Could the company that first put most Americans on four wheels be put up on blocks? Not if the latest products and technologies shown by Ford at this year’s Detroit auto show have their intended impact and jump-start the sputtering company.
The fortunes of the automotive industry and the companies that participate in it ebb and flow like the tides. Ford has been on the ebb for the last year or two, and observers are wondering when the company will reach low tide and begin its recovery. The company’s U.S. sales for 2007 slid 12 percent compared to 2006, a year when sales were down 8 percent from 2005. And the automaker has surrendered second place in the U.S. sales sweepstakes to rising star Toyota.
Companies whose fortunes wane for too long tend not to recover, and Ford’s huge losses in recent years have contributed to concern that it would have trouble reversing its slide. The problem has been serious enough that Ford’s Chairman and CEO Alan Mullaly has resorted to selling off high-profile assets — the Jaguar and Land Rover British luxury divisions are next — to raise cash and refocus attention on the core Ford brand and its home market in the United States.
Ford’s recovery plan? The first order of business is to stop the bleeding, which has meant closing plants and pulling the plug on marginal product lines such as the Freestar minivan, the monster-sized Excursion SUV, the Lincoln Aviator mid-sized SUV and Lincoln’s LS sport sedan.
“When managing to return to profit, you take those actions which almost always have a near- to mid-term impact on sales volume,” observed George Pipas, an analyst for Ford, remarking on ceding second place to Toyota.
With the pruning done, Ford’s future is staked on a new crop of appealing small cars and a new type of fuel-efficient engine for vehicles of all sizes. These new products are on show at this year’s Detroit auto show. What remains to be seen is whether they are the solutions American consumers will want as they arrive in showrooms over the next couple years.
Also on show in Detroit: An updated version of its F-150 cash cow. In an effort to keep the cash register ringing, Ford’s strategy for its top-selling pickup is more of the same — more gargantuan size, more options and more expense. Whether consumers have an appetite for more options remains to be seen, as the choices available to buyer of trucks from all manufacturers have never been greater.
On the compact car front, Ford is showing the four-door version of the Verve concept first introduced at the Frankfurt Motor Show in September. The four-door sedan body style is the most popular layout for cars in the United States, and the Verve has all the style and attitude European consumers have long enjoyed in their small cars, but which have been depressingly absent from compacts on this side of the Atlantic.
“We know that when we come out with our small car we have to be a heck of a lot better than our competition,” said Mark Fields, Ford’s president of the Americas, acknowledging Ford’s disadvantaged position in consumers’ minds. “‘Good enough’ is not good enough.”
Ford designers were able to impressively incorporate a trunk and two more doors into a design that had seemed expressly conceived as a three-door hatchback, and the result is so successful that the only question is whether Ford can get the Verve into U.S. showrooms quickly enough.
Ford promises a 2010 arrival for the Verve, which seems a long way off for a company that’s in dire financial straits. But the arrival dates for competitors’ new crop of improved compacts are equally distant, which should buy Ford some time, points out Peter DeLorenzo, a veteran industry observer who runs the Autoextremist.com industry blog.
“Every manufacturer is talking 2010-11 for their really new good stuff anyway, so Ford isn’t out of the game with their timing,” he said.
J Mays, Ford’s group vice president of design and chief creative officer, notes that customers in the compact segment are demanding the best: “The Verve concept shows people that when it comes to style and sophistication, Ford can compete — and even outshine — the best in the business.”
Not all customers want compacts, despite the rapid growth of the segment, but most want better fuel efficiency. And even if they don’t, car makers are compelled by the new government Corporate Average Fuel Economy standards to deliver it.
To boost the efficiency of its products, Ford is betting on its new advanced engines that it brands “EcoBoost.” They are smaller than today’s comparably powerful engines, but use 20 percent less fuel.
Like diesel engines, these engines use direct injection — that means the fuel sprays straight into the combustion chamber instead of into the intake port — and turbocharging. Unlike diesels, however, the engines will burn conventional gasoline, so consumers need not change their fueling habits, and unlike diesels these gas engines are quite affordable.
Diesel engines tend to be expensive both because of their sturdy design to withstand their powerful combustion and also because of the high cost of the pollution control systems they require.
“Compared with the current cost of diesel and hybrid technologies, customers in North America can expect to recoup their initial investment in a four-cylinder EcoBoost engine through fuel savings in approximately 30 months,” promised Derrick Kuzak, Ford’s group vice president of global product development.
To recoup the additional cost of investing in a diesel engine in North America will take an average of 7 1/2 years, Kuzak added, while the investment in a hybrid will take nearly 12 years to recoup, given equivalent miles driven per year and fuel costs, he said.
Ford’s Mazda subsidiary already sells direct-injected turbocharged gasoline engines in its Mazdaspeed3, Mazdaspeed6 and CX-7 crossover SUV, but EcoBoost advances that technology and optimizes it for efficiency rather than power, according to Kuzak.
Ford will launch EcoBoost in 2009 and the company says it will sell half a million vehicles equipped with the technology in the next five years. The technology debuts as a 340-horsepower 3.5-liter V-6 in the Lincoln MKS luxury sedan in 2009, but will also include four-cylinder engines.
One application of the four-cylinder could be in the next-generation Ford Explorer. The potential for that vehicle is shown in the Explorer American concept car, on show in Detroit, which could use a 275-horsepower 2.0-liter four-cylinder engine along with a six-speed automatic transmission and reduced weight (through the use of lighter materials) to deliver a 30 percent fuel saving compared to today’s V-6 Explorer. Obviously, fuel savings compared to today’s eight-cylinder Explorer would be even greater.
The question is whether consumers, despite higher fuel prices and greater environmental concern, are truly prepared to accept smaller engines — even ones like the EcoBoost that promise to deliver the power they expect.
Car buyers had better get used to the idea of V6 engines being the biggest engine choice available, as smaller turbocharged motors will become the norm and not the exception, said DeLorenzo.
“The reality of the new fuel economy regulations hasn’t even begun to hit home with the American car-buying consumer yet,” he said. “They’ll be in for a shock.”