Ford NA to Make Money on Small Cars. Allegedly.
Speaking at the Morgan Stanley Global Automotive Conference in New York, Ford CEO Alan Mulally confident predicted that Ford's global rationalization (i.e. same vehicles, different wrappers) will allow the embattled automaker to make money on its small cars in the American market (providing they sell enough of them). The AP [via The Houston Chronicle] reports that Big Al told the assembled throngs he'd been surprised (surprised I tell you) by the complexity of Ford's assembly process. "For instance, the Lincoln Navigator large sport utility vehicle had 128 possible console combinations," roughly one per customer [kidding, I think]. Since taking the reins, Ford has reduced complexity by "up to 80 percent" on "some" models. "You can imagine what that means to the cost structure worldwide," he told the analysts, who tend to prefer hard numbers to vague assurances. Still, Mulally confidently predicted– well "hopes"– his employer will equip 500k vehicles per year with EcoBoost engines by 2013. "It's absolutely going to be a competitive advantage," Mulally asserted. Meanwhile, FoMoCo's CEO conceded that "Ford's market share in trucks and sport utility vehicles has slipped recently, which he attributed to competition." So now you tell us.
With Mulally leading the way? I'm pretty confident they will still be around in 2013 and with a much better line-up than most of their competitors. Making money on small cars is not some distant wish either. The Focus is a great example of how quickly things are changing at Ford. Right now, discounts on 2008 Focus to retail customers are about 1/3-1/2 less across the nation than last year and overall net pricing is up (they didn't specify). Its rental sales are down probably 60% this year (a guess based on information from monthly sales calls). Its corporate numbers are flat-ish. Retail was up 35% through February. To top it off, the cost of producing a Focus has been reduced by sourcing some parts from countries other than Canada and the U.S. The Focus used to be a $3-4k drain per vehicle sold. It's probably down to less than half that. Still a loss-maker, but imagine if it were produced in Mexico. Or, imagine if it were the C1 Focus. That would respectively lower cost or raise net pricing and help the bottom line. But more importantly, this is the kind of thing that Ford is working on - that they had to address. Whether you like the new Focus or not, it will likely create a $200-300 million change in net profits this year without any buyouts, layoffs, new work rules, overhead reductions, moving the assembly to Mexico, etc. etc. And that's how you run a business. And it's good to see that Ford finally gets it.
It isn't engineering's job to control complexity across vehicle systems. Engineers optimize their system for the requirements it must meet. The change control board and project management should be managing vehicle complexity and part sharing across platforms and marketing shouldn't be allowed to introduce needless option packages. If Mullaly is getting control of that process, which has been decidedly out of control, it would be great for Ford. Still I don't think Ford can make a profit in North America on small cars.
All the domestics have been option happy for quite some time. Honda takes it to the other extreme, you can get 3-4 versions of each model (not counting the Si or Hybrid) with different levels of bells & whistles. Same conversation on the modern version of the Accord (now the "Civic" since the Fit is the Civic and the Accord has bloated to Buick barge proportions) is: Stripped, Ok, Nice and Loaded. Ford had a good competitive offering with the Focus that they allowed to get stale.