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Ford in spotlight as L.A. Auto Show begins

When Ford CEO Alan Mulally takes the stage to open the 2007 L.A. Auto Show on Wednesday, he can afford a smile that’s broader than his trademark ear-wide grin. By’s Roland Jones.
Ford Motor Company CEO Mulally attends the opening ceremony of the newly established Changan Ford Mazda Automobile Co. plant in Nanjing
Ford’ CEO Alan Mulally sports his trademark smile.Aly Song / Reuters

When Alan Mulally takes the stage to open the 2007 Los Angeles Auto Show Wednesday before a crowd of automotive journalists and industry executives, he can afford a smile that’s even broader than his usual ear-wide grin.

Mulally moved from Boeing to take up the reins as Ford’s president and CEO a little over a year ago, and the auto industry newcomer has won a handful of notable successes in recent weeks, including a four-year deal on a new labor contract with the United Auto Workers union, which should reduce Ford’s structural costs and exposure to expensive worker health care liabilities.

On Thursday, there was more good news: Ford posted a smaller-than-expected loss of $380 million for its third quarter, worse than its second-quarter profit of $750 million but a vast improvement over its $5.2 billion loss a year earlier.

Ford’s second upside earnings surprise in a row came in stark contrast to General Motors’ shocking $39 billion quarterly loss, reported one day before, and had Ford officials saying the quarterly performance shows the company is making headway in its painful restructuring, dubbed “The Way Forward,” which includes plant closures, job and cost cuts, and a new focus on smaller, more fuel-efficient cars and SUVs.

Now as the Los Angeles event kicks off the auto show season, all eyes are on Ford, looking for indications of how the automaker might perform in 2008. Ford is generally considered to be the weakest financially of the Big Three U.S. automakers, having lost more than $12 billion last year. To fund its turnaround, the company has mortgaged all its assets — including the iconic blue oval Ford logo — to the tune of $23 billion.

That money won’t last forever, of course, and Mulally himself acknowledges that Ford is in a “race against the clock,” telling trade publication Automotive News last week in a remarkably honest interview that he has no idea whether Ford will win that race. Mulally said he has confidence that the automaker is executing the right turnaround strategy, but that “worry about worrying, as opposed to worrying about doing,” is going to put that plan at risk.

“So let’s just do the goddamn plan,” he told Automotive News.

Just how Ford is faring should be a little clearer at this year’s Los Angeles show, which promises to focus on the usual themes, most specifically the latest “green” car technologies, including the unveiling of Honda’s much-anticipated FCX Concept, the first hydrogen fuel-cell car for ordinary consumers, and the 2008 Green Car of the Year award. The clean-fuel focus is apt for an industry looking for ways to wean itself off increasingly costly oil-based power sources, and it’s also fitting for the state of California, the capital of car culture and one of the largest markets for environmentally friendly cars that run on “hybrid” gasoline-electric engines.

The show, second in importance only to the annual Detroit show in early January, also will feature the customary car unveilings, from high-performance sports cars to futuristic and daring concepts.

Notable among this year’s 14 world and 30 North American debuts are the new BMW 1 series; Volkswagen’s new mini-car concept; the Hyundai Qarmaq, built with a recycled, gas-saving lightweight plastic; Nissan’s GT-R and redesigned Murano crossover; and the $1.46 million (1 million euro) Lamborghini Reventon, dubbed the most powerful and expensive Lamborghini ever built — ideal for Los Angeles, which has a high number of luxury and exotic car owners.

Among Ford’s offerings in Los Angeles will be a new variant of the Mustang, its iconic muscle car. The “Mustang Bullitt,” which goes on sale in January, celebrates the 40th anniversary of Steve McQueen’s chase through the streets of San Francisco in the 1968 movie “Bullitt.”

The Mustang could use a boost — its sales fell 18 percent in the first 10 months of this year, according to Autodata, and the pony car is about to face stiff competition on the retro front from the “Dukes of Hazzard”-inspired Dodge Challenger, which will hit showrooms in the spring, and the redesigned Chevrolet Camaro, due out in 2009.

The Mustang Bullitt — the latest in a line of specialty Mustangs that Ford has brought out to keep the sports car fresh since its redesign in 2004 — is a nice play on the automaker’s heritage, but Ford needs to come up with something new to wow investors and regular car buyers, said Rebecca Lindland, senior automotive analyst at consultancy Global Insight.

“Over the last few auto shows, Ford has mostly just shown new versions of the Mustang, and while that’s nice, it’s still the same old Mustang,” she said. “They need to build confidence on Wall Street, and peoples’ perceptions need to be corrected. Right now, the perception is they’re not doing well, so when good earnings results come out they are met with confusion. People are not sure what to do with them.”

Good product remains a big problem for Ford, notes Lindland. For years, U.S. automakers focused too much on their highly profitable pickup trucks and sports utility vehicles, leaving the high-volume, midsize sedan market to be dominated by Honda’s Accord and Toyota’s Camry. Now they’re aiming to reclaim that lost ground, but Ford has yet to introduce a nicely styled, high-volume product like General Motor’s Saturn Aura or Chevy Malibu. Even Ford’s new “crossover” vehicles have an unexciting feel, she said.

“The fact that Ford has mortgaged the entire company is worrying, but we also have concerns about their new products,” Lindland said. “They’ve showed us their product line out to 2011, and we have no more confidence in them than we used to — there’s nothing head-turning, exciting or revolutionary. Some brands like Suzuki struggle for name recognition, but not Ford. Their individual models do struggle though because no one knows what they are, so they tend to make their lives more difficult.”

A case in point is the Ford Taurus sedan, America’s best-selling car between 1987 and 1992, which lost its luster as Ford pushed more of them into rental fleets, losing its top spot to the Toyota Camry in the late 1990s. The model was axed in 2005, then replaced by the Ford Five Hundred, and then revived again for the 2008 model year. Similarly, Ford rebranded the Lincoln “Zephyr” midsize premium sedan the far less memorable “MKZ.”

“One good thing Mulally has done is come in and say they have to get their car names straight,” Lindland said. “In a market that’s cluttered with new vehicles, getting the attention of the consumer is difficult, and so name changes don’t help the situation. Mulally has recognized that, and so they have lost ground they didn’t need to lose with the Taurus. It was easy to fix, but they wasted all those marketing dollars.”

Certainly, there remains plenty of work left ahead for Mulally. Ford’s sales are down 13 percent year to date and slid 9.5 percent in October from the year before. Ford’s U.S. rival General Motors is enjoying greater success in its U.S. retail sales, with its U.S. sales down only 5.9 percent year to date.

“It’s not clear where Ford is really going,” said Lindland. “They said recently on a sales call that their sales numbers will be down for every month in 2008, so that doesn’t really imply positive things ahead. They have a lot of cash on hand, but the clock is ticking because they have mortgaged everything they have and need to be profitable soon.”