Will Ford go bankrupt? I doubt it. Not while the “bad” automakers that suckled on the federal teat go on and on and on and on. A FoMoCo C11 would expose the government’s Detroit bailout for what it was/is: unfair, ineffective, ill-conceived and unsustainable. Politically, Ford’s failure is not an option. If push comes to shove, Uncle Sam will send Ford more Department of Energy loans, some juicy subsidies and generous tax breaks; anything and everything up to and including cash money. This despite—I mean because of the fact that Ford is guilty of the same sin that sank GM and Chrysler: taking in less money than they spent. Political calculations aside, is it even possible that Dearborn’s darlings will be forced—forced I tell you—to prostrate themselves in front of federal taskmasters? Once again, to answer that question, feel the burn.
Category: Ford Death Watch
Speaking of barnyards, someone forgot to tell Ford watchers not to count their chickens until they hatch. The MSM is ready, willing and able to pronounce the Blue Oval Boyz’ turnaround plan for the ailing American automaker as good as done, and skip the “it worked!” part of CEO Big Al Mulally’s canonization. The Detroit News is down with this fait accompli meme. “As one fund manager who controls a sizable chunk of Ford’s stock and bonds put it: ‘The biggest threat to Ford’s future is that Mulally steps off the curb tomorrow and gets hit by a bus.’ Such sentiments, blunt as they may be, are a testament to the progress Ford has made since Mulally took over as CEO in September of 2006. He predicts the company should settle into profitability by late 2011.” So that’s it, then, save “Mulally is no stranger to success” and “He’s been an agent of change” and “For many Ford employees, he has rock-star status” and I think they ought to think it out again.
By all accounts, the refreshed Ford Taurus is an excellent car. Easy-to-drive, economical, well-built, comfortable, capacious and handsome. As a sign of its pre-launch success, the vehicle’s critics are focusing on its sticker price. As a firm believer that something is worth exactly what someone will pay for it, it remains to be seen if Ford’s priced the refreshed Taurus out of the market. Meanwhile and in any case, Taurus Gen 6 won’t “save” Ford like the 1986 model. The 2010 Taurus may be a singular automobile, but it is not a signature automobile. To survive in today’s crowded, shrunken, hyper-competitive new car market, Ford needs vehicles that clearly differentiate the brand from the competition; and marketing to match. Ford recognizes the problem but fails to rectify it.
“Drive the Ford Difference.” Well, exactly. But what is the Ford difference? Even as The Blue Oval Boyz spend millions promoting their latest brand slogan, they continue to struggle with its meaning. The tag line’s tortuous evolution indicates their inveterate indecision. Lest we forget, “Drive the Ford Difference” has just replaced “Drive One,” which replaced a farrago of consumer exhortations: “Drive Quality,” “Drive Safe,” “Drive Green,” “Drive Smart.” Ford’s gone from pick a slogan, to an anti-slogan, to guess the slogan. The Glass House Gang is in real danger of descending into inscrutable, Coke-like zen koans (i.e., Ford is).
This is Ford CEO Alan Mulally’s Achilles heel, and you can see the protruding arrow. In terms of manufacturing process, Big Al has cleaned house: eliminating much of the corporate behemoth’s sloth, waste, fraud, duplication, bureaucracy, indecision, intransigence, etc. The $25 million man (first year) has also been lucky enough to prove that it’s better to be lucky than smart. The company’s rep is riding high on its decision to shun the federal bailout buffet—ignoring the fact that it only did so to protect to Ford family control and recently tapped a $5.9 billion, no-interest, taxpayer-provided “retooling loan.” More to the point, Big Al has done nothing to save the Ford brand.
Automotive branding—deciding what vehicles to build, how to build them and how to sell them—requires what George Bush famously called “the vision thing.” Mulally’s administration suffers from a failure to synthesize. In other words, truck buyers know the F-150 is built Ford tough (complete with its own logo). But how do you link that selling point with the 2010 Ford Fusion Hybrid’s claim that it’s “the most fuel-efficient midsize sedan in America®”?
Or the Mustang head vs. heart, heart wins campaign? And how does that jive with the Dirty Jobs guy’s claim that the Fusion beats the Toyota Camry and Honda Accord for quality? Meanwhile, the poor (but excellent) Ford Explorer is reduced to promoting roll-over protection while the Edge urges you to “drive past gas stations faster.”
Note: it doesn’t matter if any of these selling points are true. They’re just too damn many of them. The Ford brand stands for everything and nothing at the same time.
No surprise there. Big Al inherited a failing automaker rife with warring fiefdoms: corporate enclaves defined by country, brand, product, specialty and, of course, personal loyalty. Ford’s undeniable product excellence is not the result of a overarching corporate effort in any one direction; it’s the offshoot of individual pockets of excellence working to equally admirable but largely uncoordinated ends.
No question: Mulally has moved the entire organization towards a less inchoate structure; one where employees understand that they must reconcile personal ambition with what they have to do for the “greater good.” Unfortunately, efficiency is not a rallying cry upon which great organizations—or brands—are built.
Sure, Toyota gets maximum props (from Big Al as well) for its lean manufacturing system. But it’s product reliability that defines the Toyota brand for both its workers and consumers. Blessed with an overarching brand promise, ToMoCo is free to fuck up and recover. The FJ Cruiser may be a misbegotten platypus of an off-roader, but it didn’t ding the public’s understanding of the Toyota brand.
Bereft of focused, coherent and compelling branding, Ford has an almost infinite number of ways to fail. And few ways to recover. The Flex? What was that all about? How about, say, any Lincoln product? The Lincoln brand? Volvo? Mercury?
Quality, safety, fuel efficiency, technology, luxury, value. Must. Choose. One. Once that’s done, Ford has to build cars that embody that brand promise better than anyone else in the market—regardless of the cost. As I said when I drove the execrable, warmed-over Focus, Ford can’t afford to make money. Not when their brand is in such dire jeopardy. They should cut their portfolio to the bone, choose a shtick and use it to beat everyone in the entire company. And then sell the beJesus out of it. Relentlessly. Endlessly.
While its Detroit rivals unravel with publicly-funded gusto, Ford continues to enjoy nearly unanimous praise from the media and industry commentators. And why not? Free from the public funding, bankruptcy, dealer slashing and attendant bad publicity plaguing its competitors, Ford is clearly the healthiest of America’s automakers. But it’s impossible to forget that Ford’s buoyancy is but one of the final boons of the pre-collapse credit markets. Mortgaged to the hilt, Ford finds itself facing new CAFE and emissions standards without a certain deep-pocketed uncle standing by to pay its way into the new, green automotive paradigm. As a result, Ford seems to be trading long-term opportunities for short-term survival.
It’s no coincidence that, in the lead up to their bailout bonanza, Chrysler and GM embarked on ambitious (to put it kindly) alt-energy vehicle programs. The more we learn about newly-proposed CAFE/emissions standards, the more Chrysler’s ENVI vapor and GM’s Volt moonshot seem like winning propositions. Yes, really. Gaping loopholes in the proposed legislation point to a credit-trading scheme that seems to have been designed to create a Potemkin auto industry.
Bankable, tradable carbon/efficiency credits (and, especially, so-called “super credits”) create massive government incentives for Detroit’s automakers to build electric and alt-fuel vehicles regardless of their viability in the free market. Since these credits offset (and in the case of super credits, multiply) the efficiency ratings of an OEM’s fleet, tomorrow’s mass-market offerings must be subsidized by EVs with inflated mpg ratings.
Chrysler and GM are perfectly positioned to capitalize on the auto industry’s political New Deal. As the projects of an independent automaker, the ENVI and Volt projects amount to shocking hubris; as dependents of the state however, these “advanced technology” projects are the only incentive for ongoing government subsidies. With the public investment in GM and Chrysler expected to crest $100 billion and with nothing promising a short-term reversal of fortune for these firms, the government has no choice but to continue to invest in the politically-expedient in hopes that it someday becomes financially viable.
Assuming electric vehicles will someday become a workable business model, this puts Ford at a massive disadvantage. By carefully and strategically spending its $23 billion privately-funded do-over fund (acquired in early 2007), Ford has survived without resorting to a government bailout. And though this helps the media in glossing over the uncomfortable details on the way to crowning Ford the winner of “Survivor: Detroit,” it doesn’t change the underlying reality: Ford doesn’t have the capacity to position itself for the post-bailout market.
The curse-blessing of Ford’s survival is perfectly illustrated in the contrast between the media coverage and the reality of Ford’s Focus EV program. Ford has wisely kept its PR field day rolling by announcing that its Michigan Truck Plant will be the new home of the Focus, including future EV and hybrid versions. Dazzled by the vision of electric cars replacing reviled Explorers and Expeditions in a Michigan factory, the media has dutifully repeated and amplified Ford’s message of transformative change.
In reality though, the “Ford-ness” of the Focus EV is highly suspect. Rather than develop an electric car of its own, Ford is licensing a vehicle built by supplier giant Magna with a Focus shell on top. In fact, Magna showed up in Dearborn with a Focus EV prototype based on its modular EV platform, the mila ev.
Ford spins the cost-savings and “innovation” of the supplier-led development as a positive, but the move speaks only of desperation. Ford is mortgaging its future (again) by outsourcing its EV development because the project does nothing to improve Dearborn’s in-house capabilities. Furthermore, it’s outsourcing on the cheap. Ford did not insist on an exclusive contract for Magna’s technology in order to avoid paying for the platform’s entire development.
This means that not only has the Focus EV failed to prepare Ford for the electric future, it has also helped finance a platform that other OEMs can now use to compete with the Focus EV. By buying into Magna’s “any OEM, any car” platform, Ford dooms its Focus EV to competition with identical (save for the body shell) vehicles at even the hint of success. Think cross-OEM brand engineering.
Ultimately, Ford had no choice but to develop an EV on the cheap. Although it enjoys short-term sales prospects that its rivals can only dream of, it’s highly unlikely that Ford will see profits soon enough to spend any more on long-term development. Its limited (if honorably come-by) cash pile is already forcing Ford to punt on EV development, while its cross-town competitors are gearing up to spend billions of taxpayer dollars developing future vehicles with little apparent concern for their short-term oblivion. Recent automotive history (aka the Prius) proves the value of developing long-term capabilities. Ford could well be winning the battle but losing the war.
Perusing the February 23rd issue of AutoBiWeek brought to mind Frank Sinatra’s final concert series. My thought at the time: can someone just shoot this guy? One of the greatest singers of all time couldn’t hit a note with a blunderbuss. In AutoBiWeek’s case, we can skip the paean to their heyday (for obvious reasons) and highlight WeatherTech’s two-page spread on the inside cover. It’s only a matter of time . . . . Meanwhile, Ford’s ponied-up to advertise their pony car. As Chrysler and GM embark on their “You Paid for It” farewell tour, one wonders if the ad for Ford’s greatest hit remix signals a dramatic return to form, or the end of the end.
“DEFIES TIME. AND MOST EVERYTHING ELSE.” You can almost hear the scree of marker on whiteboard, as the agency and marketing guys compete to see how many levels of meaning they can ascribe to a vague, mundane come-on.
Defies time! Eternal appeal! Defies time! Like the old bastards who still want to buy a Mustang. Defies time! Like the time it takes to accelerate from zero to sixty! Defies time! Like “Why is Ford still making this thing?”
Yes, there is that. The Mustang is still a two-plus-torture coupe; a toy at a time when nobody’s got a plug nickel for toys.
Don’t get me wrong: I adore the current-gen GT despite the fact that the interior’s made of recycled toothbrush handles and the on-the-limit handling makes me shout (at the appropriate moment) Live! From the rear axle! It’s the end of my life!
Never mind. The Mustang is as iconic as a coke bottle and the V8’s eargasmic. Only . . . you can hardly find a Coke bottle anymore and the GT is a niche within a niche.
To its credit, Ford knows the entry-level Mustang’s back is up against the wall. Hence the “AND MOST EVERYTHING ELSE” part of the headline.
You can almost feel the embattled resolve. The 2010 Mustang defies federal fleet-wide fuel economy regulations. Defies anodyne Toyondissan styling. Defies the end of Detroit. Defies the wife, who’s freaked that we might end up on the soup line (and BTW we’re $15K backwards on our current auto loan).
I’ve yet to drive the new base Mustang. But I doubt it will defy my expectations; I’m sure it’s vastly better than the model it replaces. The new EcoBoost (born TwinForce) V6 should provide some driving pleasure where, previously, there wasn’t any. And . . . that’s about it.
The Mustang’s exterior modifications are strictly forum fodder, the interior still looks so cheap it Hertz (even though it probably isn’t) and Ford refused to bite the Bullitt and put an independent rear axle out back. Oops! I guess someone forgot to defy the beancounters.
But the real problem with the new Mustang (the killer app in the literal sense) is the marketing.
“COMPLETELY CHANGED,” the body copy shouts, in its own small-font-size sort of way. “INSIDE AND OUT. BUT THE FEELING IN THE SAME AS EVER.” Translation: IT SUCKED BEFORE BUT WE CAN’T SAY THAT BUT ANYWAY YOU LOVE THE WHOLE MUSTANG THING, RIGHT?
The Mustang’s “Same as it Ever Was” magazine ad is just one example of The Blue Oval Boys’ po-faced approach to marketing. Appealing to muscle-minded Mustang motorists with a message of eternal life is all very well and good in a preaching-to-the-choir kinda way. But Ford needs to win new converts via a major “come to Crazy Henry” moment, saving souls with a charismatic product born of bad ass branding.
Yes, The Blue Oval Boys finally whittled down their four tag lines. They’ve gone from “Drive Smart, Drive Safe, Drive Green, Drive One” to “Drive One.” Which is, without doubt, the worst possible choice (out of four less-than-inspiring options). Drive One is bland, unimaginative, insipid and entirely forgettable.
Ford may be completely changed inside and out, but the feeling amongst consumers remains the same: meh. Or, to put it in a corporate context, the company’s branding sucks. No, it’s worse than that. Ford doesn’t have any branding.
And that’s a shame because Ford makes some terrific products. The Explorer is a tremendous vehicle allowed to die without a fight. The Freestyle—sorry, “Taurus X”—was another potential winner that flew so far under the radar it crashed into an anthill. The F-150 is one hell of a truck whose virtues have never been properly tied to other Ford products. The Fusion handles like a dream . . . that no one’s ever had.
Mark my words (Fields): Ford will die unless it distills and disseminates a coherent brand message. F. Scott Fitzgerald famously opined, “There are no second acts in American life.” Read in context the line means that most Americans skip directly from act one to act three. Ford had better get a move on, or, one way or another, it will be forced to leave the stage,
Ford sits on the “Edge” of disaster. Despite the assurances from its CEO and chief cheerleader to the contrary, Alan Mulally knows that the day of reckoning could soon appear at his doorstep. Without an increase in sales volume, and soon, there will be no way to stop the cash burn. We’re not going to malign anything Mr. Mulally has done so far. In fact, he’s done more right than any other head honcho from Detroit in decades. But it’s time to pull out all the stops and break with tradition of never wishing ill on a competitor. It’s time for Chrysler to die.
Mulally needs to publicly state the obvious: Ford’s survival depends on Chrysler elimination. There’s no other way. Chrysler needs to go away immediately, not sustained in some semblance of suspended animation with token grants of government assistance. Now is not the time to be shy about this startling reality. Alan Mulally has to speak up now. He might also want to mention that Chrysler’s death will give GM a chance at salvation. Perhaps he can get to Rick Wagoner to show some of spine in support of this action, as well.
Ford has managed to stabilize its market share around 15 percent of the U.S. market. The slide towards ignominy has stopped in its tracks. The only problem: the entire market has shrunk to about 10.5m units. This gives Ford maybe a 1.6m unit per year throughput– if the annual sales rate continues. If sales go lower, well, good things won’t happen.
Last year, Ford sold 1.9m units, and 2.4m units in 2007. So in just two years (2007 to 2009), Ford will lose about 800k units in sales, roughly three assembly plants’ worth of production.
In the last quarter of 2008, Ford burned cash at the rate of $2.3b per month from automotive operations globally. Europe, Asia-Pacific and Volvo had negative operating income during the quarter, with future losses likely. We’ll assume that there won’t be positive cash generation in the near term there. But the bulk of the burn comes from North America and again, we know which way that’s going.
Ford claims that the cash burn will slow. That’s probably true. But it will still be a burn. To bolster its cash, Ford will soon borrow $10.1b from its credit line. Its cash on hand at the start of February will be on the order of $23b. Assuming it slows the burn to $1.5b per month, Ford has only seven more months before it goes cash critical at its minimum operating cash of $10b. That’s sometime in August this year.
There’s one cure. Kill Chrysler now, don’t wait.
Chrysler sold almost 1.5m units last year, of which one million were trucks (includes SUVs and Jeeps). Its recent sales pace puts it on target for only one million units for 2009, while living on the taxpayer dole. Of this, roughly 175k will be Ram pick up trucks, 160k minivans and roughly 200k Jeeps of all flavors. The rest are the hodgepodge of cars, small trucks and SUVs no one really wants anyways.
With Chrysler out of production, at least 800k of non-unique but easily substituted Chrysler vehicles (everything but minivans and Jeep Wranglers) could be sold by Ford and GM. That’s pick up trucks, fleet cars and SUVs. Plus, each of the remaining Detroit 2 could pick up some or all of the minivan and Jeep business.
Keeping with this line of logic, let’s assume Ford splits the future Chrysler business with GM. That’s an additional 500k unit of sales, of which approximately 60 percent or so are trucks (including minivans). That’s some decent profit business. And with Chrysler gone, the merry-go-round of rampant discounting for fleet and retail business led by this weak sister also grinds to near halt.
Worst case: the transplants pick-up the lion’s share of the “new” business. There’s no evidence to suggest that Oldsmobile’s death transferred sales to the remaining domestically-owned brands. And there’s another problem…
Kissing Chrysler off today would mean that shuttering Chrysler dealers would offer their entire existing inventory at clearance pricing. That’s something like 400k+ units selling at prices levels never seen before seen (save decades ago). And the ChryCo cast-offs will sell. Imagine new Chrysler 300’s at $10k. Heck, whip out a credit card and drive away.
The fire sale will sop-up “excess” demand, most likely from the D2. So there will be short term pain at Ford and GM stores. But it’s a pill worth swallowing.
Under this scenario, in a few months, Chrysler’s inventory will be gone. Ford will then add sales, especially in trucks and fleet sales. Maybe 500k or so. Pricing will improve. The cash burn will be eliminated, as its existing plants product more without adding capacity. That’s the win.
Alan Mulally needs to abandon his pro-Chrysler bailout stance and tell the world that it’s time to kill the once-proud American brand.
It’s been a while since we’ve run a Ford Death Watch. Which doesn’t mean Ford isn’t dying. It is. It’s just dying more slowly and less spectacularly than GM and Chrysler. In fact, Ford’s head-faked the press. They’ve convinced the pundocrats that The Blue Oval Boys don’t need federal bailout bucks to survive. Oh what the Hell, FoMoCo CEO Alan Mulally just about told Congress, as you’re offering… we might as well accept. In truth, the Detroit’s last man standing is about to hit the pavement just as hard as its cross-town co-conspirators.
Tomorrow, the injury will be audible– and not just in the halls of Congress. Ford’s November sales stats will go splat. Ford analyst George Pipas will seek shelter in metal-moving relativism. Just as Ford proudly trumpets the fact that their cars are nearasdammit as reliable as Toyota’s, Pipas will claim that Ford’s sales drop is nearasdammit as bad (i.e. good) as Toyota’s. Which will be both true and irrelevant.
All things being negative, ToMoCo is still on track to bank $5b in profit this year. Meanwhile, Ford shed $2.6b in Q3, burning through $7.7b of its cash pile. So forget Toyota. General Motors is the more appropriate comparison. And there are only two significant differences between Ford’s plight and that of GM: scope and scale.
GM has eight U.S. brands, six of which need to die. Mazda excepted, Ford sells four brands in the U.S., two of which need to die. GM has around 6550 dealers, 5k of which need to die. Ford has around 4k dealers, 3k of which need to die. Meanwhile, Ford and GM are struggling under the weight of identical labor contracts, desperately trying to shed plants and jobs. In short, as goes GM, so goes Ford.
Commentators— and Ford— like to point out that The Blue Oval Boys are in less danger of running out of cash than GM. Truth be told, the danger’s the same; only the time line varies. Ford’s decision to stock-up on money before the current fiscal meltdown– mortgaging everything up to and including their logo– was either the smartest move the company ever made or the luckiest. Or both. But it doesn’t alter the end result. Unless Ford starts taking in more money than it spends, it’s going to go bankrupt.
As Ford CEO Alan Mullaly bellies-up to the Congressional bailout bar, he’ll parrot GM’s claim that numbers alone don’t tell the story. Right-sizing, on track, bridge loan, bright future, new products, fuel efficiency, world platform, economic downturn, yada yada yada. As the only American automaker with a plausible turnaround tale to tell (which isn’t saying much), Ford will get the money. After all, Congress wants to save SOMEONE in the American auto industry.
Whether or not the feds re-stoke Ford’s coffers and/or help it reduce its overheads, FoMoCo’s comeback is destined for failure, for one reason: branding. Ford doesn’t have any.
Quick: what’s Ford’s slogan? Drive Quality, Drive Green, Drive Safe, Drive Smart or Drive One? Yes. The latter is Ford’s ur-slogan, which says, well, nothing. Given the ailing American automaker’s product overlap, the company’s call to arms might as well be “pick one.” Edge, Flex, Taurus X or Escape?
Make no mistake: this is no small matter. If Ford is to survive, it must come-up with a compelling reason to buy a Ford instead of anything else.
Reliability? Toyota. Resale value? Honda. Price? Hyundai. Stress-free shopping? Saturn. Buy American? Only if you’re thinking continentally. In today’s mixed media world, a car company without tightly-focused branding is like a twenty dollar bill that’s been bleached white in the wash.
Ford’s anodyne anonymity doesn’t end there. Lincoln’s “Reach Higher” slogan– a not-so-subliminal slam at working class buyers– reflects the luxury brand’s lack of a coherent product or marketing plan. And if that’s not enough to convince you that Ford doesn’t “get it,” Lincoln’s farrago of MK monikers illustrates the point nicely. As do the vehicles themselves: a range of tarted-up Fords whose excellence is there for no one to see.
As for Mercury, other than ogling their comely spokesmodel, what’s the point?
Legislators are not likely to concern themselves with such things. If products are the subject, mpgs are the answer legislators want to hear. If pushed, Mulally will argue that Ford’s 2010 Euro-style products will save both planet and company. Politicians will score some points for the folks back home, cross their fingers and sign the check.
But if the pols really wanted to protect the taxpayer’s money (as if), they’d remember that nobody ever submitted a business plan that ends in bankruptcy. The pols would focus on the fact that Ford’s future depends on its products, and products depend on their branding. Someone would look Mr. Mulally in the eyes and ask a simple question: what, sir, is a Ford?
In a recent article, The Economist wondered if Detroit's automakers would win their "race against time." In other words, will Ford, GM or Chrysler return to profitability before their cash conflagration throws them into the Chapter 11 burn unit? At the risk of providing a piercing glimpse into the obvious, The Big 2.8 need to change course or flame out. STAT. The Economist rightly suggests that Ford is the only carmaker of the three with a coherent strategy for escaping C11. For contrast, let's recap GM's and Chrysler's plans…
GM's roadmap: pare structural costs out of its bloated North American installed capacity until they can replace high profit light trucks with… something. To that end, The General's axing people and factories like they're going out of style (which they have), costing the company billions. The overarching problem: GM's market share and revenues are falling faster than the cuts. GM might be able to scrounge additional capital, but that's merely delaying the inevitable.
Chrysler's plan: become a distributor of cars made by others. Someone. Anyone. Aside from the fact that it won't work– branding still counts for everything– the outsourcing effort can't happen soon enough to save the company. Chrysler's product-related income stream is evaporating faster than a Texas rain puddle, and owners Cerberus have no hope (and no intention) of raising (or providing) sufficient capital to transform Chrysler into a viable carmaker, rebadged products or no.
In a nutshell, GM's still in denial, bleeding a slow death (in North America), while Chrysler is running around like a headless chicken, running out of money.
Meanwhile, Ford's been executing a focused, determined and sensible new new turnaround plan since the arrival of the aluminum-winged savior from Boeing.
Alan Mulally's strategy: transform Ford into a smaller, more nimble company by leveraging its global resources (which are mostly smaller vehicles in Europe) to reduce platforms and costs. Build quality products in North America (as done by Ford Europe today) offering excellent fuel economy and class-competitive value for money.
It doesn't sound crazy, and it might just work. But there are more than a few hurdles Mulally and his Blue Oval Boys must jump before they can beat their cross-town rivals to the "no C11" finish line.
First, Big Al must break down Ford's bloated bureaucracy and legendary in-fighting. No more individual unit fiefdoms. Intra-national waste and duplication of effort must be ruthlessly eliminated. Consolidation must be pursued without fear or favor.
Big Al's got to look outside Ford for expertise where needed. This he's done, hiring marketing whiz Jim Farley from Lexus and Ken Czubay (U.S. Sales and Marketing Chief) from Southeast Toyota Distributors. The more top-notch outside talent brought on board Ford, the better.
Second, Ford's got to jettison those parts of the company that don't fit to the global strategy. Throwing Jaguar/Land Rover and Aston overboard was the right thing to do. Volvo can't be offed soon enough.
Third, Ford's got to develop a profitable product plan for North America.
Ford's newfound commitment to smaller cars, more efficient engines and better design makes perfect sense. The new Fiesta and Euro Focus are overdue, but they will be welcome. When the company restyles the Taurus and drops the Freestyle, we'll know they're getting their you-know-what together. Turbocharged engines also make sense: more horsepower, better fuel efficiency. No wacky bets on unproven electric go karts.
Finally, Ford must challenge the entire organization to perform to stated goals. They must energize the engineers, design staff, factory workers and dealers with their plan. And when I say Ford, I mean Alan Mulally.
The importance of leadership in a crisis can never be overstated. GM's got the same old tired financial guy trying to make it look like he's addressing the problem without really solving the crux of the matter. Chrysler's in the hands of the Home Depot despot– a proven cost-cutter who lacks any feel for the customer experience. Only Ford's Mulally has the skills– and credibility– to successfully energize his troops. Kind of like the way he brought the B-777 to fruition.
Even so, there's no getting around the possibility that Ford may, indeed, run out of time. They may not get the small car products they need to the North American market soon enough. (Not to mention the possibility that those hecho en Mexico products may not be popular enough to generate those now-elusive profits.) The fact that Ford has withdrawn its "return to profitability" deadline is worrying.
But at least Ford has its eyes on the prize. Mulally may not know exactly when the ship will stop taking on water, but he knows Ford's got to get rich or die trying. He's laid out a viable plan, and he's sticking to it. Every Ford employee, supplier, and dealer knows the plan. We know the plan.
John Lennon observed that "life is what happens when you're making other plans." But genuine progress is only possible when you realize that you must adapt or die.
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?
I recently bought a dishwasher. Investor Kirk Kerkorian (a.k.a. “The Lion of Las Vegas”) bought 20m shares of Ford Motor Company. As a percentage of net worth, we each spent comparative amounts. But I’m pretty sure I got the better deal. I’m positive I’m going to have guacamole-free dinnerware for the next five years. Capt. Kirk can’t make anywhere near as bold a statement about the longer-term value of his Ford shares. Or can he?
In May, billionaire Kirk Kerkorian’s Tracinda Corp. tendered an offer to purchase Ford stock at $8.50 per share, back when the American automaker’s stock price hovering around $6.12. Investors offered 1.02 billion of the outstanding 2.24 billion shares. Tracinda increased its stake in FoMoCo from 4.7 to 5.5 percent. This week, Kirk's mob upped their share of FoMoCo to 148m shares, or 6.49 percent of Ford's public stock.
The deal is glass-like, as in half empty or half full. The fact that the nation’s seventh richest man is willing to overpay for Ford paper by 34 percent is a glowing vote of confidence in the company. Tracinda believes Ford will transcend its troubles.
Conversely, owners holding almost half the company’s value wanted to dump and scatter like the cops just showed up. These people didn’t think Ford stock would reach even $8.60 any time soon. And why would they? Ten years ago, the stock traded in the 60s. Exactly whose view is more valid is a matter of perspective. Do you put more credence in the opinion of a couple thousand people or one 91-year-old guy?
It helps to know more about Kirk. An accomplished pilot, Kerkorian made his early money delivering Canadian planes to England using the fastest, most profitable and life-risking route. After WWII, he turned surplus bombers into an enormously successful charter airline. Its core service was Los Angles to Los Vegas. Sin City is where Kerkorian made his banked billions, buying and selling casinos and hotels.
Kerkorian’s interest in America’s automotive world is a familiar story. In 1995, he ambled over to a house of straw. Chrysler fended off the hostile takeover. In 2006, it was the RenCen’s house of wood. Kirk blew into the boardroom with 9.9 percent of GM’s stock, but accomplished nothing. He unloaded it all and huffed away. Departing from the traditional tale, Kerkorian went back to Chrysler in 2007, as Daimler sought to shed the company. He was outbid by Cerberus Capital Management. A year later and he’s standing outside Ford’s house of glass.
So what, precisely, does Tracinda want out of its Ford position? Seven percent of a company is certainly a good chunk, but it’s far from controlling interest. The Ford family retains 40 percent control, no matter who else owns what. Sure, you get influence, but you are not in charge. Even if, according to regulatory filings, Kirk's willing to offer an an "infusion of additional capital."
Perhaps Ford is a good buy. There are angles from which to view Ford stock whereby it’s doesn’t look so limp. Cash and equivalents divide out to more than $11 per share. Property is worth about $16 per share. Eight dollars and fifty cents ain’t bad if you’re going to carve this pig up. Not that slicing and serving are in Ford’s future. The family has become quite attached. Besides, if GM or Chrysler go down, they’ll be other meat on the table.
If Tracinda were simply taking a position in an undervalued stock, why go whole hog for this one? As of June Standard & Poors put FoMoCo in the bottom 40 of their 500 index. Ford’s off 28.9 percent for the year. Soaring gas prices are shifting U.S. consumers' tastes faster than any company can re-tool. Ford is running far bellow capacity at eight of its 15 North American plants.
On the positive side, Ford is probably better positioned than Chrysler or GM to survive the near future. At the very least, they have some fuel-efficient cars to market, with another on the way. The other two American automakers have sucking chest wounds where their trucks and SUVs used to be. Still, that is an odd way to buy stock: wait to see if two major competitors kick it.
Kerkorian is euphemistically referred to as an “activist stockholder.” During his 18 months as a major GM player, he tried to force a deal with Renault/Nissan. When the board wouldn’t play his game, he sold his ball and left. Again, despite the back room meetings with Big Al and attendant ass-kissing, Kirk can’t realistically expect more power at Ford until the company is so far gone it's probably not worth it.
All Kirk can really do is depreciate CEO Alan Mulally’s authority, either by suggesting what Mulally was going to do anyway, thus sapping credit, or causing dissention. Put short, he can make a small mess just when it appears Mulally has set the Blue Oval for “pots and pans” and hit start. Half full, half empty, whatever. For Ford’s sake, I’d like to see Kerkorian come clean.
Why would gunslinger/investor Kirk Kerkorian want to buy Ford? After two decades living high off the [gas] hog, Ford’s still suffering the Mother of all Hangovers. The night before the day after, FoMoCo headed down to the Vegas strip and got hitched, polygamy-style (Hertz, Aston-Martin, Jaguar and Volvo). While town father Bill Ford's sobered-up and hired sheriff Mulally– whose drawn-up the divorce papers and cleaned-up the town– it still looks like tornado fodder. And here comes Captain Kirk, all guns blazing, looking to take over the joint. Why now?
Thanks to his investment “experience” with Chrysler and GM, Kirk’s mob have had a good look at the automakers’ books. They know that GM and Chrysler are doomed. But they also know that the domestic auto industry is too large for all three to sink at once– if only because of brand/national loyalty and popular access to Detroit dealers. In Motown’s game of last man standing, Ford's become the odds-on favorite. That said, it takes a practiced eye to see it.
In April, Ford, Lincoln and Mercury racked-up 189,247 sales. Retail sales (down seven percent) are not falling as fast as fleet sales (down 12 percent), but both are still headed for the outhouse. Zoom in. The refreshed, Volvo-derived Taurus is a flop. Comparing ’08 Taurus to the ’07 Five Hundred, sales were down 21.3 percent last month. Zoom out. Jaguar, Land Rover and Volvo added just 11,480 units. Ford sold Jaguar and Land Rover to Tata Motors; Volvo now accounts for less than 5 percent to Ford's U.S. sales volume.
Yes, the Edge, Fusion trio and revised Focus are still helping to staunch the wounds. But Ford’s share of the U.S. new car market is down 15.1 percent from last year, to 15 percent. And while there’s an upswing in car sales, none of these vehicles are generating the profit margins Ford needs to survive.
Now that the Explorer is lost (April sales were off by 38.5 percent, down 25 percent year-to-date), that task rests squarely on the F-150 pickup’s shoulders. What are the odds? Forthcoming refresh be damned; April sales of the country’s most popular vehicle fell 21 percent.
The market is beginning to wake-up to Ford’s cash conflagration. The money they’re burning is all OPM; Ford hocked everything down to the executive china and its famous Blue Oval. Liquidity is now a life or death issue. Although Fitch Ratings has downgraded Ford on that basis, the agency seems to think that Ford will turn the corner and achieve a positive cash flow by 2009. Unless, of course, more shit hits the fan.
The problem is, of course, product. There’s no doubt that Alan Mulally is kicking ass and taking names behind the scenes. Ford is becoming a smaller, leaner, faster and fitter organization. But Big Al’s done little to reenergize Ford’s branding or products. We still don’t know what a Ford is, Lincoln and Mercury are still gussied-up Fords, and Volvo overlaps everywhere. The new Flex, Fiesta, MKS and Taurus will all do well, but the competition isn’t standing still.
In short, where’s the vision thing? In truth, at the moment, as Kirk Kerkorian knows, Ford doesn’t need it. Assuming Chrysler files this summer– a probability of which Captain Kirk is not unaware– both Ford and GM will get a dead cat bounce. At that point, all Ford has to do is hang tough and not be GM, with eight brands stuffed with 40-plus lackluster products. When GM finally goes down, Ford wins. They’ll have all the time they need to [continue to] get their shit together.
Meanwhile, Kerkorian can’t lose. Ford’s stock will rise on the news of Chrysler’s fall. The head of Tracinda can sell his shares and walk with a gigantic profit. Even if he doesn’t bail at the new zenith, Kerkorian knows that Mulally’s Ford has the best chance of going the distance. Perhaps with a little strategic intervention…
As it stands, CEO Alan Mulally can ignore Kerkorian (and his minion Jerry York’s) advice. Thanks to the Ford family’s SuperShares, which give them 40 percent control, Mulally’s got “You Can’t Touch This” on his Sync. On the other hand… Ford has a long history of lynching outside CEOs. Donald Petersen turned Ford around in the dark days on the 1980s. Chief Executive Magazine named Donny "CEO of the Year" in 1989. In 1990, he was "retired" for resisting the naming certain family members to powerful board committees.
Short of shooting itself in the
Mulally foot, Ford will be Detroit’s last man standing. Long term, there’s a line of gunslingers ready to take on the Blue Oval Boys. By that time, Captain Kirk will have cashed-in his chips, perhaps in more ways than one.
"Ford on a good day is always about the people," declared Jim Farley, group vice president of Ford marketing and communications. Like many of these pre-digested pronouncements, Farley’s seemingly innocuous, feel-good assertion is fraught with unintentional meaning. What does Farley mean by “Ford on a good day?” What’s Ford about on a BAD day? Is Ford bi-polar? Manic depressive? Does it forget to take its meds? And what about the contradiction between “on a good day” and “always?” And, most damning of all, Ford is NOT about the people. It’s about the product.
I know: cars don’t build people, people build cars. I have consistently and persistently argued that corporate culture ultimately determines an automaker’s success or failure in the marketplace. A public declaration of respect for your workers is never a bad thing. And there’s nothing inherently wrong (or innovative) with Farley exhorting FoMoCo’s extended family to move the metal; the alleged point of his “Drive One” marketing campaign. The problem is, once again, one of subtext and nuance.
Drive One’s underlying assumption: Ford has won– or at least drawn level– in the battle to build desirable products. Hence the recently launched national ads trumpeting the fact that Ford’s initial build quality is now “as good as Toyota’s.” This may be true, but it’s not particularly motivational. In fact, the statement does more to draw attention to and underline Toyota’s reputation for quality than give potential Ford customers a unique and persuasive reason to switch to The Blue Oval. For this, Ford relies on Microsoft’s SYNC gizmo, whose exclusivity is set to expire.
Ford’s Drive One campaign is based on the same “chip on our shoulder” attitude that’s bedeviled the domestics’ thinking for the last decade or more: our vehicles don’t suck, people just THINK they suck because they're American products (excluding the Mexican, South Korean, Belgian and Australian thing). But don’t take my word for it. "It's a marketer's dream to be here right now because the reality doesn't match up with perception," John Felice, Ford-brand general marketing manager, told Automotive News. "It's that gap between reality and perception that this whole thing is designed to close."
Unfortunately, Ford dealers are down with that. "It's incredibly frustrating to be a Ford dealer and know we have the best showroom we've had and yet we don't have people coming in to consider us," says Ford-Lincoln-Mercury franchise owner Jeff Robberson. "The need for this campaign was huge." Robberson’s contention that Ford has the best showroom they’ve ever had completely ignores the other guys’ product lineup, and fails to provide a compelling reason for customers to darken his doors.
So here we are again. Rather than concentrating on making their products unassailable, or at least choosing a unique selling point and sticking with it, Ford’s marketing efforts are once again [still] focused on its customer’s supposedly ignorance, perceived bias and, let’s face it, stupidity. If anything, the Ford campaign’s stridency– “Drive One” as opposed to “Have you driven a Ford lately?”– indicates a hardening of the automaker’s indefensible, defensive position.
The “get your ass behind the wheel of one of our cars and then you’ll see why you should buy one” marketing strategy completely ignores important buying considerations: long-term build quality, depreciation (i.e. total cost of ownership), dealer service and, of course, comparative product excellence. Ford made a stab at this crucial component with its rigged Car & Driver pimpatorial comparo, then abandoned it for… this. Which is what? A farrago of ad messages wrapped-up in a command to take a test drive.
The wider, ultimate question remains unanswered: why? Why should anyone test drive a Ford? Even more crucially, what exactly is a Ford?
It doesn’t really matter how Farley’s followers implement the Drive One campaign (human viral marketing is, if nothing else, cheap). It doesn’t even matter if more people take a Ford for a spin in the next month than the previous six. When considering Ford’s chances of survival, the central and damning fact is that [ironically enough] Drive One focuses on four product areas: quality, safety, environmentally friendly initiatives and technology. That’s three too many.
You don’t have to be a professional branding guru to know you shouldn't market a product based on four disparate selling points (at least not without a single unifying concept). But it was my understanding that Jim Farley answers to that job description. Ford poached Farley from that most focused of car companies (Toyota) at tremendous expense, presumably to apply his proven expertise to Ford’s sagging fortunes. And yet it seems as if Farley’s new employer’s lack of focus (both figurative and literal) has infected his thinking.
Not to put too fine a point on it, “Drive One” is the same old shit in a different wrapper.
Automotive News recently published an interview with Ford's group vice president of human resources. Joe Laymon mentioned the names of six brass hats Ford considers potential successors to their current CEO Alan Mulally. As Mr. Mulally has only been in office for just 18 months, anticipates a long stay and hasn’t seen his 63 birthday, the timing was, at the least, odd. More importantly, Laymon effectively turned a succession plan into a very public episode of Survivor Dearborn.
Taken on its own, the mess should disappear before the end of the news cycle. Taken as a glimpse into Dearborn’s corporate culture, it becomes a clarifying tale. Laymon shows us the primacy of internal politics and the resulting backseat relegation of everything else, including-– I don’t know-– building decent cars and trucks.
Backstabbing, career sabotage and secret alliances are all part of internal power struggles. They almost never profit a company as a whole. Good ideas get axed because they came from form the “wrong” exec. Good people get axed because they hook-up with the wrong team.
Sadly, this isn’t baseless or general speculation. A quick look at Ford’s Shakespearian history sets the stage. Henry the Second fought Harry Bennett, then Lee Iacocca. Bill Ford struggled with Jac Nasser. And those are just the big public fights. Every day, smaller, darker battles wage. Just this week we’ve seen the Glass House Gang pull the rear wheel-drive (RWD) rug from under Ford of Australia’s proverbial feet, as Dearborn declared that America will handle the new global RWD platform.
In short, the Ford culture has been poisonously political since its inception. If current CEO Alan Mulally could do one thing to turn around the Blue Oval, eliminating these Machiavellian machinations would be it. Laymon’s announcement of a battle for succession both reveals the fact that nothing has changed, and amplifies the inherent discord.
Then there’s a Board of Directors, currently stocked with two members of the Ford family. The board alone has the power to pick Ford’s CEO. The CEO title itself derives from the position’s job number one: executing the directives of the board. Sure, the board takes recommendations from staff and company officers. But they are in charge. Ostensibly.
For Laymon to publicize the list of CEO succession long before Ford’s CEO is slated to leave tells us that Ford’s board is a bunch of bystanders– at least when it comes to their most important responsibility.
Jabbering away in public about who’s next takes the attention from who’s now. The ‘now’ at Ford, is a pretty important time. Market share and money are fleeing the company like the Jews from Egypt. Mulally was brought on board from Boeing at enormous expense to perform miracles. He’s pointed the way forward and issued some commandments. Now is the time for everyone to line up behind him and get through the desert. It’s NOT the time to wonder who gets the staff when he’s gone.
Not that it’s wrong to have a line of succession. A responsible company has plans for both the untoward-– in case a CEO pegs it-– and the long term. The learning curve at a company like Ford is steep and treacherous. You need executives who can move into place and keep things moving.
What IS wrong: waving everything around in public. Most of corporate American would do well to be more transparent. But this is one of those rare instances when the Glass House Gang should have kept the curtains closed. Most of the world expects Detroit execs to be clawing and conniving, but no one wants to see it. People want to see hard work, rallying ‘round the chief and honest effort.
People don’t always care what kind of company creates their cars. Porsche made Nazi war machines. BMW used slave labor. GM has closed plants across the country, off-shoring the work. But if there’s one thing Americans love it’s a come-from-behind Cinderella story. A Ford that pulled together and turned itself around would have something more valuable than steel and glass to sell.
It was once common for someone to refer himself as a Ford man. Such loyalty has not completely gone the way of the fedora. It’s still achievable, as any Mac-evangelists or Harley rider will be happy to tell you, at length, in a language outsiders barely grasp.
No such luck for Ford. In the end, Joe Laymon has shown us that it’s still business as usual in Dearborn. FoMoCo are missing yet another opportunity to change, grow and inspire, not just in terms of design or technology, but as a community. It’s too bad. Who knows how many more chances they can afford to blow.
Not that Joe Laymon cares. The day after the interview broke, he quit Ford and moved to Chevron Corp.
Alan Mulally began last year as a passenger on a nose-diving Ford Motor Company. Clocking the company’s $12.6b fiscal flummox, FoMoCo’s CEO left no punches unpulled. "We fully recognize our business reality,” Big Al pronounced. “And we’re dealing with it.” Twelve months later, Mulally’s machine’s cut a new deal with the United Auto Workers (UAW), scaled back production and launched some new whips. During today’s announcement, Big Al proudly pronounced the new new turnaround a success. “Each of our automotive operations is improving, and we are encouraged by the progress.” That makes one of us.
The bulk of the Blue Oval Boyz blues arrived in the fourth quarter. Over the year’s final frame, the automaker posted a net loss of $2.8b, racking-up a $2.7b loss for the year. NorAm came-up $1.6b short, bringing the worldwide sector down $1.1b on the year. Special items took their share of the FoMoCo fortunes ($3.9b YTD). All that red ink leaves FoMoCo’s corporate coffers with $34.6b in begged and borrowed cash and cash equivalents (including VEBA assets).
Some of those bucks will (again) head off for blue collar buyouts. As reported by TTAC, Ford is (again) sweetening the deals and asking all hands on deck to abandon ship. In an effort to “help ensure we are able to deliver our commitments despite the difficult external environment,” Mulally is trimming fat (again) and (again) putting product development on the front burner, serving-up a new Verve and yet another version of Ford’s never-say-die Taurus/Five Hundred/Taurus.
On the year, excluding special items, the Blue Oval Boyz generated just shy of $174b in revenues, an increase of $13.8b over last year’s total. Doing so while moving 12% less metal, in the current economic climate, indicates that Mulally’s minions might have made good on their promises to stop strapping [as much] cash to the hoods of moribund metal. It also leads one to believe that Ford is keeping its promise to trim low-profit, residual-killing fleet sales; reportedly down 18 percent.
As always, the devil is in the details. While U.S. retailers were able to scale back rebates in the fall, Canadians were cashing in on exchange rate induced bonus bucks. This occurred while the Loonie was soaring at unheard of heights. Therefore, the trend was more costly overall to the bottom line greenbacks.
Also, a closer inspection of FoMoCo’s fleet reveals that Edge buyers may soon feel snubbed. Yours truly was aghast at the site of Ford’s last next big thing (in full Limited trim) on a rental lot. While sampling some of Ford’s finest wares at an airport near you may help brand awareness, flooding used car lots with ex-renters never yields positive results.
The Blue Oval moved 2.57m units (down 350k) in 2006. Ford floggers attributed more than two thirds of those declining sales to discontinued models. What kept 3600 dealers (400 less than last year!) afloat: the new cross-border crossovers (Ford Edge and Lincoln MKX) and (believe it or not) the fresh faced Focus.
Ford’s Edge bested predictions by 30 percent (130k units)– although Ford doesn't say how many of these vehicles ended-up in the aforementioned fleets. The Focus did nine points better after its launch, but it could well be one of the “rising tide lifts all B-segment boats” deals, heading for a dead car bounce.
Meanwhile, what was once high margin full-size pickup truck paradise, Bloomberg reports that Ford is losing the battle on hallowed ground, in Texas. According to market research firm R.L. Polk & Co, ToMoCo’s Tundra market share skyrocketed 79 percent in the Lone Star State, while the domestics shrank by five percent. The trend is truly, madly, deeply worrying, especially as Texan Ford dealer Sam Pack reports that Tundra sales “are coming from traditionally Ford buyers."
Heading into ’08, the Glass House Gang figures total U.S. new car sales will continue to slip to around 16 million vehicles, and shrink their piece of the pie right along with it. Ford’s (once again) revised market share target is now set at the “low end of 14 to 15 percent.” This translates into about 2.3m new FoMoCo products hitting America’s highways and byways in the year ahead. In the current and predicted economic climate, based on previous years’ precedence, moving the metal is going to get a lot harder before it doesn’t.
Bottom line: profits aren’t on the horizon. As Dearborn continues to “right size” its operations, its transplanted competitors are already there. No wonder Ford’s stock price is only slightly better than January ninth’s 22-year low. While there’s no question that posting a year-on-year improvement resembling Paraguay’s GDP ($9.9b) is nothing to sneeze at; that the gain still leaves a net loss more than twice the size of Belize’s GDP ($2.7b) is.
Four vehicles. That’s all you’ll find on Mercury's web site. If you’re as “lucky” as I am, Mercury will respond to your browsing by asking if you want to spend five minutes on a questionnaire. Say what? Asking for five minutes of your customer's time before you even show them your products? That isn’t the smartest thing to do to a spam-weary public. Then again, once you click on the word "No" and return to the actual products, you begin to realize that the entire Mercury product line represents the brand’s not-so-smart existence.
In fact, calling Mercury a “brand” is like calling a sampling of the touch-tone hold music version of Greensleeves a classical music concert. The erstwhile automaker represents nothing to nobody in a fantastically non-descript way. Every vehicle Ford sells as a Mercury is either a drab clone or a dying breed.
Milans are mildly redesigned Fusions that sit on dealer lots for nearly four months. Mariners are half-blinged Escapes sporting fake wood, fake leather and a very large and cheap fake plastic grille. Mountaineers are Explorers who’ve lost contact with base camp (which has given-up and moved further down the slope). The Mercury Sable is so boring and pointless that most full-sized car shoppers don't even know it exists. And the last of the great Panther-platformed sedans, the Grand Marquis (which outsells the Sable), appeals to customers who make Buick buyers feel like spring chickens.
In short, aside from Jill Wagoner’s comely curves, there is nothing compelling about anything Mercury says or does. Of course, Mercury’s non-existence is nothing new. The division hasn't had a competitive product or a compelling raison d’etre for at least 15 years. By the 80’s, Mercury’s model line up was as it is today: a dumping ground for slightly tarted-up Fords.
To wit, when Ford finally took the imports head on with the Taurus (and won), Mercury simply sent in the clones. As time and corporate idiocy went on, the 'non-Ford' Scorpios, XR4Tis, and Cougars flopped with increasingly predictable regularity. (Not to mention the Capri – an Aussie-built shitbox convertible.) Thanks to the “Ford first” culture, scant marketing dollars and limited engineering sources translated into a unique line of one generation wonders that were never improved the next go round. Nothing of any unique value endured in the Mercury division.
For Ford’s not-so-new-anymore CEO, Mercury’s mediocrity is déjà vu all over again. Alan Mulally was keenly aware of the importance of the “branding issue” when he took the reins at Boeing. Mulally knew the aviation Goliath had too many fiefdoms, which translated into too many products, which competed with each other, for no good reason. Big Al worked tirelessly to eliminate pointless redundancy of processes and products. And corrected Boeing’s nosedive.
Mr. Mulally is obviously far less beholden to Ford’s old guard than the gentleman that came before him. He’s been there, done that, killed the extraneous bits. And here’s the truth: when Mulally finally gets around to taking a good hard look at Mercury, Mercury will be toast.
For now, Mercury is merely milquetoast. The company adds zero uniqueness to Ford's product line. Mercury has zero technology, zero differentiation, zero prestige, zero class-leading products and zero long-term priority for the Ford Motor Company. Hundreds of Mercury dealerships, thousands of Ford employees and millions of advertising dollars are wasted trying to counter a counter clockwise death spiral. Every penny that goes into turning a struggling Ford product into an even less competitive Mercury is a penny wasted.
At a time when Ford is struggling to generate a profit anywhere within its North American product portfolio, what value can be had with Mercury? None.
There is but one, obvious solution: kill the brand. While politicians and lobbyists (one and the same) within the Ford fiefdoms will fight for Mercury’s survival– offering Saturn-like visions of imported import fighters– it’s only a matter of time before the death man’s blade swings its inevitable arc.
Ford is clearly– and rightly– bent on re-focusing its energies on becoming a smaller, faster, better carmaker. Once the corporate cancers known as Jaguar and Land Rover are removed from the body corporate, Mercury is next. I predict that within the next six months Ford will announce the closing of the Mercury division. The consolidation of Lincoln and Mercury dealers is such that the move will not be “another Oldsmobile,” requiring billions in dealer pay-offs.
Most likely Mulally’s minions will announce Mercury’s termination in conjunction with a 'realignment' of the Lincoln division (towards it original luxury roots). Lincoln will once again start building unique vehicles. It will become the anti-Mercury, if you will.
If Ford files for bankruptcy before the man at the top can get Dearborn’s ducks in a row, the end result will be the same for Mercury. It is, and has been, a dead brand walking. It’s time to say goodbye.