FORD's PROBLEM

[Gavin Allan]

FORD REORGANIZATION



How Ford lost its way

Bad product choices helped trigger steep drop in market share



By Jim Mateja

Tribune auto reporter

Published January 24, 2006





The most stunning aspect of what went wrong at Ford is how easy it is to explain.



"Selling what you have rather than what consumers want doesn't make sense," said Bill Ford Jr., chairman of the auto company bearing the family name. "It used to be that you'd build it and they'd buy it. But that's wrong, that's antiquated. Now it will be that if they will buy it, we will build it."



It was a telling admission on a day when Ford acknowledged its problems by announcing sharp employee and manufacturing cuts designed to bring the company back to profitability in North America by 2008.



"The reason Ford is in this mess is product, product, product," said Dave Healy, analyst with Burnham Securities. "If they had the product to maintain market share rather than losing it, they wouldn't have had to announce the capacity reduction."



Analysts said Ford made several wrong choices. It made a significant bet on sport-utility vehicles--once the sweetheart of buyers--but sales of those began to cool even before gas prices spiked to more than $3 a gallon in September.



The company has a Taurus sedan that was once the biggest-selling car in America, but it simply got older as Toyota and Honda brought out new Camry and Accord models every few years, including gas/electric models.



It also fell behind in the mini-van campaign, coming slow to the party and slow to add the latest innovations like sliding rear doors on both sides of the vehicle.



The result is that between 2000 and 2005, Ford lost 6.5 points of market share as sales decreased by 1 million units, said Rebecca Lindland, senior market analyst for Global Insight.



"By building products to fill plants rather than fill consumer needs, Ford lost touch with what consumers want and with consumers' changing needs," she said.



Meanwhile, the market was only getting more competitive, with the South Koreans, like the Japanese in the 1970s, moving in. They started with low-priced, high-mileage cars and, once established, moved into midsize and entry-level luxury cars, along with SUVs and mini-vans.



"While there's nothing they can do to stop Toyota, they also underestimated the ability of Hyundai and Kia to grab market share," Lindland said.



But Ford's troubles go beyond product, added Jim Hossack, vice president of AutoPacific, an industry research and consulting firm. Ford and the other domestic automakers have no one but themselves to blame.



He's talking about the huge sums paid to United Auto Workers members for health-care and pension costs.



"The long-standing relations between the U.S. auto industry and the UAW were forged between 1945 and 1975, when there was no significant foreign competition," he said. "It didn't matter what the manufacturers paid the workers as long as the workers at GM, Ford and Chrysler all got the same deal."



These deals came at a big price.



U.S. automakers became uncompetitive in terms of cost so they couldn't afford to compete on product, Hossack said. "The Japanese could add more features and focus on more quality because they had more money to do so," he said.



"Now you have import competition with young workers in new [U.S.] plants without UAW restrictions and benefits. Those with competitive costs grow, those without competitive costs don't.



"And it's not just autos. I don't care who the chairman or president or chief designer is, if you aren't competitive in costs, it means you are in trouble. Can Ford survive? Sure. Can it prosper? That's not clear yet."



On Monday, Ford spelled out only the barest details of how it will make a comeback, focusing on the announced closing of plants and loss of jobs

 

[M B]

 

[Robert Stanton]

Very interesting. And from what little I know, seemingly on the mark.

 

[Aaron Laake 2]

From what I know about the situation, this hits the nail on the head.

-Ford is paying huge bucks to the UAW and pension plans that the competition doesn't.

-A lot of models are antiquated. Look at the Taurus. I wouldn't buy it. It is plain white toast. It doesn't feature any benefits that the competition doesn't. The focus just looks like a replacement for the Escort. The F150s, the explorer line, and mustang line is all that is keeping it afloat.



My question is, why is there still a Mercury line? The mercury line is pretty much the same as ford, but with different model names: sable = taurus, mountaineer = explorer, mariner = escape. Does anyone actually go into a dealership today with there heart set on something made by mercury? Do people not realize that the fords and mercs are the same thing? I would either turn mercury into a different line, like performance cars (I thought the marauder was cool) or scrap it .



The Hawk

 

[Keith McElroy]

Hawk,



I originally bought my 97 Mountaineer because it came standard with the leather seats, V8, AWD, etc. and was thousands less than the comparatively equipped explorer. The Mercury line seems to be the way Ford gets rid of its stock of parts from the previous model years of the Ford cars. In the case of the 97 Mountaineer, it was simply a previous year explorer with a different grill, wheels, and badges.

 

[Tom Schindler]

Ford is paying huge bucks to the UAW and pension plans that the competition doesn't.

Very true. The import car makers are a young company in the USA. They do not have many pension plans.

A lot of models are antiquated.

Again, very true. If I were in the market for a car, a Taurus would be first on my list. Cheap to buy, about $14,000.00 and they last forever. Sister 170,000 miles on a 1991, she now has a 1999 with over 100,000 and has not done anything to it. Still as the original plugs. A guy at work has a 1997 Taurus with over 200,000 miles on it and just recently replaced some things that should have been done years ago. I know they are reliable and dirt cheap.



he Focus is a joke. Ford killed the Escort and replaced it with a Focus. Ford has never had the sales numbers with the Focus as they did with the Escort. Dump the Focus and bring back the Escort. People will buy them by the millions.





Tom

 

[Deleted deleted]

There are a few bright lights for Ford. The Escape has been a strong seller since its release in 2001, and the new Mustang seems to be very popular.



Tom - bring back the Escort and people will buy them by the millions???



hehe you're too funny. Toyota Corollas and Honda Civics were outselling Escorts by a huge margin which is why Ford killed it. Focus has fared only slightly better against the imports.

 

[Thomas Rogers]

Caymen shouts the Escort accolades because he had (has) an Escort, and if you haven't figured it out yet, Caymen likes what Caymen is used to and has experienced; all else sucks!







I had an Escort, and sucked.

 

[Wes Davis]

I had a Ford Escort EXP, the new body style. I loved it, everyone thought it was some sort of miniature Ford Mustang.

 

[Ken Crockett]

I had a '91 Mercury Tracer (escort), which the ST replaced. 13.5 years, 202k miles, original engine, original tranny, original owner. No rebuilds (except for the owner; I was rebuilt once or twice).

 

[Thomas Rogers]

And my 81 Escort had its water pump replaced at 40K miles and hits head gaskets at 65K. That seems like crap design to me!

 

[Mark Grumpy]

The Escort was introduced in Europe in the '60s. The Focus replaced the Escort in Europe and did very well. I suspect that is why Ford, at least in part, brought it here a couple years later.



grump

 

[michael taylor]

A lot of models are antiquated. Look at the Taurus. I wouldn't buy it.

And you couldn't if you wanted to. Ford stopped selling them to the public last year. It was replaced by the Fusion.



About Mercury, have you sat in a Milan? Actually, have you even seen one? Did you know they were making them? In your terms, milan=fusion. I'm guessing since you just found out the Taurus made its exit, you probably missed Fusion/Milan/Zephyr's entrance.

 

[Tom Schindler]

Tom - bring back the Escort and people will buy them by the millions???



hehe you're too funny. Toyota Corollas and Honda Civics were outselling Escorts by a huge margin which is why Ford killed it. Focus has fared only slightly better against the imports.

The Escort was dumped after the final design in 1997. The 1991 to 1996 Escorts were the best selling years ever for Ford. In the 90's, between about 1992 to 1994, the Escort was the top selling small car in the USA. More then honda's Civic and more then Toyota's Carolla.



Look it up.



Here is just one example I found in my library.



Autoweek Feb. 20-26, 1995



Top ten selling vehicles in the USA for the month of January 1995.



1. Ford F series pickups..............47,968

2. Chevrolet C/K series pickups....39,134

3. Ford Taurus...........................29,958

4. Ford Escort............................24,845

5. Ford Ranger...........................22,882

6. Toyota Camry.........................21,832

7. Ford Explorer.........................21,297

8. Honda Accord.........................20,290

9. Saturn...................................19,490

10. Pontiac Grand Am..................18,221



Toyota was selling the hell out of those Corolla's and Honda sold many more Civic's then Ford did the Escorts.



If you want, you can buy a Taurus. This is the last year. You must special order it. No dealers stock them. Fleet and special order only.





Tom