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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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.
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.
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.
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!
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.
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.
@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.
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!
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
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.
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?
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.
@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.
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.)
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.
Stein, then you should read “Mr. Gatling’s Terrible Marvel,” which I just reviewed for Military History Magazine (for which I regularly write).
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.
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.
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.
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.
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.
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.
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.
“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.
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.
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”.
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.
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?
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.
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
@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.
@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.
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.
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.
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.
“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!
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.
@Canfood: By building them here.
@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.
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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.
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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.
“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.
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.
I think you mean “founder” in the sentence below — you founder on rocks, you flounder if you’re thrashing around having a hard time.
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.
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.
Stein,
The advantage of moving out of detroit is that it is a place where creative Americans don’t want to live.
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.
“Oh Flounder, you’re such a guppy!”
My bad. Text amended.
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?
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.
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.
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.