Ford's Banking on 2 Global Vehicles
Apr 28th 2013 10:11AM
Updated Apr 28th 2013 3:30PM
At the end of this year, Ford plans to have 85% of its global sales coming from just nine core platforms. Creating economies of scale was one of the main reasons Ford was able to return to profitability only a year after General Motors and Chrysler declared bankruptcy. Trimming the number of platforms it uses has enabled Ford to juice its operating margin to a strong 11% in the United States.
When you own stock in companies like Ford and GM, you need to know the products and numbers down to the finest detail. It's important to understand where the vehicles have had past success and how the company plans to improve their positioning for increased sales going forward. Here's a look at two vehicles that will be key to increasing Ford's market share globally and reaching its goal of achieving that 85% figure.
Fiesta and Focus
According to data from Polk, Ford's Focus was 2012's No. 1 selling nameplate -- topping more than a million sales globally. As Jim Farley, Ford's executive vice president of global marketing, put it:
Focus and Fiesta represent the culmination of our One Ford global product strategy. ... Our global products are resonating with consumers - especially in the best-selling, most competitive segments -- with their unique combination of fuel efficiency, high quality, rich content and fun-to-drive personalities. Through One Ford, we're able to bring economies of scale and fantastic value to customers all around the world.
In March, the Focus helped deliver a record-breaking sales month and quarter in China. That's an important development, as Ford trails rival General Motors significantly there. Sales of the Focus more than doubled in March, up 148%. The numbers were even better for the quarter -- up 156%.
Fiesta, in the future
The Fiesta is proof that Ford is now producing smaller, valuable, and more fuel-efficient vehicles to compete with imports. Its success will be important for Ford to take market share in segments long dominated by Toyota and Honda.
What's even more important is the long-term vision Ford has with this vehicle. Auto buyers are very loyal to brands, and securing the next generation will be important to continuing growing sales. The Fiesta is aimed at attracting a younger consumer -- millennials in particular, a generation that represents almost 80 million consumers, with an estimated purchasing power of $170 billion. That makes it the largest generation since the baby boomers, and much larger than Generation X's 48 million.
In 2009, Ford took on a unique and groundbreaking marketing campaign with the Fiesta, when it recruited consumers to drive a Fiesta for a full year. Their experiences were logged, and Ford used this information to create valuable marketing content for social-media outlets, targeting millennials who are use those online tools to share content about their daily lives.
It turned out to be a great move, and the content created more buzz than expected. Dealerships took more than 132,000 inquiries, 83% of which came from consumers who had never owned a Ford. On top of that, 30% were under 25. Ford is clearly way ahead in attracting the younger generation, and that will bode well for future company sales and profits.
Ford receives just about all of its profits from North America, led by the highly profitable F-Series. As we progress through this decade, the Focus and Fiesta will lead global sales to make Ford profitable in emerging markets. It's locking down younger consumers in the U.S. and planning to double its market share in China. I expect great things to continue from Ford, as a consumer and as an investor.
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The article Ford's Banking on 2 Global Vehicles originally appeared on Fool.com.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.