The Future of Ford's Vehicle Lineup
Apr 27th 2013 1:24PM
Updated Apr 28th 2013 12:00PM
What Ford has done with its economies of scale in the past four years has been nothing short of impressive. It was the single most important reason that a mere one year after Detroit brethren General Motors and Chrysler claimed bankruptcy, Ford was posting its first profit since the recession. Ford went from $30 billion in losses between 2006 and 2008 -- through a recession in which we saw vehicle sales tank mercilessly -- to a profit in 2009. It's also the single most important reason that its operating margins top the industry, and hit 11% -- very strong for the auto industry -- in North America in the first quarter.
By the end of this year, the goal is to have 85% of global sales from nine core platforms, but what do they look like? Here's the look of Ford's future. It aims to please the masses -- and investors along with them.
Here's a rundown of what you can expect from two of the most important platforms for global revenue growth going forward. I'll cover another two tomorrow.
Ford's stylish Fusion sedan is setting the accounting books on fire, posting more than 80,000 sales for the first quarter -- a record for the model. It strikes a perfect mix between value and fuel efficiency. It received this year's "Green Car of the Year" award recently in Los Angeles and has earned U.S. News & World Report's 2013 "Best Car for the Money." Those two qualities will be absolutely critical for the Fusion to replicate its success here and overseas.
Ford recently unveiled the new Mondeo/Fusion at the 2013 Shanghai Auto Show. Ford is aiming to double its market share in China by mid-decade, and for this to happen, the Fusion needs to be a hit with the Chinese. So far, it has been met with much fanfare and is expected to be very competitive -- it stands out on the road in a stylish way.
Unfortunately, even the 30,000 in U.S. sales we saw in March may not be sustainable at current plant capacity. Typically, automakers want to have 65 days' supply of high-volume sellers, and WardsAuto estimated the Fusion to have as few as 40 days' inventory before March sales took place. This is a good problem to have, and the company has plans for extra plant resources at Flat Rock, Mich., to produce more of the sedan as soon as this coming fall.
For growth purposes, it would have been easy to discuss the Focus or Fiesta here, but I think the Mustang offers unique potential among Ford's vehicles. In 2012 it ranked seventh in Ford's vehicle lineup for sales in the U.S and has slightly trailed the Camaro in the past three years. Its value isn't limited to its sales figures, as the iconic American muscle car will always be a large part of Ford's brand image. The trick is to attract customers overseas as well, as the Mustang will need to be a part of Ford's shrinking global platform picture.
It's going to be a difficult transition, and it will be a fine line to walk in attracting both domestic and international markets with the same style. The Mustang as we know it in America won't sell in Europe; it will have to evolve into a smaller, more modern ride. There is already anxiety and tension surrounding its 50th anniversary and the secrecy of the redesigned 2015 model. Ford has to find the right balance and will need the Mustang to transform from an American icon to a global icon. It has to get this right.
If Ford continues its success with the Fusion and plays its cards right with the 2015 Mustang, then one very important factor we typically watch with investments -- margins -- will be affected. For one, as Ford becomes less dependent on its massively profitable F-Series for revenues and profits, we will probably see margins contract. If that happens, it must be understood that in the grand scheme of things, the margins will be contracting for a good reason. The growth in top-line revenues and bottom-line figures will more thank make up for the shrinking margins -- I promise.
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The article The Future of Ford's Vehicle Lineup originally appeared on Fool.com.Motley Fool contributor Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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