Automotive News - May 19, 2008 - (Page 30)

30 • MAY 19, 2008 TA L K F R O M T H E T O P Fields navigates Ford through ‘white water’ espite lower costs and smaller losses, North America remains Ford Motor Co.’s problem child. Fuel prices are rising, the U.S. economy is shaky, and buyers are shifting ever faster from pickups and big SUVs into smaller vehicles. Ford Americas boss Mark Fields has a big job ahead. He is charged with cutting costs in North America by $5 billion by the end of this year compared with the end of 2005. Meeting that target is necessary if Ford is to fulfill its larger goal of returning the North American business to profitability in 2009. Fields spoke with Editor David Sedgwick and Staff Reporter Amy Wilson. Jim Farley and Alan Mulally have said the second quarter is going to be the most difficult of the year. Will April turn out the worst, or could May and June get worse? From a SAAR (seasonally adjusted annual rate) standpoint, it won’t look particularly attractive. April always tends to be a little lighter on the SAAR. We’ve revised our industry forecasts (to) between 15.3 and 15.6 (million vehicles). Through the first quarter, the industry is about 15.6 (including) mediums and heavies. We probably expected the second quarter to be weak, and then as the stimulus actions that the Fed has put in place take effect as the rebate checks start coming in the mail, we’ll see some improvement. There was a time when two-thirds of your sales were big pickups and big SUVs. Now it’s less than half. At what point does that stabilize? We’re in a lot of white water in the industry right now. Since the first of this year, some of the segments have changed dramatically. The C-car segment has grown almost four points as a percent of industry. The good news is the segments that are growing — the small, mid-sized cars and the crossovers — we have really strong entries. Our sales year over year are up significantly on things like the new Focus and the Edge. Are you actually trying to boost production of the Focus and Edge? We’re going to look at every opportunity to satisfy the market demand that’s out there. What are you doing to leverage that demand in terms of getting added pricing and product content? What’s really interesting is (that customers are) moving down on size, but they’re not necessarily wanting to move down on feature content. We’re seeing a richer mix of feature content. That offers margin opportunity. Secondly, it’s the old supplyand-demand curve: As we see those become tighter as those segments grow — in crossovers and small and mid-size cars — we’ll look at opportunities to maximize revenue both for us and the dealers. Is that preference for premium content showing up in your transaction prices for the Focus, Escape and Edge? Yeah. Our net revenue on a per-ve- to go with that? I’m not going to get into future product plans on Mercury. We know there are questions out there. We’ve laid out a strategy to focus a lot of our efforts going forward on the Lincoln side of the franchise. (The luxury segment) offers attractive profitability for grosses for the dealers and also profitability for us. That’s where a majority of our focus is going to be, and Lincoln will become the dominant portion of the Lincoln-Mercury franchise, which is a flip from the history. Do you expect your U.S. market share will bottom out this year, or is that going to happen in 2009? Retail, our first quarter came in at 12.9 percent. Fourth quarter, our share was lower. So it’s starting to be stable. From a performance standpoint, we’re doing very well, and we’re actually growing in a number of segments. But because the segments are shifting — we have such a large share of the truck or SUV segment — then the math works its way to hurting your share. I’d love to be able to say we’re going to bottom out (but) clearly there are some industry dynamics here that are going to affect that. You’re stuck in a bit of a trap in the pickup segment, keeping the dealers competitive and staying with what the competitors are doing on higher incentives. On the face of it, it contradicts the stated goal of finding the real demand. How do you get out of this trap? The way you get out of this trap is continually adjust your production, as we have been. We’ve also seen some other competitors start to do that, which I think bodes well for finding that natural demand. CAFE is going to make a real difference in the vehicle lineup. You are studying what Ford looks like in 2020. Can you tell us about that? We’re committed to meeting the regulations that were laid out. We’re looking at our product plan and saying: “OK, what’s the best way of achieving those regulations across the board — cars, trucks, crossovers?” What specifically do you need to do to get there? Short term, it is more fuel-efficient gasoline engines. EcoBoost falls into that category (and) gives you 20 percent better economy, 15 percent better emissions. And it’s fun to drive, which we think is a real differentiator for us. More applications of six-speed transmissions, literally across the board; more application of electric power-assist steering; more hybrids — obviously, the (Mercury) Milan and the Fusion are coming. Midterm, it’s all about how do we take weight out of the vehicle. How do we also look at things like plug-in hybrid electric vehicles? And continuing to work on efficiency on gas engines, as well as appropriate applications of diesel engines. Longer term, toward the end of the cycle, we’re still developing that. But clearly it’s going to require more alternative powertrains to get you there: plug-in hybrids, electric vehicles, potentially fuel cells. c Mark Fields hicle basis is going upward. The revenue difference between an F-150 and a Fusion or something like that is pretty significant. The mix is really stacked against Ford’s historic lineup. How does that threaten the near-term goals of your turnaround plan? We knew we needed to change that balance. Part of the Way Forward plan was to get the cost structure right, work on the overall material cost in our vehicle. The good news is, as we see vehicles like Fusion and Focus and Edge continue to rise in volumes, that gives us a lot more opportunity to get economies of scale, a really fluid situation, and we’re going to continue every month to look at our performance, look at the segmentation, and then we’ll take appropriate actions. If it gets to the point where we see those things make sense, we wouldn’t be hesitant to do that. You’re seeking more hourly worker buyouts. What about white-collar job cuts? We’ve said previously, in terms of our people, that for the most part we were going to handle that through attrition. But again, we’re going to look at the external environment, and we’re going to take actions that are necessary to achieve our objectives. So, I’m not ruling that out. Are you going to have more money for dealership buyouts this year? Where it makes sense, we’ll participate financially, but everybody has to have some skin in the game. So we’ll look at it on a case-by-case basis. You’ve had a target in metro areas of about 1,200 to 1,250 new units per year for your stores. How close are you? In the areas where we’ve taken some actions, we’ve seen throughput and profitability go up. A lot of dealers are worried about whether Mercury will continue. Alan Mulally has talked publicly about the new Taurus coming a year from now. Will Mercury dealers get a new Sable What vehicles do you need more of? Focus. It’s really outstripping even our most optimistic projections. Edge continues to do well as we launch the Flex in the same plant in Oakville (Ontario). We’re going to have to look at ways of balancing production. working on the material costs and improving the margins. Do you expect more production cuts in your truck plants? Don’t know. We’ve been very, very disciplined over the last couple years in managing our inventories and matching capacity to demand. You can’t sell your way out of a recession, so to speak. Alan Mulally has said “truck production needs our special attention.” Are there significant plant idlings or shift cuts? Not yet. Our approach has been to take down weeks at our plants. This is

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Automotive News - May 19, 2008 Ford eyes smaller F-150 cousin Sonic: Mercedes tries to 'extort' store upgrades Chrysler seeks 25% slash in parts prices Dealership managers pushed Chrysler's latest incentive Crain names 4 new VPs Automotive News staffers win Wheel Awards GM will keep cutting sales to fleets GM studies the future of full-sized trucks American Axle plans to expand in Asia At Lexus, the sales laggards are cars VW positions Tiguan as 'GTI' of small SUVs Tata enters race for 100-mpg car Harley Earl was the daddy of auto design Focus will follow Fiesta as a global vehicle Lexus shows how it sweats details Industry slows tide of state CO2 rules Chevy tweaks Cobalt to add fuel economy Be careful; don't do anything dumb Looking ahead to different industry They thought they knew everything Cerberus doesn't belong in autos Dealers as scapegoats Smart, steady growth works best for suppliers Farley's smart to value Ford's heritage Absurd logic in the U.S., cowardice in Germany BMW, Daimler keep a wary eye on U.S. economy James Franey Dealers' approach can lessen pain of staff cuts GM plans to distinguish Opel with image makeover Make or buy? Software can estimate costs for company Honda, Toyota see robots in their futures Bosch aims to lead in hybrids technology King of hearts Clarke aims to get GM back on track in N.A. Fields navigates Ford through 'white water' LaSorda steers Chrysler's global ventures Toyota's Lentz: A crash course in hard times Truck sales fall 13% in April Modine sells Thermacore unit Alcoa to close Mexico plant Toyoda Gosei expands in Mexico Hayes Lemmerz plans to close Georgia factory Japan's sales slide 2% in 1st quarter; output climbs Dealers Hyundai let U.S. direct Sonata freshening After .com and .edu, is it time for .car? Panoramic sunroof of Lincoln MKS boosts Inalfa sales Chrysler hedged gas price bet Smart phones help dealerships retain customers CAW completes pacts with GM, Chrysler early GM, UAW resolve 2 disputes New media buyer for Chrysler Visteon names Stebbins CEO Convertible registrations drop Ferrari: From denial to debut Buildings Porsches in U.S.? Depends whom you ask Toyota will go slow in Tupelo Ghosn is glum on prices, U.S. sales prospects Pischetsrieder has earned a celebratory cigar NHTSA spins VINs, averts meltdown F_RD GU_S WI_ BUI-_KS 50 PEOPLE FOR 50 YEARS Yutaka Katayama Clarence Talley Jim Morton Pete Brock Marvin Runyon Yoshikazu Hanawa Bill Bruce Shin Maki Jack Collins Mitsuya "Scape" Goto Bob Link Soichi Kawazoe Jerry Hirshberg Takashi Ishihara Roy Rogers John Parker Bob Thomas Teruo Uchino Morrie Sage Bob Thomas Nobe Wakatsuki Earl Hesterberg Carlos Ghosn Lee Clow Jerry Benefield Yutaka Kume Doug Betts Tim McCarthy Jed Connelly Atsushi Nakatsuji Dave Hubbard Joe Opre Patrick Pelata Yoshiyuki Kimura Diane Allen Mad Mike Taylor Chuck King Larry Dominique Mark Igo Mitsuhiko Yamashita Shiro Nakamura Tom Mignanelli Dick Roberts William Cushing Emil Hassan Chester Luby Jane Nakagawa Louis Schweitzer MR. K Ray Lemke Richard McCutcheon

Automotive News - May 19, 2008

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