Ford Focuses on Market-Share Slide
Strategy to Stop Bleeding Includes Midsize Sedans And New Crossover Vehicles
By JEFFREY MCCRACKEN
Staff Reporter of THE WALL STREET JOURNAL
January 10, 2006; Page A3
Ford Motor Co. says it has turned its focus to halting a decade-long slide in its share of the U.S. car and truck market, even as it restructures in North America to be profitable on a lower sales base.
The move marks a big change for Ford, which de-emphasized market share in recent years, saying it was willing to forego unprofitable business such as bulk sales to rental-car fleets. Ford is now preparing to defend its share amid a market it believes is becoming more like the European and Japanese auto markets, where there are six to eight dominant players of roughly equivalent size.
The U.S. auto market was long dominated by three Detroit auto makers with foreign auto makers fighting for a third or less of the remaining share. Ford market share held around 25% from 1994 to 1998, but has dropped since. It fell to 17.4% in 2005, according to Autodata Corp.
"It is most important that we stop our [U.S. market share] slide in 2006," said Ford Chairman and Chief Executive William Clay Ford Jr. "It is the year we have to stop the slide. Then we can rebuild."
Ford acknowledged it is unlikely to regain its previous market strength. "The focus of the organization is to stabilize the share. The days of 25% market share, that's not gonna happen," said Mark Fields, Ford's North American chief, at the North American International Auto Show this week. Mr. Fields is leading a restructuring effort called the "Way Forward," which will be unveiled Jan. 23.
Ford's strategy for defending its market share includes a renewed push into the midsize-sedan market the auto maker had long ignored and new vehicles for the growing market for crossover sport-utility vehicles, which are built on car frames and are smaller than traditional SUVs. Ford projects that market will exceed the traditional SUV market this year.
The 2006 Ford Fusion, Mercury Milan and Lincoln Zephyr sedans went on sale in late September and Ford says they are exceeding internal sales projections despite some production delays. Those sedans will "earn their stripes in 2006," said Mr. Ford. Ford will also introduce two new crossover vehicles later this year, the Ford Edge and the Lincoln Mark X.
Ford is focusing on market share "because we've done an enormous amount of work on the cost side, but you need to also focus on revenue," said Derrick Kuzak, Ford's head of product development.
AUTO SHOW COVERAGE
• See complete coverage of the North American International Auto Show in Detroit, including our news tracker.
• Motor City Rides: A slideshow of production and concept cars.
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• Ford, GM Promote 'Flex-Fuel' Vehicles
Despite the new products, much of the focus on Ford at the Detroit show is on the Way Forward plan. Mr. Fields, while declining to discuss specifics, said a major part required Ford to be honest about what its legitimate market share was in the U.S., and then to cut back on the size of the company accordingly. Mr. Fields has taken to using the phrase "change or die" in speeches and conversations with journalists when he discusses what must happen within Ford.
The auto maker, which lost $1.2 billion on its North American automotive operations in the third quarter, is hoping this effort can go further than a restructuring launched by Mr. Ford in January 2002 a few months after he took over as CEO from Jacques Nassar. This restructuring is expected to include several plant closings as well as an emphasis on some new product offerings.
Mr. Fields, who previously oversaw restructurings at Ford's Mazda and Premier Automotive Group businesses, says this plan will also be "more honest" about the competition, Ford's strengths and weaknesses and the likely size of Ford into the future. "I think in the past we erred on the side of being too polite. But my style is not to sugarcoat. I'm getting people to understand the reality of where we are heading," he said.
Ford Chief Operating Officer Anne Stevens said Ford did several "scenario analyses to construct different worlds," where oil supply is constricted or the U.S. consumer is more or less worried about gasoline prices. She said the plan analyzed what Ford needed to do to be profitable through 2015.
Also helping drive the plan, said Ms. Stevens, is what she called "psychographic research" that looked at the "values and attitudes" of both consumers that buy Ford products and those that do not. Many of those potential buyers are more interested in cars than in the pick-up trucks and sports-utility vehicles that had been Ford's specialty. As such, Mr. Fields has said Ford wants to become "America's car company." |
