tastes and Federal requirements - safety, emissions, etc.
Ford's plan calls for the introduction of six European small cars to the U.S. market and an extension of turbocharged engines to help fuel economy in other models. Ford intends to reduce its reliance on trucks and SUVs by rolling out a range of smaller, more fuel-efficient vehicles and converting three truck plants to make cars. The company plans to double its production of four-cylinder engines by 2011. And save money by reducing/consolidating platforms worldwide.
Ford executive Mark Fields said that, by 2010, 40% of the vehicles the company sells in Europe would also be sold in the United States, with 100% commonality expected by 2013.
In the meantime, Ford NA has to get through the rest of 2008 and 2009 with pretty much the current product offerings.
Regarding Ford plans to bring over some of its Euro-centric small car designs to the U.S., I hope it works out for them. Ford's track record in this arena is mixed at best.
• English (and German) Fords have been imported on and off since the 1950s. The little Anglia, with the reverse-slant rear window, was strictly a curiosity and never caught on with American buyers. The Cortina was nice enough and had sporty pretensions but was priced too close to the larger Falcon and, therefore, never went anywhere.
• The original German-made Capri coupe of the early 1970s was a success - a tribute to it's good styling and attractive pricing. (In those days, the Deutschemark was pretty low relative to the Dollar.) Over a half a million European Capris were sold in North America between 1970 and 1978.
• The Merkur of the 1980s was a total flop. Buyers saw the Scorpio four-door sedan as overpriced and too close in size and looks to the Sable/Taurus. The Merkur XR4Ti hatchback coupe with its twin wings was just weird. (Interestingly, it was the brainchild of then Ford Vice President Bob Lutz - aka Maximum Bob.) And, at twice the price of the similarly-sized Topaz, not viable. (The XR4Ti sold for $18,700 and the Scorpio for just a little over $21,000, which was almost-Lincoln territory in those days.) Merkur disappeared in 1989; in five years, less than 65,000 were sold.
• Attempting to produce a 'world car' platform, FoMoCo introduced the Ford Contour and Mercury Mystique twins in 1995 - American-made vehicles based on the European Mondeo design. The Contour/Mystique never really took off, living in the shadow of its larger but not much more expensive brethren, Taurus and Sable, and was discontinued in 2000. The Contour was perceived as 'cramped' while the 4-inch wider Taurus was 'comfortable'. This, plus the proximity of the Contour's price to that of the Taurus made the Contour a slow-seller, despite accolades from the buff mags praising its handling and roadability. The Contour was on Car and Driver's Ten Best List for three consecutive years.
• When Ford owned Jaguar, it offered the next-gen European Ford Mondeo with a Jag grille and trim as the Jaguar X-Type. This, too, flopped in the U.S., despite some good initial press reviews.
In order for a Euro-design to succeed in the U.S. market, it needs four things:
As long as Ford remembers these four items and doesn't make the cars too Euro-weird (Citroen-like, Merkur-winged, Peugeot-nosed or pretty much anything with Matra or Reliant badges), they'll probably do OK.
1. Made in North America. The Euro and Pound are just too expensive these days and cars manufactured in Europe cannot compete profitably with NA-assembled offerings.
2. Roominess. American asses are larger. 'Nuff said.
3. Convenience. For example, the European-made Saturn Astra is missing some increasingly common upscale features. Edmunds noted that, in the Belgian made Astra, "the secondary controls are awkwardly placed and strangely labeled with acronyms and logos unknown on this side of the Atlantic. In fact, looking at the dashboard for the first time is like watching a foreign film without subtitles - you'll understand what's going on eventually, but it'll take a few viewings. Also, unlike most other GM vehicles, the Astra is missing satellite radio and an auxiliary audio jack."
Others have complained about the lack of cupholders in Euro autos. Europeans, who disdain drinking fountains, do not understand America's Great Thirst. Germans are particularly appalled by our Drink/Eat/Shave While Driving habits. When a German feels thirsty, he/she will consume part of a chocolate bar. Go figure.
4. Bling. Americans buy McMansions with "street presence" because we don't understand the term Understated Elegance. For domiciles and/or transport. The Simpsons once had an infomercial for "the mobilier - the car chandelier." Too many European cars have understated interiors. We like interiors featuring (not necessarily in this order): Tu-tone stuff, wood (or near-wood), fancy buttons, chrome, brushed chrome, things which glow or light up at night, 3-D lettering with a swoopy script typeface, gadgets with big buttons.
Everyone blames the recent demise of SUVs on high gas prices. Maybe so, but I believe that people got turned off when car makers failed to take these machines to the next level of luxury - timbered ceilings and fireplaces.
Speaking of bling, you'll never find a car in Europe equipped with a "gold package." To Europeans, a Gold Package is something you smuggle into Switzerland in a body cavity during wartime.
The good thing about Ford's plan is that it involves multiple products across Ford's entire lineup. These changes will provide FoMoCo with a more balanced portfolio of offerings, which will surely help it weather any future market shifts.
Meanwhile, if you believe all the PR, GM seems to be placing most of its bets on one fantasy product, the Volt - a vehicle which began as a $25K Prius-killer conceptual idea and is now at $45K and counting. And the Volt won't be on the streets until ... ummm ... I dunno. I don't think anyone does either, since the intro date keeps 'slipping'.
Maybe Ford does have a Better Idea.
copyright 2008 - Joseph M. Sherlock - All applicable rights reserved
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