By on July 25, 2008

Someone call 911!At one time, the nations of Europe took great pride in their cavalry divisions, horses and men numbering tens of thousands. Then Gatling gun made its debut, and all those horses and all that equipment became sausages and bric-a-brac. And so it is with the SUV. The Gatling gun of rising gas prices has laid waste to The Big 2.8's armies, throwing their plans into complete chaos. To its credit, Ford is attempting to regroup, rearm and re-engage. So how's it going?

Early days. Bad days. Light truck cash cows are queued-up at the slaughterhouse. Ford's leasing department is sending seas of rolling metal to auction to sell (or not) at bargain basement prices. FoMoCo Credit took a $294m hit in the second financial quarter, reversing last year's $112m profit. Ford's North American market share is now 14.4 percent, down 1.2 percent. On the revenue side, FoMoCo's North American Q2 results sank to $14.2b, down from last year's $19b take.   

The bottom line: Ford booked a $8.7b loss for Q2. Downsizing accounts for the lion's share of that loss. Since 2005, Ford NA has closed 12 factories and eliminated 51k jobs or 38 percent of its workforce. The American automaker claims it's on track to reduce its annual operating costs by $5b by the end of 2008 (compared with 2005). That's some serious cost-cutting.

And it comes at a serious cost: some $700m per month, and rising. To pay the bills, Ford created a $26b war chest- mortgaging everything up to and including its logo. Equally important, the company gave itself serious reality check, in the form of Alan Mulally. "Adapt or die" may not be tattooed on the FoMoCo CEO's forehead, but it might as well be.

After contemplating the numbers, Mike Jackson praised Mulally's moves Fordward in yesterday's Guardian. The CEO of AutoNation says it's amazing to watch the speed at which Ford has slashed production and begun switching from trucks to cars. "The old Detroit [GM?] would have taken ages to come to terms with this," he opined.

"This" is the need for small, competitive, profitable products in the North American market. It's that last element that's caused Ford's corporate culture conniptions.

Mulally is up against Old Detroit, right there in his own office. During Thursday meetings, the former Boeing exec heard the "can't make money on small cars" mantra so often he [almost literally] hit his execs over the head with a simple stat. Worldwide, large cars account for 15 percent of the market. Small cars account for 60 percent of units sold.   

FoMoCo NA suits' recalcitrance is understandable. The American car market was founded on cheap gas. To suggest that the U.S. market will soon mirror its overseas equivalents requires a paradigm shift in thinking, and a leap of faith. And, again, there is that thorny question of profitability. Decades of failure have taught Motown small cars equal small profits. 

Mulally is counting on replicating Toyota's success. Ford's "global platform" strategy: simplify products and production on a worldwide basis, then leverage the resulting economies of scale to reap massive profits. It's a good plan- if only because Toyota's already made it work. But there are several rocks upon which Mulally's vision may founder.

Toyota's American adventure was hardly an overnight success. In fact, their success still depends on long-term, long-haul thinking. The first fruits of Mulally's global plan– the Euro-designed mass market models– arrive in two year's time. Given Ford's parlous finances, they may have one chance to "get it right:" to adapt (or not) these cars for American tastes. History suggests staving off the beancounters will be a "challenge." And if you doubt the importance of trial and error, have a look at the first generation Toyota Prius.

There's also the question of branding. What is a Ford? It will have to be something that applies across its model range that commands a premium price. Toyota owns reliability. Style, safety, green, fuel economy, gizmos, driving pleasure? Ford's three-pronged "Drive" campaign indicates a bad case of ADD. In that same vein, Ford has too many models. Simply adding European-style vehicles to a bloated product portfolio will not help.

Equally worrying: Mercury. The latest product announcements contain an unspecified role for Jill Wagner's brand. That's not good. Mercury blurs the branding message for both Ford and Lincoln, and stops both brands from seeking sales in the near-luxury middle ground. It may be cheaper to keep Mercury than kill it, it may even deliver profits/volume for Lincoln dealers, but it's the wrong thing to do.

At a recent town hall-style meeting, a Ford worker suggested that making small cars was a money-losing proposition. "Why can't we make money on small cars?" Mr. Mulally demanded. "Do you think Toyota can't make money on small cars?" The question is, can Ford be Toyota?

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90 Comments on “Ford Death Watch 46: The Toyotafication of Ford...”


  • avatar
    lprocter1982

    Toyota makes money on small cars because the cars sell themselves. Toyota charges what it needs to, and knows people will pay the price. Ford, on the other hand, can’t do that. They have to compete on price, if only because their reputation is killing them. The Fusion might be as reliable as the Camry, but until the general public believes that, Ford won’t make money on small cars. And when you’re cross shopping a poorly-made Focus with a well made Corolla, is there even a decision to be made? The only reason, I think, people would by a Focus, is again it’s lower price. Ford can’t sell it’s cars for what they cost, Toyota can. And that’s why Toyota is making money.

  • avatar
    CeeDragon

    In a sense, the products and processes are just a reflection of the people and culture in a company. Ford (as well as the other domestics) need to change the culture of can’t-do, entitlement, and bloat inside of Detroit. No one wants to hear it, but the people are the problem. Everyone from the numbskull executives, provincial dealers, to the overpaid union workers.

    The solution? Move out of Detroit. Go to somewhere else where the cultural systems aren’t enablers to the old-guard mentality. My company has consulted with the domestics and I truly believe that no real change can come without changing (or moving away from) the huge infrastructure that supports the strange mentality in Detroit that says:

    - Everyone needs a truck or SUV.
    - Small cars are for weenies, such as liberals, terrorists, gays, etc.
    - Bling on trucks and SUVs are classy.
    - Everyone goes “up north” to vacation and needs a truck or SUV.

  • avatar
    Stephan Wilkinson

    It doesn’t change your point, but the gun that put paid to Europe’s mounted armies and mass charges was invented by Hiram Maxim, not Richard Gatling, and was based not on a rotating-barrels assembly but the use of muzzle gases to charge the next round. The Gatling really was only used briefly in the U.S., largely in the Indian Wars although also famously in the assault of San Juan Hill by Roosevelt’s Rough Riders.

    Back to cars.

  • avatar
    macarose

    Small change. The word ‘income’ in this sentence should be changed to ‘results’.

    “On the revenue side, FoMoCo’s North American Q2 income sank to $14.2b, down from last year’s $19b take.”

    The slaughterhouse analogy is the best one I’ve ever heard. I literally see these vehicles lined up hundreds deep at every auction, crawling forward to the auction block in the hopes of a buyer.

    I would think that Honda may be a better representation of what Ford wants to do on the car side of the business. Toyota’s known for making bland, conservative, and reliable vehicles. Ford is all too familiar with the losing proposition involved in making comparable blandmobiles in the pro-Toyonda North American market. Sporty, stylish, and excellent handling will be the way to go for Ford. In fact, it’s already worked for them in Europe.

    Great article!

  • avatar
    canfood

    America isn’t Europe. A mid-level trim Ford Mondeo, which is supposedly a world class Ford that even Jeremy Clarkson likes, costs 20000 Pounds or $40000 USD.

    When these “world class, comfortable, fuel efficient, well appointed” European models come to America, how much of what makes them “world class” will be stripped to make them fit the US market?

    if we look back at the history of these euro imports in America, the answer is pretty clear. They’ll be stripped down and turned into cheap and ugly step-sisters of their euro brethren.

    Now either our european friends are getting ripped off like crazy, or it really does cost a lot to make a world class euro-spec car.

    if so, how well will Ford be able to maintain that European quality while maintaining an American price point?

    I’m not optimistic.

  • avatar
    lewissalem

    Perhaps Ford can position itself as a stylish alternative (I can’t believe I’m typing this) to Toyota. I think we could all use a cure from blandness that isn’t simply stuffing bigger engines into cars. Our small cars shouldn’t have to be de-contented.

  • avatar

    @Stephan

    As you’ll be aware, the Gatling gun predated the Maxim by 23 years, and its rate of fire presaged the change in cavalry tactics.

    Maxim’s solution was much more reliable, however, and had a higher rate-of-fire.
    I’ll let it stand with the Gatling (kind of a military history buff …)

    To develop this track: in an act of insane “bravery,” Polish horse cavalry charged German motorized cavalry and infantry units in WWII.

    I guess GM will stick to its horses until the bitter end.

  • avatar

    macarose

    The word ‘income’ in this sentence should be changed to ‘results’.

    My bad. Text amended.

    Thanks for keeping us honest guys. And thank God we don’t work in print!

  • avatar
    canfood

    to be really fair though, the european cavalry tactics really didn’t change until Maxim’s machine gun was fielded.

    The gatling gun may have been first, but no one in America much less Europe really gave a damn

  • avatar
    TEXN3

    Excellent article.

    @Canfood: It’s not a direct pound or euro to dollar conversion to determine the price of a vehicle. The Mondeo, in the US, would still sell for about $20k USD. I really don’t understand why this is such a common misunderstanding.

    Look at every equivalent car sold in Europe and in the US, take away whatever currency symbol is in front of the price and you’ll see the two numbers are similar.

  • avatar
    Dave

    Great article, and I think Macarose has got it right, FMC should be Hondising with bold, exciting and reliable cars – bland won’t work for them. The consumer already has a bland supplier with outstanding reliability which caters to their conservative tastes with Toyota so they’re never going to take a chance that FMC has got it right – they’ll wait to see the evidence – and that can only come from consumers prepared to try new/daring cars that are reliable – the Honda clientele.

    With the Eurocars – FNA may have a chance – the key thing will be stopping middle mgt from Americanising the cars. They work in Europe (and Europe is a collection of diverse people – not always one big happy family as the masters in the EU leadership try an d get everyone to believe). The Fiesta/Focus etc work across Europe with only minor variations for feature (6CD standard is some markets, optional in others). Engine, transmission, suspension, seats etc are generally common whether in Britain, Spain or Germany.

    Can FNA make money on them without decontenting or compromising? Maybe if they regard that the bulk of the development cost is already sunk and paid for by Euro customer, Ford can cost (and price) the vehicle so the US customer effectively pays for a car with no (or very reduced) R&D cost allocated.

    I suppose “they may have one last chance” is actually a positive statement, how many chances do we think the others from Detroit have?

  • avatar
    GS650G

    I used to be a ford man, no longer. The quality problems turned them off for me. I don’t identify with Ford products any longer nor feel comfortable buying one. I have two Fords still and when they are gone that is it. I’m in the market for another commuter car soon and it will not be a GM or Ford product. Chrysler doesn’t make small cars any longer so they are not even being considered.

    That being said I think Ford will make it. They will fill the gap with trucks when Chrysler calls it a day, along with Toyota.

  • avatar
    canfood

    @TEXN3

    unfortunately that is a gross simplification. The Mondeo may exist in the SAME market segment in both England and the US but my point was that in Europe, the Mondeo is highly respected as a well appointed vehicle which exists at a 20000 pound price point.

    Will an American Mondeo exist in America with the *same* level of trim and power at a $20000 USD pricepoint? I’m certain it won’t be $40000 USD but $20000…

    I find that highly unlikely.

  • avatar

    I believe the challenge facing Detroit is bigger than just coming up with a “me too” compact that people will perceive as on a par with or better than the transplants’ offerings.

    When I say there’s a need to reinvent the equation as far as cars are concerned, it’s on a total scale: the role of cars in society; what particular tasks various versions are best suited for; increasing customer flexibility in modes of ownership and number of cars owned; the division between privately owned and communally owned cars (car sharing schemes); types of drivetrains and usage.

    (Of course we give a damn about the Gatling! It’s the principle used in today’s superhigh rate-of-fire systems, as found in military jets, attack helicopters, A10 tankbusters, ship defense systems, etc.)

  • avatar

    Ford ‘s secret weapon: their dealerships. There are literally hundreds of places in this country where you can’t buy a Honda, where you can buy a Ford. In fact, too many…

    I’m thinking Ford really needs to go head-to-head with Honda, not Toyota. Anyone want to venture a guess what a Honda is, compared to a Toyota? Whatever the answer, this Ford U.S. branding thing is still, as Stein more or less says, a tightrope.

    And it seems to me that Ford isn’t even on the wire, yet.

  • avatar
    Stephan Wilkinson

    Stein, then you should read “Mr. Gatling’s Terrible Marvel,” which I just reviewed for Military History Magazine (for which I regularly write).

  • avatar
    Steve-O

    RF> Agreed, Ford DOES need to go head-to-head with Honda. Going “bland” but with quality will be a losing battle, and I would hope Toyota-vet Jim Farley knows that. Honda means practical, reliable, valuable at trade-in time, and compared to Toyota, more fashionable. (I’m sure some people will disagree with the latter…)

    To take a page out of the Ford playbook circa-1982-1986: For starters, they have to differentiate themselves with some particularly daring designs. I believe the euro Ford models fit the bill. But this time around, it is crucial that quality will at least match the transplants or best case- exceed.

    canfood: Will an American Mondeo exist in America with the *same* level of trim and power at a $20000 USD pricepoint

    I also think it is unlikely they would price the Mondeo at that level. With the Fusion at the $18000 – $28000 USD pricepoint, I have to believe we would be looking at at least $25-28k price of entry into a Mondeo. And fortunately from design standpoint, it looks a lot more expensive than that, IMO.

  • avatar
    Negative Camber

    Canfood’s right.

    So often on-line pundits believe euro-market product to be this panacea to the D2.8. As he points out, this has already be tested time and again with failures like the Astra and GTO.

    After all, even Toyota knows it needs to make certain products market-specific. Here in the UK we have the Auris to your corolla. Probabaly based on many of the same components, but it’s not like they slapped a new badge on the thing and imported it like the Astra.

  • avatar
    Pch101

    The solution? Move out of Detroit. Go to somewhere else where the cultural systems aren’t enablers to the old-guard mentality.

    Mulally is effectively attempting to do this by moving US market car production to Mexico. The Fusion is already being built there, and truck plants near Mexico City are being converted to build the Fiesta.

    Of course, this move also should increase the profit margins on the cars, due to the lower labor costs. May not quite match what they earned from SUV’s, but if successful, they should be enough to put Ford back in the game.

    The Fiesta could prove to be a make-or-break car for Ford in the US. If it can sell in large numbers, lure in younger buyers and keep them happy, it will create a base of customers for its next products.

    But the spy shots of the next Fusion have me worried that they still don’t quite understand the American sedan market. They have to find a way to conquer Altima, Accord and Camry buyers, and I have my doubts that the next Fusion will be able to do that.

    I also worry about Lincoln. A hot product is needed to put it back into the game, and they haven’t got one. If they want to replace those SUV margins, this is where they have to do it, and they clearly can’t.

    As for Mercury, I personally think that it needs to be put on the back burner and badge engineered until there are time and resources to mend it. Ford doesn’t have enough money or management time to fix every problem immediately. They should instead focus on rebuilding the main brand, and roll those future profits (assuming that they have them) into improving Mercury later.

  • avatar
    golden2husky

    I also worry about Lincoln. A hot product is needed to put it back into the game, and they haven’t got one. If they want to replace those SUV margins, this is where they have to do it, and they clearly can’t.…

    Here is where Ford really is the weakest. Lincoln had been on the right track when they started with the Mark VII LSC, but quickly lost the scent. Had they continued on the correct path, Lincoln would be in a much better position. GM, against all odds, did much better here. Cadillac, while not a peer for the euro labeled cars, is at least a near peer. They at least have a chance to springboard into the fold. Lincoln has no chance at all. It is now nothing more than a trim level.

  • avatar
    Jacob

    canfood

    Mid-level and up level Civic is selling well for basically just under 20K. A mid-level Accord trim is in the upper 20s. Modeo’s direct European competitor, Acura TSX, stickers for just under 30K and sells well. I don’t see why a decent Mondeo trim wouldn’t sell for about 25K here. Ford’s branding might be tarnished right now, but if they bring good product, they’ll sell at a good price. See how Cadillac turned around. The problem with Detroit is that for the last 15 years they were trying to compete on price (e.g. make crap product and hope it will sell well for a really low price, then once it doesn’t sell, sell it to fleet customer). Obviously this didn’t work well for them.

  • avatar
    KatiePuckrik

    It’s no coincidence that the Detroiter with the most promising future is the one who hired a pragmatic engineer with an emphasis on long term results, rather than short term gains. Ford does have the best chance at survival, but there are a few points which work against them:

    1. Ford are trying to perform an almighty turnaround in an economic climate where Nissan and Toyota are losing market share.

    2. I’m still not convinced that all of Mullaly’s execs are on the same page. I’m sure TTAC did a news post recently about how Mark Fields STRONGLY suggested that Mercury was to retire (via starvation of product) then 2 months later, Alan Mullaly puts a vote of confidence behind Mercury, with Mark Fields iterating his sentiments a few days later!

    3. Ford’s cash hoard of $26 billion is actually $16 billion. Remember, they need $10 billion for day-to-day operations. Which leaves them less money for R and D, marketing, hiring of talent, etc, which, in turn, leaves Ford less chance for error.

    4. The “Euro Ford” plan may work, but my worry is this continual use of the phrase “adapting for US tastes”. What does this mean, exactly? The reason I am doubtful of this exercise is because the story that Mr Leikanger told us about Mullaly continually beating the idea of small cars into his execs’ heads, means that THEIR interpretation of “adapting to US tastes” may mean just sucking out the “european-ness” of the car and turning into a US car. The whole point of the car is it is from European, things will be different. If Ford start “adapting” it for US tastes, what will make it different from Ford’s current offerings?

    5. Lets run with the hypothesis that Alan Mullaly saves Ford by turning into Toyota. What will happen once he retires? Will Ford revert back to their old ways? The corporate culture will be one of Alan Mullaly’s biggest problems. At Toyota, corporate culture and brand identity are drummed into EVERYONE, from the rank and file to the executives. Th evidence suggests that Ford won’t continue its “Toyota path” once Alan Mullaly goes. ADD, you see.

    I don’t mean to be down on Ford, their quality is improving, their cars are “interesting” (Euro ones, certainly), they’ve acknowledged they’re in a bit of a hole and confidence in the company is rising. But let’s not forget that Ford have huge problems left to solve and they have little room for error.

  • avatar
    Lichtronamo

    The buildup for Thursday’s announcements specific to Mercury promised clear direction for the brand florists everywhere prefer. However, what was said amounts to announcement for the 1987 Mercury Tracer, which was a slight redo of the Mazda 323 sold as a step up from an Escort. No news here.

  • avatar
    John Horner

    “America isn’t Europe. A mid-level trim Ford Mondeo, which is supposedly a world class Ford that even Jeremy Clarkson likes, costs 20000 Pounds or $40000 USD.”

    Simple minded currency conversions do not paint an accurate picture. We have been through this discussion on TTAC before. For example, the Honda Jazz (Fit) starts at 9,177.00 GBP in the UK, which converts to $18,257. And yet, the actual starting price for the US Fit is $13,950, or 24% less than a simple minded currency conversion would imply. To top it off, said Fit is built in Japan, a high cost place to do business.

  • avatar
    jwltch

    Another angle that I think Ford should take is really focusing on their dealership and bringing about a world class car buying experience. I think they are headed in the right direction product-wise, for the most part. Add in a commitment to 100% customer satisfaction at the dealer level. And I mean commit. As a former Ford owner and now Toyota owner, I’m thinking about Ford products in the future. I like what I’m seeing from them. But, my last Ford dealer experience was so horrible, even the thought of stepping back into a Ford showroom causes major anxiety. It was dreadful, from being yelled at, lied to, cheated, lied to again and again and again. Make the hometown Ford dealer experience a truly great experience. I think this is an area where they could greatly improve, move ahead of the competition and not spend a great deal of money doing it. I had poor and mediocre experiences with two Toyota dealers. The 3rd was great. I’m sure franchise legalese prevents some action, but I’d really like to see an auto maker really push the dealers to deliver great service to all buyers and prospective buyers with consequences when that doesn’t happen.

  • avatar
    nudave

    I think Ford is as likely to become just like Toyota as “W” is of becoming Emporer Akihito. It’s a cultural thing.

    The best they should reasonably hope for is that (nonwithstanding 50 years of past mistakes) they can get their European products certified for sale in North America without screwing them up again.

    The NA Focus is an perfect example of what happens when you contaminate European design with the American esthetic.

    After all, the main reason Americans routinely rave about the Fords, Opels & Vauhalls they rent in Europe is that no one back home has redesigned them for “domestic consumption”.

  • avatar
    Dave M.

    I believe what may help Ford in this transformation is that the current and upcoming generation of car buyers have completely different tastes than the previous generations. If the product is ‘right’ (style, price, reliability), ‘they’ will come. Witness the resurrection of Mazda, Hyundai, and to a lesser extent product-wise Saturn (the most salvagable of the lesser GM brands IMO – although adjustments need to made on price points).

    I give Mulally huge kudos for grabbing the bull by the balls and massively changing direction, and look forward to the fruits of his labor 2-3 years down the road.

  • avatar
    Landcrusher

    I second the leave Detroit idea.

    Contrary to popular belief, not all the oil companies are headquartered in Houston (though this is where most all their geologists and engineers office). I think it helps the industry be more competitive. They are less likely to all walk off the same cliff at the same time, and it also keeps the competition from becoming personal.

    Move all the brains as far south and/or west as you need to get away from the unions and union controled governments and set up camp. Maybe Michigan will catch a clue and start playing ball?

  • avatar
    Bozoer Rebbe

    To develop this track: in an act of insane “bravery,” Polish horse cavalry charged German motorized cavalry and infantry units in WWII.

    Foolish, perhaps, but more noble than the French who lied down or bent over.

  • avatar
    detroit1701

    As much as the new Focus’ style turned many enthusiasts off, it is selling relatively well. I see them everywhere in Michigan. Brilliant short-term move. Ford already had the platform, developed a new 2.0L 4 cyl engine, and threw its preexisting sync system in. The Focus has become what people need now, high MPGs and lots of toys, exterior styling be damned (I actually really like it in the light blue color). Then the current Focus drivers may be convinced to “trade up” when the newer more expensive European edition arrives.

    Other good ideas: the hybrid Escape and the Explorer-on-a-car platform. Ford could also benefit much by bringing the Mazda2 over and putting smaller displacement engines in the Mazda3/S40/C30

  • avatar
    TEXN3

    @canfood: I made it an oversimplification for a reason. The basic Mondeo is around 15k GBP but has as much content as a base US Ford Focus.

    So, I went to http://www.ford.co.uk and priced the equivalent of a Fusion SEL I4, a Titanium model with the 2.3l I4 (as the Mondeo doesn’t offer a V6 and this is a shared drivetrain with the Fusion), DVD navigation, 17
    in alloys. It is about 22k GBP.

    I just went to http://www.ford.com and priced the Fusion SEL I4, with DVD navigation and leather and it came out to $25k USD. Now, I didn’t want the leather but it was packaged with the DVD nav. The DVD nav is really a $1800 option and before I clicked that box, the car was at $22k USD.

    I think the Mondeo, if built in North America would be comparably equipped. Heck, I would like to see Ford offer some lower-content models for those who need a mid-size car without all the bells and whistles. Does Honda even offer a DX model of the Accord anymore? It sold well, for those who wanted a basic midsize and dependable sedan.

    I do agree that selling a Euro-car is not easy, besides the recent GM offerings Ford messed up with Merkur. Although much of that had to do with the lack of a brand image or marketing.

  • avatar
    canfood

    @Jacob

    I don’t see why a decent Mondeo trim wouldn’t sell for about 25K here.

    I completely agree with you. But the “decent Mondeo trim” will NOT EQUAL the european trim in the equivalent market segment here in america.

    And it’s the European Mondeo with all the European trim that is getting all the kudos from everyone.

    can Ford make a decent trim for a European car for the US market? They’ve tried before…and failed.

    @TEXN3

    you may very well be right. I’ve never sat in a Mondeo and for all I know maybe all this talk about how much better the European Mondeo is in terms of materials, trim, and quality is all a bunch of hype.

    maybe Ford can build a $22000 USD Mondeo that is equal to a 22000 GBP Mondeo….

    but if I were european i’d be mighty curious about that.

  • avatar
    TEXN3

    They are a bit nicer, I’ve been in a few and driven the older ST220 model (3.0l V6 sport suspension). I forgot about Ford’s biggest Euro failure=Contour. I bet it would be selling right now, as it’s the right size at the right time. 10 years ago, it wasn’t. Which is a real shame as it was a wonderful car.

  • avatar
    nudave

    Are there any more of you out there who want to tell us the Focus is selling well where you live?

    If so, please find the nearest wall and bang your head against it repeatedly until the urge is gone.

  • avatar
    Pch101

    Simple minded currency conversions do not paint an accurate picture. We have been through this discussion on TTAC before. For example, the Honda Jazz (Fit) starts at 9,177.00 GBP in the UK, which converts to $18,257. And yet, the actual starting price for the US Fit is $13,950, or 24% less than a simple minded currency conversion would imply. To top it off, said Fit is built in Japan, a high cost place to do business.

    This misses the point. It’s a given that Ford would have to sell a comparable model in the US for a lot less money. But that doesn’t mean that it would produce enough margin to make it profitable in the United States.

    Aside from branding, there is a reason why the lower-end models from Mercedes, Audi and BMW aren’t sold in the US — because they can’t make money on them here, the prices wouldn’t be high enough to cover the costs. For the most part, VW has opted to build these in North America because they face the same labor cost hurdles that the others do.

    For Ford to sell European-built cars in the US with any success, it would need to command some sort of price premium to cover the cost difference. But Ford has been relegated to competing on price, so it would need to undercut Toyota and Honda, at least for awhile, to try to establish a market. And with their track record, it seems unlikely that it could work, anyway.

    Given their issues, if forced to choose, Ford is much better off selling a Mondeo in Europe at a high price than it would be to sell them in the US for a low price. Money is money, and if they get more of it from selling it somewhere else, they’d be smart to take the higher price from whomever is willing to pay it.

    I seriously doubt that Honda makes much on selling Fits here. They are probably more motivated by preserving market share and keeping their customers satisfied than they are by the amount of profit. If they weren’t already producing it in large volumes for other markets and didn’t have available capacity to add a few more for the US, then they probably wouldn’t have bothered at all, at least until they could build it in North America.

  • avatar
    whatdoiknow1

    “Toyota makes bland and boring automobiles.”

    I here a lot of commentors here make that remake but do the actual owners and buyers of Toyota products feel that way?

    Needless to say the answer to that question is NO.

    What Toyota does make are vehicles that manage to embody the attributes and qualities that the vast majority of people expect and want out of their automotive purchase. In a nutshell Toyota makes nice, feature rich, well engineered and built, cars that most folks either like the styling of or simple find non-offensive. They also manage to sell their automobiles at prices that match up correctly with the products.

    Today in 2008 a Camry is the quintessential “American Car”! A no-nosense ride that will get the job done with ease and comfort yet will not let you down. It will last you forever and after being paid-off will allow you to feel a sense of pride in your purchase. “I good got a good deal on a good car!”

    For the last 20 years if you went into a Toyota dealership to buy a car they were happy to sell you a CAR and would do so with pride. On the otherhand if you went into a Ford dealership in the last 20 years looking for a simple car you were always being “pushed” toward some type of unnecessary and wasteful SUV. If I lived in Montana maybe I could understand this type of hard sell but in NYC WTF do I need an Explorer for?

    It is important to take note of the fact that Ford does not sell a single “smaller” vehicle with a 3 or 5 door design yet they offer a 5 door escape, a 5 door Flex, a 5 door TaurusX, a 5 door Explorer, and a 5 door Expedition. Considering the amount of hatchback and wagon Focuses they sold of the last model, one has to ask why they do not make them anymore? Does this have anthing to do with all of that more expensive metal that they are unable to move? “Looking for a Focus Wagon, why not check out one of our Escapes or maybe you want to splurge on one of our new Flexes?”

    Toyota on the otherhand has NEVER stopped making the vehicles that match MY crowded urban/suburban lifestyle. Today I can buy Yaris 3 door, a Matrix 5 door, a 5 door Prius or go over to scion and check out an XB or XD. Hey, if I want a SUV Toyota ALSO has the equivalent of everything that Ford has to sell me!

    Ford is in trouble because they have made a business out of NOT selling the products people actually want but pushing products that they want to sell!

  • avatar
    macarose

    20 years ago the only SUV Ford had was the Bronco.

    I had a Toyota Camry coupe for 12 years and 239k miles. Other than the Celica, MR2, 1st gen Xb, and Supra, Toyota has always made by and large boring and bland vehicles. Nothing wrong with it so long as it fits the customer demographic… which in America happens to be the largest one out there.

    The current Camry is really a 21st century version of a Cadillac. It’s a luxurious, quiet, comfortable and incredibly big car that is designed to isolate owners from the daily driving experience. The model is now larger than an early 90′s Deville sedan while the new Corolla is just as big as the Camrys that were made during the 1990′s.

    Again, so long as the public demands it I don’t see a problem. But like the Yaris, Avalon, and current Scion models… they are incredibly boring to drive.

  • avatar
    LUNDQIK

    @Canfood: By building them here.

  • avatar

    @KatiePuckrik

    The reason I am doubtful of this exercise is because the story that Mr Leikanger told us about Mullaly continually beating the idea of small cars into his execs’ heads, means that THEIR interpretation of “adapting to US tastes” may mean just sucking out the “european-ness” of the car and turning into a US car.

    Yup, they’re not on the same page. Remember writing about that in an editorial here – I guessed the following exchange had taken place between Mulally and Ford:
    I suspect this is why Mulally insisted on being co-director along with Bill Ford. A fly on the wall would have heard this: ”I’ll do it, but only if you’re willing to rain hell on the holdouts that will be fighting my changes. You and me Bill, we’re in this together.”

    http://www.thetruthaboutcars.com/toyota-the-weakness/

    Had lunch today, on a sidewalk café in a quaint European town. An Escalade parked close by — what a butt-ugly car, and I agree that there’s always the risk that Ford exec’s will find a need to Americanize the compacts … that way be dragons of the fiercest kind.

    ===

    Moving out of Detroit. Yes and no — there’s a lot of talent there, including a lot of talent that can be got from GM and Chrysler. Yet the manufacturing is taking place just about everywhere else, and at some point staying in Detroit becomes tradition, and not necessary.
    I don’t see what would be gained by moving out — look at Nissan’s woes in attempting a similar relocation. It would have to be part of a ten-year plan, seriously.

    ===

    Again – we’re committing the same fallacy that the majors have trapped themselves with: slotting existing models around, discontinuing one, creating a hybrid out of another two.

    Ford needs to stem the loss of cash; they need to pare down the range of models, getting rid of WTF; and they need to seriously improve the after-sales experience of their customers. That’s when they’ll get the premium they need in order to not only stay afloat, but to get going at full speed again.

    And that’s not going to happen through a reshuffle of the existing platform. Interestingly, in spite of Toyota’s “Sustainable Mobility” effort, I think Ford’s best positioned to redefine how we move with cars and other transportation devices — once management understands that’s the way to go.

    “One Ford” – if Mulally pulls it off, GM will be left in the dust.

  • avatar
    John Horner

    “For Ford to sell European-built cars in the US with any success, it would need to command some sort of price premium to cover the cost difference.”

    Ford isn’t planning to sell European built cars in the US, the are re-tooling US and Mexican factories to build some of their European designs.

    “I seriously doubt that Honda makes much on selling Fits here.”

    Honda doesn’t report profits by region, but at a time when everyone else is sucking wind, Honda just reported an 8.1% profit increase for the April-May-June 2008:

    http://online.wsj.com/article/SB121696801863784241.html

    High margin vehicles like the Pilot, MDX, Odyssey and Ridgeline are all selling slowly while the little cars are moving on out of there. Against rising raw materials costs and a mix shift to smaller, cheaper vehicles … Honda reports a solid profit increase. You don’t do that by giving away your stuff.

  • avatar
    Pch101

    Ford isn’t planning to sell European built cars in the US, the are re-tooling US and Mexican factories to build some of their European designs.

    Yes, I pointed this out already in my first post on this thread.

    Those who advocate selling European-built Mondeos in the US miss that this would most likely be a losing proposition on a lot of levels. It is highly unlikely that Ford could provide a comparable level of content to American buyers at the prices that Americans are willing to pay and still turn a profit.

  • avatar
    Hellhund

    I think you mean “founder” in the sentence below — you founder on rocks, you flounder if you’re thrashing around having a hard time.

    “But there are several rocks upon which Mulally’s vision may flounder.”

    Really good piece. You have to wish Mulally well. It’s heartening to see a realistic appraisal by a CEO of what has to be done.

  • avatar
    Bunter1

    Good article Stein.

    As I see it the war for survival in Detroit comes down to leadership.

    Ford-Mullaly

    GM-Wagoner

    Need I say more.

    Bunter

    Enjoyed the military history subplot also.

  • avatar

    Stein,

    The advantage of moving out of detroit is that it is a place where creative Americans don’t want to live.

  • avatar
    galaxygreymx5

    As much as the new Focus’ style turned many enthusiasts off, it is selling relatively well. I see them everywhere in Michigan.

    Unfortunately I think this might be some Grosse Pointe Myopia. I’ve worked for one of the Big 2.8, and I’ve spent plenty of time in Michigan, and I’d bet that about 92% of those Foci were bought by people working for Ford, with friends at Ford, with a grandparent at Ford, etc., etc..

    I’m not exaggerating when I say that I think I’ve seen more Audi RS4s in the last month than I’ve seen privately-owned Focuses. I’m in Southern California, a somewhat more critical market for Ford than Michigan.

  • avatar

    “Oh Flounder, you’re such a guppy!”

    My bad. Text amended.

  • avatar
    Paul Niedermeyer

    The question is, can Ford be Toyota?

    No. It might have been possible in the eighties. Ford has no serious/viable hybrid program (the Escape/Fusion hybrids are limited production and have little or negative profit margins). Ford’s passenger car share is barely 10%.

    It seems to me, the question should be, can Ford be Huyndai?

  • avatar
    RobertSD

    We still don’t get it, do we… The Mondeo, when it “comes” to the U.S., will be in the form of a Fusion!

    Ford is not literally taking the Mondeo currently onsale in the UK and shipping it to the U.S. They are aligning the platforms between the U.S. and Europe. Which means, the “pricing” question is moot. The next-next-gen Fusion (MY2013, CY2012 I believe) will share the same underpinnings and will probably cost $19-$29k in 2008 dollars.

    Unlike the 2000 Focus or the 1995 Countour, there isn’t going to be a finished FoE model that FNA has to “decontent” in order to make it priced and contented right for the market. There won’t need to be any significant changes because the platform will be built to handle the different drivetrains and configurations demanded in each location. The exteriors might differ in subtle ways and the interiors might have slightly different layouts, the content available at different trim levels will certainly vary, but nothing significant will be different. As a result, Ford will be able to make more money on the vehicles in both markets without “decontenting” anywhere.

    When the Fiesta arrives, one of the reasons it is being built in Mexico is that it is an example of a car finished in Europe and sent to the U.S. because FNA joined late. The whole goal with the car, though, is to change nothing fundamental. What we get here will be *exactly* what they have in Europe, except the nose which has to be modified slightly for our crash standards.

    As far as Mercury is concerned, I’m not sure what this article is implying, but the best way to think about where Mercury is headed is a small-to-medium size vehicle focus, FWD and in niches that aren’t covered by Ford and Lincoln. Like a premium small-car, for example. A premium small sports car. A premium small SUV. I think that’s what they’re going for. The only place we may continue to see overlap is Fusion/Milan – but even that isn’t guaranteed. That leave Lincoln room to play in larger cars and still pull traffic into L-M dealers. Eventually, Lincoln will be more RWD, at which point it will be even easier to slot everything.

    Really, the only unknown is if Volvo gets sold off completely or remains in a capacity similar to Mazda. But, I think the creation of more premium small-to-medium cars in Mercury spells certain doom for Ford’s ownership of Volvo.

  • avatar
    wmba

    First of all, the UK price includes 17.5% VAT, so the $40K becomes $34K.

    Second, there is more than a 10% markup in the UK.

  • avatar
    Pch101

    It seems to me, the question should be, can Ford be Hyundai?

    I would replace that with Nissan. If I was Ford, I would build my business plan and budget around trying to take third place away from Nissan in the mid-sized sedan, compact and subcompact markets, and then building up from there. Nissan has little in the way of a quality advantage, and they could be beaten on styling (assuming that Ford figures out how to actually beat them with styling.)

    Trying to compete most directly with Hyundai on price would be suicidal, that ensures Ford of continued losses. Ford has to convince its customers that it is worth buying Fords for a bit more money.

  • avatar
    Dave M.

    To develop this track: in an act of insane “bravery,” Polish horse cavalry charged German motorized cavalry and infantry units in WWII.

    Foolish, perhaps, but more noble than the French who lied down or bent over.

    The foolish ones lived, though….didn’t they?

    While car shopping last weekend with a relative I saw a handful of Foci on the dealer’s lot….nowhere near the numbers of Fusion, Tauri and trucks amassed.

    The Contour failed for a number of reasons, including the back seat room was way too small for the class, Ford applied the same ugly ‘oval’ styling that effectively killed the Taurus as a major seller, and the first two years of reliability was horrible. The revised model (’97?) was certainly better looking and more reliable, but by then its fate had been sealed.

  • avatar
    fearless freep

    I’m just wondering what happened to De Lorenzo’s proclamation that Ford was going to skip a model generation and release 2012-2014 MY vehicles for 2010-2011. Didn’t see anything about that in Ford’s statement.

  • avatar

    I want car names that get a simple -s at the end to denote the plural!!! Prius, Focus, be damned!

    Mulally is playing percentages. Where GM seems bent on staking it all on the Volt Hail Mary Juju Voodoo “please let my number come up” plug-in to fix their mojo, Mulally is looking at what the market wants, and seeking to mine the potential profit, though with smaller margins, offered by higher volume. It all evens out.

    Sleek, urban nimble and relatively quick – that’s the car of the future. It’s kind of depressing to be contemplating whether Ford should be Toyota, Honda, Nissan, Hyundai or Yugo. What Mulally picked up from Toyota is the ability to make a production line move, and a customer orientation that is second to noe.

    If he can transplant that into Ford, then that’s all the Toyota Ford needs – in addition, they need to offer their own versions of the car(s) of the future – cars I will lust for, want to own and drive.

    The truth about cars should mean a healthy serving of reality with our dreams and aspirations – and there’s little doubt that Detroit’s been in a reality-free zone for far too long. The fact that the car equation is under modification doesn’t mean we should expect all our future cars to be boring, far from it.

    Like fearless freep I am also waiting for a hint at the 2012-2014 lineup – I’ve been told they are exciting cars.

  • avatar

    Y’know what I think would help Ford? Almost as much as the new product they really need? A complete re-think of their approach to customer service and customer experience.

    One of the biggest liabilities that Ford and GM have is that their dealer service is often vile. (Same goes for VW and Saab.) An apparently pathological unwillingness to fix things properly; amazingly poor parts availability; the need for the customer to kick and scream to get warranty claims honored; overcharging for non-warranty work. A friend of mine, a longtime Ford loyalist, got so frustrated with the inability of multiple Atlanta-area Ford dealers to repair anything without breaking something else in the process that she swore she’d never buy a Ford product again.

    Granted, Toyota and Honda dealerships can be extraordinarily variable, with some that are as bad or worse, but Toyota and Honda have stronger products and reputations to leverage. Ford and GM do not.

    A long time ago (in a galaxy far, far away), Volkswagen built a presence in the U.S. on the basis of a strong dealer network. Their cars were at best mediocre in any functional sense, but not only were they cheap, you could be reasonably confident that the company and the dealership would stand behind their products. VW has lost the plot on that one, partly because of the dysfunctional relationship between VW NA and the home office, but the basic premise is still sound.

    Improving customer service is not free, and it would involve higher warranty and service costs, but it would pay real dividends for them. I don’t think GM is bright enough to grasp this, but it’s an opportunity for Ford.

  • avatar
    Landcrusher

    The problem with GM’s big bet on the Volt is that they only bet a dollar. That is not the way to get the company behind ensuring success.

    Pushing the model updates at a spectacular rate is a better big bet as it is being played. It’s not really “safe”. It’s expensive, and hard work.

  • avatar
    RedStapler

    macarose Says:

    20 years ago the only SUV Ford had was the Bronco.

    Back in the day you could get 2 SUVs from the Blue Oval. The Bronco which was a short F150 with a back seat and the Ranger platform based Bronco II. The Bronco II was just as if not more rollover prone as the Explorer that replaced it with a short wheelbase and high COG.

  • avatar
    turbobeetle

    If Ford cannot kill Mercury, they they need to turn it into a Scion!

    The Merc name has been around much longer than I have and it has become very stale and boring not to mention redundant to their other brands. Since Ford already has this Mercury infastucture then I say give it a face lift… Change the name, change the market, and use it to introduce the Euro- soon to be global platform to the US.

    As I see it if Ford wants to follow ToyMoCo’s plan for success then here it is. Lincoln=Lexus Ford=Toyota and Scion=The new Mercury.

    This new face lifted Merc, like Scion, could appeal to the younger market who are looking for more cost efficient solutions (esp. these days). With this new company they should put cars on it ranging from the Euro focus, perhaps the Ranger, or a similar but maybe smaller truck, A compact SUV-crossover,something sporty yet cost effective, and perhaps something unique like bringing back the Ranchero, but this time make the Ranchero a front wheel drive 4-banger on a unibody design… Kinda like an s-max with a bed… hmmm

  • avatar
    Dynamic88

    A few things I’d like to comment on.

    1. I’m suprised by how many people seem to think of Honda as “daring”. I’m not saying you’re wrong, just that I’m suprised. I’ve been buying Hondas for more than 20 years, and I’ve only ever thought of them as the Uber-Toyota -e.g. more reliable than the reliability car.

    2. Repetition Warning! Ford is quickly becoming the south of the border “American” car company. I don’t give a damn about saving any of the 2.8 if it’s not going to mean more jobs in the US – and principally in MI. I’d rather give my money to the Ohioans than the Mexicans.

    3. Re: moving from Detroit. This whole geography imperils creativity thing is a crock. I live in Mich., and have visited Ohio numerous times. You can take it from me, Ohio is every bit as bland, if not more so. Yet Honda manages to make it’s “daring” cars there – and they sell quite well – and at prices higher than their “American” competition. The problem with Detroit is not the location, it’s the corporate culture. At any rate, in another 20 years there may not be any car companies in Detroit.

    4. When peopel rave about Euro- Fords, I always wonder if they’re car nuts, or just ordinary people. What I’m getting at is it may not be the case that most Americans would like the Euro -spec models. Most of us who read TTAC probably would like them, but we aren’t most people.

  • avatar
    John Horner

    “I’m just wondering what happened to De Lorenzo’s proclamation that Ford was going to skip a model generation and release 2012-2014 MY vehicles for 2010-2011.”

    It looks like what we are going to see for 2010/11 is the introduction of multiple formerly Europe only Ford designs to North America. De Lorenzo’s proclamation of a rift in the time-space continuum is just a bit over the top :).

  • avatar
    TEXN3

    Dynamic: of course you’re right about Ohio. Ohio isn’t much different than Michigan. They’re both old industry and union worker states. It’s the same mentality because it’s the same type of people there. These companies need to move beyond the midwest or even northeast.

    However, Detroit has tried moving certain parts of their companies to places like California and have ended up coming back. I think the northwest has a completely different corporate mentality, focused on the work and pushing the edge.

  • avatar
    PJungnitsch

    I don’t think bringing over the advantages of the Euro fords is that complicated. Tough to implement perhaps, but not complicated.

    The big advantages of Ford Europe over Ford NA is that:

    a) Their cars tend to be stunningly styled compared to ours, ‘Kinetic design’ simply blows ‘Red, White, and Bold’ out of the water.

    b) They offer a full lineup of smaller vehicles.

    Otherwise it’s all Mazda/Volvo based platforms, same as they have been doing here. Nothing wrong with a Mazda6 based Fusion, performance or reliability-wise, it’s just clumsily styled inside and out compared to the Mazda6 based Mondeo.

    So keep Ford NA from uglifying the styling and cheapening the interiors, and refit the plants for the new Mazda2 based Fiesta, Mazda3 based Focus/Kuga/C-Max, etc. Mazda has sold its ‘advanced’ Ford platform cars here for years.

  • avatar
    mel23

    I doubt the current Ford management is so sloppy that they haven’t scoped this thing out to be sure they at least have a good chance of making the company viable by doing it. They’ve surely done a thorough job of fixing a cost/price of each product, determined how each would stack up against the competition, etc. As for Mercury, I think a shot at making it an econo-stylish brand might have a chance. And as Chrysler and GM fade, Ford will look better by comparison; unless they look worse just be being seen as a US brand.

  • avatar
    RobertSD

    @ PJungnitsch

    You mischaracterize the relationship between Ford and Mazda (and Volvo) products. Mazda doesn’t hand all its platforms to Ford to build on. Ford leads or contributes significantly to every platform. For example, it is not the Mazda2 platform that Ford is building the Fiesta on. It is the B-platform designed in a JV between Ford and Mazda that Mazda has also built its 2 on.

    The C1 is not a Mazda or Volvo platform that Ford built its Focus on. The C1 is Ford-lead platform design that Volvo and Mazda contributed to and built cars on.

    The Fusion was not just grafted onto the CD3 (which before it was modified by Ford, had been engineered with the help of Ford), the platform was stretched and strengthed significantly. Much of it with Mazda’s input, but, still, by Ford. The reliability of the Fusion has nothing to do with Mazda.

    Similarly with the D3. The platform that originally served as the basis for D3 was significantly stretched and strengthened to support the XC90 and the Five Hundred. The platform currently sitting under the MKS and Flex and, soon, the new Taurus is not recognizable as the P2. It is stiffer, stronger and more adaptable than the P2.

    This is the truth about cars, after all.

  • avatar
    davey49

    In all the hubbub and panic to make small cars (or not so small) I sure hope that Ford continues to make nice versions of the F150 and the Expedition.
    I would hate to see the F150 as only a “work” truck and Ford sell nothing else but cars.
    Not sure I care about the Mondeo unless a wagon shows up. 1 mid size FWD sedan is the same as any other.
    Ford does seem to be doing well on the reliability front.

  • avatar
    HEATHROI

    Stein

    to get right off topic;

    the Poles that attacked the German tanks were dragoons ie used horses as transport then fought as infantry incidentally doing very well until those sneaky soviets stabbed then in the back.

    Incidentally the Wehrmacht were most reliant on horses out of the Western powers which can be seen in the junk tanks that the nazis’s fielded, from mk1 to mk4, they were all rubbish.

  • avatar
    Landcrusher

    Dynamic,

    It ain’t geography, it’s culture and free property. Under Michigan law (and any non right to work state) a union has the right to take the property of any business or the right to work of any laborer.

    What a crock.

    I have done business with the 2.8, EDS and several other companies in Michigan. The sense of entitlement is overwhelming. The overall attitude is one of zero sum rather than grow the pie. It’s even a problem in management types who have less humility than most CEO’s I know.

    The move would have to be permanent, and irreversible. It’s a big bet, but it better be sink or swim. The reason they move back is that most other places can’t handle the culture. I bet if you even went to their Texas facilities you would find a bunch of people from out of state working there.

  • avatar
    Landcrusher

    Heathroi,

    The Mark IV’s weren’t rubbish. They compared well to the Sherman. Do you think the sherman was rubbish as well? Just because the V and VI were so much better, that doesn’t make the IV rubbish in my opinion.

    It’s pretty hard to use a magnetic mine or other device against a tank from horseback, but I say anyone who tried certainly has a solid pair. There were cavalry charges against infantry, so the cavalry did not always fight dismounted.

    Also, it’s true the Germans used horses a LOT. Mostly to pull wagons and guns by the last years of the war though. The loss of horses from Normandy through Falaise (when the Germans retreated across the Seine) was a serious blow. The french also used horse mounted scouts after Normandy when the rest of the allies had (afaik) switched to vehicles.

  • avatar

    HEATHROI Says:
    July 25th, 2008 at 11:33 pm
    Stein

    to get right off topic;

    the Poles that attacked the German tanks were dragoons ie used horses as transport then fought as infantry incidentally doing very well until those sneaky soviets stabbed then in the back.

    Incidentally the Wehrmacht were most reliant on horses out of the Western powers

    Using military metaphors in the editorial is definitely sidetracking this thread!

    There were 16 confirmed Polish cavalry charges with men on horses against German units during WWII.
    Guderian writes in his memoir of Polish units attacking his tanks on horseback, with lances, but this is being much disputed by mil historians, and Polish military historians have dismissed as propaganda the claim that Poles charged tanks on horseback.

    You’re right that the cavalry at that time was mostly used as mounted infantry, but there were 16 charges in traditional cavalry style, against German units.
    The Wehrmacht’s horses were used for transport, and there were 625.000 during Barbarossa alone – but that’s something entirely different.

  • avatar
    folkdancer

    One of the biggest liabilities that Ford and GM have is that their dealer service is often vile.

    I wanted a new Toyota and I visited 4 Toyota dealers last year before finding one that treated me with respect. So Toyota has problems with its dealers too. A salesman at one Toyota dealer didn’t even recognize my old Camry as a Toyota.

    As I have said on TTAC before I am waiting/hoping to be able to buy a car from Best Buy, Walmart, or Amazon.com someday.

  • avatar

    @folkdancer

    I am getting more and more indications that Toyota has expanded too fast. It’s clearly a potential benefit when dealers wish to switch brands or when you can expand your network through people willing to set up new dealerships — but not if the dealers don’t get the brand.

    A Toyota is a car that’s just a touch better than your expectations, in the category. And a lot of the Toyota “feeling” comes from exemplary after-sales service and from being taken seriously when you come through the door.
    If those fail, then Toyota as a brand will lose a lot of the rationale for the premium they’re being paid now, and they should really worry about that.

    Here’s Ford’s opportunity. Compared to Honda, for instance, Ford has a huge network of dealers — if they can be made to understand the value of a serious, customer oriented setup, then that will add perceived value to Ford’s offering. If, in addition, that offering is properly streamlined to meet real-world-needs, then Ford is well on its way to turning the ship away from the shoals.

    Big IFs – but not MIT stuff. Mulally made Boeing customer oriented (yes, even selling a huge airplane means you should listen to the customer) and streamlined manufacturing — he’s on his way to doing the same at Ford.
    Compare that with GM, which thinks its customers are suckers. (The recent campaign against private sales, Lutz on rich people, etc.)

  • avatar
    Dynamic88

    > As I have said on TTAC before I am waiting/hoping to be able to buy a car from Best Buy, Walmart, or Amazon.com someday.

    What about CarMax?

  • avatar
    folkdancer

    As I have said on TTAC before I am waiting/hoping to be able to buy a car from Best Buy, Walmart, or Amazon.com someday.

    What about CarMax?

    I have delt with franchised car dealers many times and the dealings have seldom been pleasant. The main problem is the salesperson is busy selling financing rather than the car. Several other posts on TTAC have mentioned the other usual problems with dealers.

    Amazon.com: The advantage here is they do a very good job of listing the features and specifications for the products they sell. Amazon also lists comments from previous purchases who can rate their experiences with the product. I have learned a lot reading customers’ comments.

    Best Buy: The advantage here is that the salespeople are nice to talk with and can answer most questions about their products.

    Walmart: The advantages here are usually low prices and a great many stores.

    CarMax: I haven’t visited any of their stores. Have you had good experiences with them? What advantages do they offer?

    Many of my comments here on TTAC are reminders to sometimes think outside the box.
    Are dealers necessary?
    Do we need to make a lot of noise and heat just to move around?
    The piston ICE is terribly inefficient – is there any new type of engine, motor, non piston ICE, or wind up that doesn’t waste 75 to 80% of the fuel fed into it?
    Why do people buy something like an Escalade which reminds me of Ru Paul the transvestite?
    Why are Asian and European cars that come here usually lighter than 2.8 cars?

  • avatar
    carlos.negros

    Bozoer Rebbe Says:

    “To develop this track: in an act of insane “bravery,” Polish horse cavalry charged German motorized cavalry and infantry units in WWII.

    Foolish, perhaps, but more noble than the French who lied down or bent over.”

    Yes, the French surrendered to the Germans in WWII. One must take into account the number of French that died in WWI to understand why. In WWI, France had a population of about 39 million. She lost nearly 1.7 million people, along with another 4.2 million wounded. As a comparision, the U.S., with a population of 92 million at the time, lost a total of 117,000, with 205,000 wounded. France’s loss was greater in terms of overall population than any other country.

    In WWI, Austria-Hungary and Germany together had a population of about 116 million, about four times the population of France. They lost a total of about 4 million people, a bit over twice the number of deaths in France.

    By understanding the extent of the French losses, one can better understand the lack of military resources (men) in place at the time of the German invasion.

  • avatar
    Pch101

    Foolish, perhaps, but more noble than the French who lied down or bent over.

    During the invasion of Poland, Poland had about 95,000 KIA. During the Battle of France, the French had about 92,000 KIA.

    Both nations lost about the same number during their initial invasions. I do hope that no one would accuse the Poles of being perogi eating surrender monkeys. (I happen to like the cheese ones, myself.)

  • avatar
    Landcrusher

    Carlos,

    Given that armies of the time mostly depended on young men to fill the ranks, how would a lack of WWI vets, who would have been at least in their late thirties, make a big difference? If you mean they didn’t have enough veteran leadership to stand up to the Germans properly, then I will go along. Or, if you mean they simply did not have the national will to go through it all again, I can agree to that. But demographically, I would need more info to make the connection.

  • avatar
    Stephan Wilkinson

    I would assume he means there weren’t enough WWI vets to father sons who would ahve been 16 to 20 when WWII started…

  • avatar
    carlos.negros

    I don’t know all the reasons. However, I have visited France and I have spoken to people who lived through WWII; and the WWI loss is often cited as having had a devastating impact on the entire generation. If enough young men were killed and injured, it is possible the ratio of young, healthy women to men was altered. In what was at that time a religious, conservative nation, it would have been normal for there to have been a significant number of women of child-bearing age who were childless. This would have impacted the availability of fighting men exactly at the time of WWII.

    France was not the only country to have had Nazi sympathizers. The U.K., Norway, Hungary, Romania, Ukraine, the U.S. (think Father Charles Coughlin) and many other countries had pro-Nazi factions.

    More importantly for me, however, is the lack of respect shown to the tens of thousands of French who did resist in WWII, many as part of the underground, and at a great cost. I am not French, or of French ancestry, but I see no purpose to belittle such a tiny country (the size of Oregon) that, in fact, has quite a proud military history and tradition (For an interesting read, look up Charles Martel). Today, France has the largest military force in Europe.

    True, the French did warn us about Vietnam, and true, they did not support our invasion of Iraq. (But, neither did eighty percent of the European general population). I don’t think that justifies implying they are a nation of cowards or renaming French fries to “Freedom Fries”.

  • avatar
    Landcrusher

    Carlos,

    There are two things going on. One is a cultural battle of rhetoric where both sides take shots. Both sides have said ugly things, mostly it’s people too young to remember WWII.

    The truth is that we would come to their rescue if ever needed. I also think they would reciprocate if we were truly in need. However, I have not been a big fan of a lot of the games they have played diplomatically, nor the rhetoric that many of their politicians seem to thrive on.

    Their leaders say things about us that our leaders would be afraid to say about them because the voters would not find it funny from a President or Congressman. I wouldn’t worry about Freedom Fries or jokes about dropped rifles.

  • avatar
    Durask

    Ugh, so many strange things in this thread.

    First, Polish Cavalry did not charge tanks with swords, it was a propaganda myth put out by the Germans (there is a website called http://www.google.com, very useful, some of you guys should try it one day).

    Second, the talk about Ford having to decontent their Euro cars for the US market is bizarre. The reason euro Fords sell for that much money over there is because everything is more expensive over there. The truth is, the US has the cheapest cars in the world. Europe is nothing, however, in Singapore, for example, Honda Jazz (Fit) is 57,000 singapore dollars (that’s about 40,000 US dollars) and Honda Civic is 53,000 in US dollars.

    Of course personally I have big doubts that euro fords will sell well in the US. Look what is popular here – Toyota Camry – an ugly blandmobile.

  • avatar
    Durask

    Ugh, so many strange things in this thread.

    First, Polish Cavalry did not charge tanks with swords, it was a propaganda myth put out by the Germans.

    Second, the talk about Ford having to decontent their Euro cars for the US market is bizarre. The reason euro Fords sell for that much money over there is because everything is more expensive over there. The truth is, the US has the cheapest cars in the world. Europe is nothing, however, in Singapore, for example, Honda Jazz (Fit) is 57,000 singapore dollars (that’s about 40,000 US dollars) and Honda Civic is 53,000 in US dollars.

    Of course personally I have big doubts that euro fords will sell well in the US. Look what is popular here – Toyota Camry – an ugly blandmobile.

  • avatar

    @Durask

    While an off-topic sidetrack, the discussion about cavalry in WWII can actually be used to cast a light on Detroit’s woes.

    First, let me point out that I never wrote that Polish cavalry charged German tanks with swords (well, that would have been sabres.)

    This is what I wrote:

    To develop this track: in an act of insane “bravery,” Polish horse cavalry charged German motorized cavalry and infantry units in WWII.

    There were in fact 16 confirmed Polish mounted cavalry charges against German units during the defense against the German invasion of Poland.

    Did they ever charge tanks? I think not.
    Guderian writes in his memoir that Polish units did attack his tanks, on horseback, using lances — but this is much disputed.

    During “documentation” of one encounter with Poles, the Germans showed dead horses and cavalrymen on the field, and there were German tanks in the background — but these are alleged to have arrived after the battle was over.

    Those sixteen charges are not disputed by military historians.

    ===

    SO – what’s the relevance of that to Detroit’s woes?

    Sometimes one is so entrenched in what one wants to be true, that one misses truth.
    While it’s perfectly possible to understand a cavalry charge against an impregnable foe, in desperation, at the moment — it looks different in retrospect, and becomes no more than foolish bravery. Some will possibly seek to discount the tale — and just as there were stakeholders on one side promulgating it, there can be stakeholders on the other who wish to prove it false.

    Consider the discussion threads here at TTAC, and consider the attacks the site is often the target of because it didn’t swallow the Detroit line in one go.
    That’s another instance where truth and what we want to be true tend to find themselves at odds. And there’s no end of qualifiers and sidetracks, often fueled by propaganda, introduced into discussions:

    1. Honda will regret standing without large cars, when the market turns.

    2. Toyota is growing too fast, their quality and service suffers/could suffer. (I’ve written this myself — but is it true? Do I have statistics proving that the proportion of dissatisfied Toyota customers is growing, or is that proportion actually becoming smaller? I don’t know.)

    3. GM has done the best it could, given its unfair legacy costs.

    4. Nobody knew the price of gas would rise this fast.

    5. Good luck towing your powerboat with a compact.

    6. Global warming is a crock of shit.

    Etc.

    All are statements that immediately bring forth impassioned arguments from both sides, often giving the impression that life itself is at stake here.
    And maybe it is – for some, the future of their dealership depends upon a specific interpretation; for others, the resale value of their SUV goes south as the price of gas goes north.

    A contention: successful automakers do not depend upon spin or variations of the truth in order to be in business.
    That was the point of my editorial, which (as I wrote it originally) was about the Profit Basics reality check that Mulally is introducing to Ford — after editorial input it leaned more heavily towards whether Ford wants to be Toyota, and that’s the tack the discussion took.
    In addition, because we are expert at sidetracking discussions on the internet, we had this not so salient tangent about military history and Polish tactics during WWII.

    Thousands of auto engineers and managers have been inculcated with the belief that “you can’t make money on small cars.”
    Which is false. You can make a hell of a lot of money making small cars — but then you have to adopt a “let’s make money on small cars” mindset.
    Detroit’s curse is that it has refused to accept that mindset until it finds itself up against a cold adobe wall, facing a firing squad of irate customers screaming for “small and fuel sensible cars.”

    There are a lot of false assumptions about cars, and the carmakers which will see success in the years ahead will tackle them, and provide products that defy these assumptions.

    This goes all the way to the top. An assortment of quotes from Bob Lutz on the Prius will provide much entertainment — but is also tragic: because coming from him, it sent a strong signal to the GM organization as to where management wanted the focus to be.

    Did Polish cavalrymen, in desperation, seeing their fellows mowed down all around them, mount their horses for a final and glorious charge, as the outcome was given? Some resist that interpretation, as the act seems foolish in retrospect, and as it reflects badly upon the politicians and military planners who sent a WWI army against German Blitzkrieg tactics.

    The sooner GM realizes that its management is using WWI tactics (and no strategy) against guided ordnance, the better a chance GM has of pulling itself out of a losing battle with something it can build on.
    Mulally and Ford have reached this realization (though I don’t doubt there are still a lot of WWI holdouts in Ford management).

    Now that the gas prices are inching downwards, given the cooling of the world economy, you can be assured that the voices claiming “Honda will regret only having small cars the day the market wants big ones” will once again sound out.

    It’s going to be interesting to see which automakers face up to reality.

  • avatar
    Dynamic88

    folkdancer

    CarMax: I haven’t visited any of their stores. Have you had good experiences with them? What advantages do they offer?

    I’ve never dealt with CarMax. We don’t have any in Mich. My impression is that it’s about as easy as buying anything else on line. The cars are described and the price is listed. The concept was developed by Circuit City, the electronics retailer. It’s still a dealer, and of course you’d still want to test drive the car -probably. (I would) But you can pretty much pick out a car as easily as if it were Amazon.com. I don’t think they dicker on price.

    Do we still need dealers? Well we need a place to have the car serviced.

  • avatar
    happy-cynic

    Great editorial. This website should be mandatory reading for everyone who works in the auto industry.
    To take this further;
    One of the main reasons why Germany was so successful in the early years of WWII was they had had a “fresh start” due to the losing WWI. France built this huge static defense and had old school tactics. Germany went around the line, thus disrupted French army so bad, they had not much choice. Poland (as another reader had pointed out) was attacked by the Soviets, as well. Plus if you look at the lay of land, Poland tough to defend. Not many natural barriers. Unlike the UK and USA with bodies of water to aid in defense. and the huge land mass of then Soviet Union.

    Back to cars, reading the quotations of varies US auto management and union members whining about small cars is almost too funny. The need a dope slap to wake them up, they do not seem to realize that you have to sell the car/truck/suv to make mony. Also like the “winners” WWI. (using same plan that from the last war) the above seem to be waiting for fuel prices to come down again, and all will be well.

    Moving out of Detroit might help, however the costs would be very high and the Feds would make some stupid law preventing them from moving and most of all; who wants them?

  • avatar
    Pch101

    you can be assured that the voices claiming “Honda will regret only having small cars the day the market wants big ones” will once again sound out.

    You miss the point here. Honda will regret not having a functioning luxury brand to meet the market that will invariably arise during an economic recovery. Their returns will suffer compared to their rivals because of this.

    It’s great to operate an umbrella store when it’s raining. But if you had one in Phoenix and Las Vegas, your strong sales period is going to be limited to relatively short periods.

    Honda does not have the ability to turn Accord R&D into Lexus-level prices, which is why they consistently have lower market share and lower margins than Toyota. Toyota has higher profit margins because it can convert some of its investments in capacity and product development into some high dollar products.

    If you want to play in the US market during the good times, which is most of the time, then you had better have a luxury brand in your portfolio. Luxury cars tend to have larger engines, hence the need.

    Most of the time, the US is not in recession, and Americans like to spend money on cars when they have the money. When the oil bubble bursts, we will see (once again) that peak oil is based upon theology, not geology, and that consumers will invariably buy more fuel hungry vehicles once they’ve overcome this latest downturn.

    To change US fuel consumption habits substantially, the US would have to increase fuel taxes to discourage increased consumption, but anyone who watches American politics knows that this just isn’t going to happen. That’s political suicide, and neither party will support it. Since Honda can’t beat ‘em, they’d be smart to join ‘em, if only they could figure out how to do it.

  • avatar

    Pch101

    Sorry. But I’m convinced you miss the point here.

    GM’s fallacy, and somehow by implication yours, is that a carmaker must cover every niche in the market, including the luxury ones.

    The luxury niche, as hereto defined, is extremely vulnerable to fluctuations in the economy. The present SUV, large luxury vehicle craze was only sustainable due to an irrational pricing of fuel and due to an exponential “growth” in the economy due to derivatives and outsourcing — both of the latter are detrimental to long term growth in wealth, as is evident today.

    Honda, by focusing on getting their vehicles as invironmentally “friendly” as possible, while also achieving leadership in fuel efficiency (and subsequently, energy efficiency) will have a section of the market that is more than sufficient for them to grow in, without relying upon irrational purchase patterns.

  • avatar
    Pch101

    GM’s fallacy, and somehow by implication yours, is that a carmaker must cover every niche in the market, including the luxury ones.

    Why are you dragging them into it? They suck at just about everything they do (at least for US consumers), so they provide a poor example.

    And since when does GM have a successful luxury car portfolio? As has Ford, GM has failed even more than Honda in maintaining strong luxury car branding. Cadillac has been sucking wind for years, and it is the destruction of brands such as Cadillac that has helped to destroy GM’s profits.

    Toyota is making money precisely because it gives affluent Toyota customers a place to move upward to. Meanwhile, Porsche is the most profitable car company on the planet, and everybody would love to buy BMW if only they could.

    Luxury and upscale are proven strategies in the auto business — with the right branding, it works magic for the income statement.

    GM’s problem is that it put all of its eggs in one big SUV basket. That was a highly risky play, as it was clearly dependent upon low fuel costs for it to work. Since nobody can accurately predict fuel costs with any absolute certainty, it is stupid to craft an entire vehicle portfolio around a rigid assumption.

    A smart mainstream company would have products that could play to markets both good and bad, and would stay clear of forecasting commodities. They have enough to worry about without getting into futures speculation.

  • avatar
    Durask

    Beating a dead horse…so to speak.

    Polish cavalry actions in WW2 were tactically sound, there was nothing suicidal about them (attacking isolated infantry units armed with non-automatic rifles, usually in heavily wooded areas).

    Still wrong analogy.

  • avatar
    wstansfi

    The rise and fall of the SUV, and with it Detroit, will for centuries be the stuff of economics classrooms. I have never understood why something that is relatively cheap to produce – body on frame truck/SUV with mediocre interior and ride – has for so long been able to command such a generous premium in the market. You would think that as more producers got into the game and things got crowded, that competition would have driven the price down… but instead we saw more of an oligopoly rule, where producers pretty much collaborated to produce high priced vehicles to satisfy a fad bubble of demand whose bursting was as inevitable as the dot-com bust. GM, Chrysler, and Ford leveraged their entire futures as if they could continue to exploit this senseless demand indefinitely, instead of shrewdly stowing away profits for rainy days and investing the proceeds back into the cars and trucks themselves. I have no sympathy for these corporate entities, nor the plight of the luxury truck.

  • avatar
    JuniorMint

    Dynamic88 :
    3. Re: moving from Detroit. This whole geography imperils creativity thing is a crock. I live in Mich., and have visited Ohio numerous times. You can take it from me, Ohio is every bit as bland, if not more so.

    As a Chicagoan, Michigan has always baffled me. I have spent extensive time in both Michigan and Georgia, and in both states I have had moments where I forget which one I’m in.

    Unique to Michigan, however, were two incidents involving enraged local idiots and my Scion xB. I have taken to parking it in my sight at all times while visiting the state, due to the number of threats of vandalism for driving a “Jap car” that “a real truck would crush like a tin can.” Uh, a) wrong, and b) maybe if your company made vehicles more like my “Jap car,” YOU’D HAVE A JOB RIGHT NOW.

    Bitterness aside, these were in regions nowhere near Detroit. I have a feeling this is the self-destructive, insulating mindset that our domestic automotive execs are surrounded by.

    If so: get them out of Detroit, indeed!

  • avatar
    Geotpf

    Mercury is a problem. You can’t kill it, because you would kill Lincoln in the process (all the Lincoln-Mercury dealers would close if they lost 50% of their sales). But it doesn’t sell well enough to give it really unique product. So, it gets Fords with more chrome that sticker for a grand more. Now, this isn’t bad in terms of short-term profits, in fact it’s quite good, but it does mean it becomes more and more meaningless over time. But that’s the only route Ford really can take-keep it alive but not give it anything unique. They really don’t have a choice.


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