Ford Death Watch 1: Desperate Times

Neunelf
by Neunelf

Although GM’s woes are increasingly well known, the House of Ford is also in dire straits. The Blue Oval’s credit has been downgraded almost as often and deeply as The General’s. FoMoCo’s products– a truck-heavy mix in a time of fuel conscious fervor– languish on dealers’ lots with equal abandon[ment]. Both companies have too many lackluster products, confused brands and mainline dealers. In fact, other than the size of their relative problems, the chief difference between GM and Ford has been the Blue Oval’s bluster, bold moves and all.

In the first half of ‘06, Ford's US market share slumped another four percentage points. In the first financial quarter, the company suffered a $457m loss. In the second, they took a $254m hit. No surprise there. Even the F150, America’s best selling pickup truck and Ford’s perennial cash cow, seems welded to dealer lots (down 46% in June). To move the metal, Ford has increased incentives and lowered prices on models both old and new. And even the ones that've moved out are coming back; the company has just recalled 1.2 million trucks, sport utility vehicles and vans for potential engine fires. Ford needs something to pull itself out of its corporate tailspin. As Taylor Hicks might say, what are the possibilities?

Nothing much. Even with accelerated product development, it will be two to three years before Ford can readjust its product line to match the new sales environment. Most of Ford’s ‘07 to ‘10 models will be SUVs and pickups. At the same time, Ford is pulling the plug on its big rear wheel-drive sedans and ill-fated minivans: the Mercury Monterey (down 40%) dies next month and the Freestar (down 20%) goes away in April. FoMoCo’s move to deep-six (rather than re-engineer) their big sedans and people carriers when the American market is flooding with SUV refugees reflects a lack of resources, imagination, will or all three.

Ford has also failed to refresh their fuel-sipping, dynamically superlative Focus– before it fades away like the once-great Taurus. And they've decided to shelve their well-publicized goal to build 250k hybrids by 2010, despite a huge jump in Escape Hybrid sales. Playing the flexible fuel card instead may earn Ford the environmental brownie points it seeks, but hyping vehicles that run on a fuel that’s not commonly available that gets worse mileage than “normal” gas will do nothing to cater to America’s changing vehicular tastes.

Fortunately, there are a few reasons to be cheerful. In the short term, the Hecho en Mexico Fusion/Zephyr/Milan continues to depart dealer lots at around 19K units per month. Equally heartening, the Fusion and its badge engineered siblings are mining a rare vein of consumer loyalty; 93% of Fusion owners say they’d recommend the model to a friend. Yes but– the model isn’t generating enough sales activity for Ford to clamber back from the lowest market share since the Ford Pinto galloped onto the US sales chart.

To that end, Billy’s Boys have green-lighted three new 40mpg-plus B-segment vehicles based on the Mazda3 platform, two of which could arrive for the ’09 model year. There’s also a new small minivan slated for ’10 and the Fairlane box car. In the medium term, Ford’s immediate future may well rest on the Edge/Lincoln MKX Crossover. The American automaker has set a sales target of 120k unit per year for the 265hp, all wheel-drive whip. If dealers fall short, Ford’s only bold move may be towards Chapter 11.

No wonder the Blue Oval is thinking the unthinkable. After spending some $10b trying to make Jaguar their upmarket brand (forgetting Lincoln), the British marque is now, finally, reportedly, up for sale. Industry wags also suggest that Volvo and Land Rover may be on the auction block. There’s also talk of Ford taking up GM’s offer to join the Nissan – Renault alliance– or marrying its fortunes VW, BMW, Honda, Toyota or Hyundai. And just in case you thought these options are the result of ill-informed conjecture, Bill Ford Jr. just hired former Goldman Sachs and Bank of America investment banker Kenneth Leet as his big picture guru.

Provided Ford has enough cash to see it through these dark days, Moray Callum is the more important man in this drama. Ford’s new Director of North American car design– the man credited for the RX8, Mazda3, Mazda6, Cx-7 and CX-8– has received carte blanche to create vehicles that inspire the American public to return to the Ford fold. The company has access to sixty-five thousand automotive R&D workers in Michigan alone and a $7.5b R&D budget. Like everyone else in the Ford Empire, Callum knows that his employer has to create at least one major hit, and soon. As always, a carmaker’s future ultimately depends on its ability to make the right cars at the right time.

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  • Anonymous Anonymous on Aug 16, 2006

    [...] The Truth About Car (TTAC)’s “Death Watch” series, whose sole occupant was General Motors, now welcomes Ford Motor Co. into its billowing folds. TTAC’s Matthew Neundorf, armed with blunt facts and near-razor wit, lays bare the automaker’s litany of problems: the recent $254 million loss; a drop in sales of the popular F-150 Series; and the company’s inexplicable cancellation of its big people movers like the Lincoln Town Car when, to quote Neundorf, ‘…the American market is flooding with SUV refugees...’ And while he acknowledges the Blue Oval’s Mexican-built triplets (aka Fusion/Milan/Zephyr) are doing well sales-wise, their contributions are just too late. He views the possible sale of Jaguar as a necessary amputation pruning, as well. [...]

  • Anonymous Anonymous on Sep 23, 2006

    [...] Just look at Ford’s European division. This is the Ford Mondeo for 2007. This best can be compared to the US Fusion. I think the Mondeo is better inside and out. Here is the rest of the Euro Ford line up. Hands down they crush the US line. Considering Ford needs to really start “hitting cars out of the park“, I don’t think they need to look to far out of the company to find ideas. It is really no mystery why Ford North America is in trouble. Outside of trucks and SUVs Ford invested very little in the rest of its product line. They continued to loose market share and have been pounded by labor agreements that would sink just about any company. Then as the cost of fuel went up, the truck and SUV sales slowed to a trickle. Now they have lots of metal sitting on lots they cannot move, more dealers than they know what to do with and car line that leaves much to be desired. [...]

  • Lou_BC I suspect that since the global pandemic, dealerships have preferred to stay with the "if you want it, we will order it" business model. They just need some demo models on hand and some shiny bits to catch the impulse buyer. Profits are higher and risks lower this way.
  • Probert When I hear the word "patriot", I think of entitled hateful whining ignorant traitors to democracy. But hey , meant to say "Pass the salt."
  • Lou_BC A brand or inanimate object isn't patriotic. A person can buy said object based upon patriotism. I'd prefer to buy local or domestic. Is supporting one's fellow countrymen patriotic or logical? I'd rather buy from an allie than a foe. Is that patriotic or logical?
  • Ajla I don't have any preference on vehicle assembly beyond that it not be built in a handful of certain nations that I don't like for nonautomotive reasons. However, I don't think the "patriotism" survey had as much to do with assembly as it did with iconography. Which might be a more interesting question.
  • Verbal "Automakers also appear to be continuing to push higher-priced vehicles with larger margins, rather than trying to meet demand for their more-affordable models."What more-affordable models would those be? In the case of the domestics, there aren't any. They cut almost all of their passenger car lines to focus on high-margin pickups and SUVs. On one level this makes sense. If I earn low margins on some of the vehicles I make and high margins on others, just stop making the low margin ones and the problem is solved, right? Except the average buyer can't afford, nor do they even want, to buy an $80,000 truck.
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