Ford Makes Bringing European Models to North America a High Priority

But how much pain will there be before the payoff?

By Alex Ricciuti

08.26.2007

It’s no surprise that Ford CEO Alan Mulally wants to help save Ford’s domestic operations in their home market by bringing in more products developed in Europe. After all, Ford (along with GM) has to hear the criticism ad nauseum that they don’t have competitive products in the marketplace when they definitely do so here in Europe. So what’s the solution? Just ship ’em over.

I have my doubts about how easy it is to do this as I’ve explained in a previous post here.

But I do understand the frustration of what Mulally has to deal with especially when he said that he’d rather lose money selling good cars than lose money selling bad ones. Ford officials speaking to the NY Times are pretty clear about this direction.

“There is very clearly now a priority around leveraging the products we have globally,” Mr. Kuzak said this week.

Derrick M. Kuzak is in charge of global product development and creating more global platforms for models to be sold in various markets as either identical or slightly varied makes perfect sense. They should have done so years ago.

The question remains, though, will this bring Ford back into profitability and will Ford be able to deal with the institutionalized structural costs such as pensions and health-care benefits which they have to bear and that drive their costs up so dearly?

Also, how do you sell those models to US consumers who still seem pathologically hooked on large vehicles and are utterly unwilling to pay higher prices to drive what they consider to be small cars?

Sales of large SUVs are down but crossovers are a growing trend. Three U.S. dollars a gallon isn’t yet driving everyone to trade in their pickups for a Yaris. Analysts consistently said for years that 3 dollars a gallon was some sort of magic number that would change the buying habits of the American consumer, but it hasn’t. So, what is it this time? 4 dollars? 5? What is the price point at which Americans will start thinking small?

Ford needs American products to satisfy the US market. If they can manage to build those cars inside a system of cost-effective global platforms, then they will succeed.

Alan Mulally came from a very tough and very punishing business; that is, commercial aircraft manufacturing. Big highs, big lows, and lots of big bets made on new products all the time. Actually, it sounds a lot like the car business, if you had to be pressed for a comparison. But still, Ford is in such a tough spot that by now it must seem to Mulally that it’s a lot harder to build cars than to build airplanes.

Alex Ricciuti is a freelance writer and automotive journalist based in Zurich, Switzerland. He writes frequently for Automotive News Europe.

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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3 Comments

  1. Well, he’s right, if you’re losing money you may as well make your customers happy instead of angry with what you sell them at a loss.

    But, it’s not a durable business model, to keep losing money, no matter how happy the customers are with what you sold them.

  2. Mulally is doing everything he can to save Ford’s bacon, but ultimately, I don’t think it will be enough.

  3. The $3/gal. threshold was short-lived this year. Prices are falling back down and US public’s attention span is short lived. They will continue to buy cars that make little practical sense until the $3/gal. level is permanent. Now, Ford would bring to market a 35 mpg, good looking, and large SUV, they would be set.

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