BUSINESSWEEK ONLINE : OCTOBER 16, 2000 ISSUE
INTERNATIONAL BUSINESS Can the Mondeo Get Ford Back into the Race? The carmaker badly needs a big hit in Europe This year's Paris Auto Show, which started on Sept. 30, must have provided Nicholas V. Scheele with plenty of wistful moments. Two years ago, he strolled the aisles at the biennial display with a certain hit on his hands. As boss at Ford Motor Co.'s ( F) Jaguar Cars unit, Scheele had breathed new life into the long-ailing British marque, and he was about to launch Jag's now successful S-Type Sedan. As a Brit and an auto exec, the road ahead could hardly have seemed smoother. ''I was happy to stay at Jaguar,'' Scheele says today. Small wonder. Scheele is now top man at Ford of Europe, and his star entry in Paris this year--the midsize Mondeo sedan--is anything but a sure thing. Priced at roughly $17,000 and up, the totally revamped Mondeo is at the top of Ford of Europe's line and was generally well received. But it faces substantial competition in its segment, chiefly from Volkswagen's ( VLKAY) Passat, Renault's Laguna, and the Vectra model made by the Adam Opel unit of General Motors ( GM). And the Mondeo may suffer from the weak brand image that has plagued Ford of Europe for the past decade. ''There is a little question mark,'' says Ulf Nord, head of the global automotive group at consultant DRI, of the sedan. ''Does it have enough character to really stand out?'' IDLE PLANTS. And can Scheele turn things around? The world's most profitable carmaker has for years been barely profitable at best in Europe. Last year, it earned $28 million, on sales of $30 billion, and this year will be about the same. Market share, at 8.6%, is down by a quarter since 1994. While rivals operate at 85% of capacity, Ford is stuck at 70%. Ford's problems: over-cautious design and slow reaction to market changes. It lacks a European minivan, lagged on the trend toward diesels, and failed to spot the rising popularity of convertibles on European roads. It didn't help that Alex Trotman, Ford's now retired chairman, centralized global management in the mid-'90s. That move, Ford execs now say, took Ford of Europe's focus off local strategy. As a result, it lacks competitive offerings in segments that make up 35% of the European market. Ford's first major comeback effort is the redesigned Mondeo, which has a roomier interior and classier features than the old model. It's Ford of Europe's biggest launch since CEO Jacques A. Nasser tapped Scheele to revive the struggling European operations in 1998. ''We spent a lot,'' remarks Ford of Europe President David W. Thursfield. ''We think we've engineered a remarkable product.'' The Mondeo is the first rollout of many. In the next five years, European Ford will launch 45 vehicles--40% of which will be either complete redesigns or all-new models. A redesigned Transit commercial van was launched in June. To come are an all-new Fiesta subcompact, redesigns of the Puma sports compact and the Ka minicar, and a small minivan to compete with Opel's Zafira and Renault's Scenic. TOUGH SLOG. The project now, says Scheele, is ''to get closer to the market, sniff the breezes, and take appropriate action.'' Morale, Thursfield says, is up. Thursfield is also hopeful about the bottom line. ''We'll stop being a burden next year,'' he says. But analysts are less optimistic. While Scheele's team is impressive, they say, it's expensive to buy back lost market share. Reviving a brand, they add, is always a long-term proposition. Indeed, the European car market is among the world's toughest. Capacity is well above demand, driving prices and profits down for everyone. And Ford's rivals are hardly idling. ''I know what Ford is doing, and I know what we're doing,'' says Michael J. Burns, president of General Motors Europe. ''Each player, almost without exception, is replacing 100% of their product in the next five years.'' That will keep profits very tight. ''I don't expect great results out of Europe,'' Nasser concedes. ''But I expect improvement.'' Some improvements are coming, clearly. By 2003, says Leach, the product line will be much fresher. Scheele has cut capacity from 2.3 million vehicles a year to 1.9 million. As a result, by next year, factories should be running at 92% of capacity. But Scheele admits that Ford can't cost-cut its way back to health. Some of those new cars will have to be hits. By David Welch, with Christine Tierney, in Paris _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Can the Mondeo Get Ford Back into the Race? CHART: Decade of Doldrums INTERACT E-Mail to Business Week Online

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