Global Insight Perspective | |
Significance | Ford is embarking on a significant reduction in complexity, with fewer global platforms, engines, and even seat frames all expected to help the company save cost and improve time-to-market. The CEO also stated that he does not think that Ford needs to have a global luxury brand, and that focusing on the core Ford brand is paramount. |
Implications | Such thinking is a major change in Ford's international strategy, but is not entirely unexpected given the way in which the company is shedding its European brands. Ford's success will therefore depend on the reception that its common-architectures vehicles receive worldwide. |
Outlook | Ford must avoid the pitfalls of prior "world car" attempts by not only sufficiently differentiating its vehicles built on common architectures, but also ensuring that the needs of the buyers in which they are being sold are being met by the various vehicles in terms of size, style, power, economy and so on. |
Ford CEO Alan Mulally spoke with the media on Wednesday (22 August) evening, and along with product development czar Derrick Kuzak, outlined several key points about Ford's future global passenger car platform strategy. Among the executives' pieces of information:
- Total global vehicle platforms would be reduced from the current levels by 40% by 2012, leaving the company with just 10 core platforms. Roughly 70% of the company's products will be based on those 10 platforms.
- Some vehicles will become global "world cars", with platforms shared between regions. The upcoming B-segment vehicle is one, as will be the next Focus (C-segment) and Fusion (D-segment) vehicles, according to Mulally.
- Ford will reduce complexity by dropping the number of six-cylinder engines from eight to two by 2012, the number of four-cylinder engines from 10 to three, and the number of seat structure types from 20 to two.
- Having a global luxury brand is not important, says Mulally; the CEO would rather focus the company's efforts on its mainstream Ford-brand product portfolio globally, and make that the central effort to reverse the company's fortunes and grow the business worldwide.
No timeline was given for the switch to the new platform strategy, but industry analysts expect that the new global Focus will debut with the next-generation European model in 2011-12, and the new Fusion/Mondeo sometime early next decade.
The New Global B-Segment Car
In related news, Ford took the wraps off its new B-segment concept car that will debut at the Frankfurt Motor Show next month. The Verve, a two-door concept car that is said to be nearly identical to Ford's upcoming global B-platform Fiesta replacement, is based on the Mazda2. It is the first of three concept cars that the company is planning for the B-segment vehicle, and the one that the company says is aimed at European buyers. The next version is geared towards U.S. customers, and the third will target Asian market buyers. The company is using the car to demonstrate its new platform strategy, where one vehicle architecture will be used to develop cars for use anywhere in the world, but tailored through different styling to the markets in which it will be sold. Ford has not confirmed where it will build its B-segment car for North America, but reports suggest that the company is planning on building it in its Brazilian facility.
Outlook and Implications
In one year, Alan Mulally has accomplished quite a bit, even if it is not readily apparent from Ford's sales numbers or a spate of new product gracing showroom floors. The new executive secured over US$23 billion in credit to keep the company going, renamed the failing Five Hundred sedan the Taurus, brought back the Sable nameplate, and began the implementation of a sweeping reorganisation of the entire company's operations and bureaucracy. To that end, he has sold Aston Martin, put Jaguar and Land Rover up for sale, and is contemplating also unloading Volvo. Mulally's statement that a global luxury brand is not important to Ford going forward almost seals the deal that Volvo will be next on the auction block, which could put that brand in quite a predicament, dependent as it is on Ford for most of its platforms going forward. The idea that Ford does not need a global luxury brand is a stunning reinvention of the company's international positioning, and potentially heralds a new future Ford Motor Company that is much smaller, less able to play across the spectrum of vehicle segments, but which may be better focused on mass-market core products in an attempt to again establish itself at home and abroad. Ford already has one luxury brand, Lincoln, which is gaining traction in the United States again with fresh new products, but that brand has nearly no international presence and little in the way of appeal outside the United States (and even within it until just recently, if sales numbers are an indication). This is not to say that Ford could not attempt to expand Lincoln internationally, much in the way that General Motors (GM) is doing with Cadillac, but it would take a significant product investment in Lincoln to make appealing vehicles, and Ford's most recent strategy of basing Lincolns and Mercurys on Ford-brand vehicles would not suffice.
But key to the company's forward progress will be the swift implementation of the shared platform strategy that it is developing. The play is essentially one that is very commonly seen among the world's top automakers, but which has been practically perfected by Toyota and Volkswagen (VW). Both of those companies make dozens of models on common architectures, with vehicles as diverse as the Audi TT and VW Golf sharing a common structure, engines, and more. By minimising the variation between models globally, Ford can capitalise on economies of scale and reduced time-to-market, focusing instead on tailoring the platforms to the markets in which it will be sold.
But great care must be taken in using this approach. The company has tried a similar tactic in the past, as have other domestic automakers, to little success. Ford sold a version of the Mondeo sedan in the United States as the Ford Contour and Mercury Mystique, but despite its superior European-style driving dynamics, its rather diminutive European-style proportions put it out of contention among its domestic competition, and its elevated price put it as overlapping with the much larger Ford Taurus sedan. GM attempted to do the same with a global minivan platform; as a result of the width limitations imposed by European streets, the resulting domestic minivans found themselves coming up short in terms of interior cargo capacity and passenger space.
Ford promises that these new common-architecture programs will not face the same kind of compromises that previous "world cars" have had. By using common underpinnings, the company has stated it is confident that it can deliver vehicles suitably different that they appeal to their respective markets. With more and more automakers pursuing this strategy, flexibility in design and manufacturing is going to become more crucial than ever to the car making process.