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The Shape Of A New Machine


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THE SHAPE OF A NEW MACHINE

It was a balmy day in May, 1990, and Richard L. Landgraff was squirming in his seat. The Ford Motor Co. executive had come to Atlanta to listen in as Honda Accord owners raved to market researchers about their cars. In dismay, Landgraff watched as the Accord owners bragged about all the features Honda had loaded into its automobiles. The group was so taken by their cars, many drivers even swore they had air bags--which, in fact, they did not. "They were insistent," Landgraff remembers ruefully.

Less than a year after that daunting lesson, the 55-year-old Landgraff would take over one of the toughest and most coveted jobs in Detroit: overseeing the redesign of the next Ford Taurus, the most popular car in America. Since its 1986 launch, the Taurus has been the pacesetter for U.S. auto makers. The sleek family car helped bring Ford back from the financial brink--and by demonstrating that Detroit could again build stylish cars, it helped revive the entire U.S. industry.

But as Ford embarked on its redesign, Landgraff and the team he led upped their own ante. Sure, the original Taurus had succeeded in drawing millions back into American showrooms, but it still wasn't winning many younger import buyers. Landgraff's mandate was clear: The new Taurus was to be the first American car that truly matched the quality and engineering of Japanese rivals. As he listened to the Honda owners rhapsodize about features that weren't even included on their cars, Landgraff realized just how tough a job he had ahead. "This wasn't going to be a cakewalk," he says wryly.

Five years and $2.8 billion later, Landgraff is about to find out how well he has done. The all-new 1996 Taurus--the first major overhaul since its launch--will hit showrooms on Sept. 28 accompanied by a splashy $110 million-plus ad campaign, Ford's priciest ever. Many industry insiders think Detroit's No.2 auto maker has another big hit. The new Taurus features distinctive elliptical styling, its interior is quiet and comfy, and handling is taut and precise. And with early pricing for the most popular model set at $19,390, Ford has dampened fears that high costs would push prices into the stratosphere. Crows Ford Chairman Alexander J. Trotman: "Adjusting for the hyperbole you would expect from me anyway, I think it will be sensational."

It had better be. The Taurus is vital to Ford's future. Thanks to aggressive incentives and fleet sales, it overtook the Accord as America's best-selling car in 1992, and it has held that lead since. Ford sells nearly 400,000 Tauruses annually in the U.S. It leads the family-car segment, the industry's biggest and most ferociously competitive. The Taurus brings in roughly $7.5 billion in sales a year--just over 10% of Ford's U.S. auto revenues of $73 billion. Altogether, Ford counts on the Taurus and its sister car, the Mercury Sable, for half a million vehicle sales annually--a startling 6% of the U.S. car market. Moreover, some 10,000 jobs at Ford--6% of its U.S. total--and 100,000 jobs at 240 suppliers ride on their success. "They're the `family jewels' of the Ford car line," says Trotman.

If it is to keep that position, the new Taurus will have very big treads to fill. After years in which "American design" was synonymous with boxy, look-alike cars, the original 1986 Taurus took the industry by storm. Sporting a sleek, aerodynamic look--with its rounded shape and grilleless front end--the Taurus revolutionized auto styling. It spawned two books and won dozens of major car awards.

ACHILLES' HEEL. It was also a big gamble, but Ford, then deep in a slump, had little choice. Although critics initially derided the Taurus as a rotund "jelly bean," Ford's roll of the dice paid off: Taurus was a huge hit. As soaring sales helped fuel a turnaround, Ford raced past General Motors Corp. to become America's most profitable carmaker.

The redone 1996 Taurus, with its sculptured, curvy look, is another bold design departure. Much has changed inside, too: Top-of-the-line models sport a new multivalve V-6 engine, while the base V-6 engine offers a smoother, quieter ride. The new Taurus is stuffed with little extras. Power windows and variable assist steering are standard, while a weld-free muffler will reduce rusting. Features include a slow-release glove-box door that won't bang passengers' knees and a versatile multipurpose central armrest console. Another plus: delayed power cutoff to some controls, so drivers can roll up power windows even after shutting off the car.

Snazzy enough. Now the question is whether in its zeal to match Japanese engineering, Team Taurus went too far. Landgraff's 700-member team wrestled with tough decisions pitting high quality and engineering against cost. More often than not, engineering won: The Taurus is the latest in a series of higher-priced, feature-laden cars that Ford has launched.

With demand slowing and consumers balking at stiff sticker prices, however, Ford may be inching dangerously close to an affordability crisis. At the same time, the added engineering and features Ford built into the Taurus have increased production time, reversing hard-won productivity gains. That left Ford facing a tough choice: charge more for the Taurus, and risk driving away customers, or sacrifice profits.

Moreover, even as Ford raced to catch up, its Japanese rivals have again moved the goalposts: Pressured by the rising yen, they're trimming cost and content. For now, the sky-high yen gives Ford some breathing room: A new Taurus with the most popular options will sell for roughly $700 to $1,000 less than comparably equipped models from Honda Motor Co. or Toyota Motor Corp. But Ford faces a big threat in the redesigned Camry, due out in late 1996. Toyota is said to be slashing its costs by 20% without eliminating features (page 66). That should allow Toyota to price the Camry on a par with the Taurus.

So why did Ford add so many costs and features? Trotman knows that for Ford and its flagship, the next 10 years promise to be far bumpier. Winning over baby boomers who drive Japanese cars isn't just a matter of pride but one of survival. For all its success, the Taurus has an Achilles' heel: It has done far better drawing older customers back to Ford showrooms than in wooing young buyers. As a result, Ford's current customers are aging, and many of the younger car buyers now moving up to family sedans in coming years are dyed-in-the-wool import owners. Moreover, Taurus' No.1 ranking depends on low-margin sales to car-rental agencies and corporate fleets. Nearly half of all Tauruses sold go into fleets, while Honda's Accord--the best-seller among retail buyers--gets just 5% of sales from fleets. Ford now aims to cut fleet sales to 40%.

The new Taurus should bring Ford nearer to winning import buyers. "It's their closest shot yet," says Road & Track Detroit Editor Ken Zino. In an upcoming review he writes: "The 1996 Taurus moves two, maybe three giant steps toward parity with the Camry."

Still, that progress means Ford is shipping a pricey car just as the market is softening--and therein lies its strategic dilemma: Although the Taurus is the best of the domestic family sedans, until now it has not achieved the status that allows the Japanese to charge top dollar. To join the top ranks, Ford had to improve quality and add engineering refinement. Yet until buyers are sure Taurus rivals the best, they won't pay the premium Ford needs to justify its investment.

In an effort to recoup the $2.8 billion spent on the car, dealers say, headquarters tried to push through a 7% price hike from the current base of $18,135. They got a rude awakening. "The initial pricing was way too high," says John B.T. Campbell III, a Ford dealer in Garden Grove, Calif. Instead, Ford settled for a 5.6% rise, to $19,150, for the base model, while on the most popular model, prices rose just 2.5%, to $19,390. But on the upscale LX model, which Ford is counting heavily on to lure wealthier buyers, Ford pushed through an 8.7% increase, to $21,680.

"FLABBERGASTED." Ford denies it discussed pricing with dealers. But it's clear that for now, Ford has opted to sacrifice profits for the sake of price. Beryl S. Stajich, a Ford marketing planner, admits Ford has swallowed some of the cost of added features: Stajich says Ford trimmed its planned price by $700 per car. On 400,000 cars, that will cut profit on the new Taurus by some $280 million a year. The move stunned rivals, who had expected far higher prices. "I was absolutely flabbergasted by the Taurus price," says one Chrysler Corp. executive.

The difficulties of pricing into a slowing market seemed far away in October, 1990, when a handful of Ford engineers began planning for the next Taurus. Ford began with extensive market research. It polled its current customers, studied surveys by J.D. Power & Associates Inc., and conducted consumer car "clinics" with Taurus owners and--more important--those who had opted for a Japanese car. A predominant theme arose: Customers wanted a quieter, smoother car, and they especially disliked Taurus' excessive wind noise.

Still, it wasn't until Ford held a series of clinics for its engineers and executives in the spring of 1991 that ideas began to gel. For Stephen T. Kozak, who became the head of body engineering for Team Taurus, the clinics--in which consumers drove the Taurus and seven domestic and Japanese rivals--were "a monumental eye-opener." It was the first time engineers saw how consumers perceived their cars. One driver showed Kozak how the Taurus' door klunked shut, while the Accord's clicked quietly. Others pointed to ugly exposed welds.

By fall of 1991, the advance team handed off to Landgraff, who had overseen the minor revamping Ford had done on the 1992 model. Soon, 150 team members set up shop in the basement of Ford's Design Center in Dearborn, Mich., nicknamed "the Dungeon," the same quarters used by the original Taurus crew. Banners on the wall declared: Beat Accord.

Team Taurus is Ford's biggest experiment with the team method Trotman plans to make the cornerstone of Ford's global product-development process. Engineers handling chassis, engine, and manufacturing chores work alongside designers, marketers, bean counters, suppliers, and factory-floor workers to design and test the vehicle together. Says Landgraff: "How we managed this program is as important to Ford as the vehicle we engineered."

Some of the innovations seem obvious, such as housing the whole team in the same building. Christopher Clements and Douglas F. Gaffka, the designers in charge of the Taurus' interior and exterior, respectively, sat side by side. The two exchanged drawings constantly and critiqued each other's work as they went along. It shows: The new Taurus avoids the mix-and-match dissonance of many American cars. Instead, the ovoid styling so prominent on the outside is echoed throughout the interior in everything from the rounded radio-control panel and air-conditioning vents to the elliptical door handles.

The team started out resolving to build the best possible car, but quality kept bumping up against cost. Engineers argued that each side of the Taurus body--from taillight to windshield pillar--should be fashioned from a single piece of steel rather than welding two body panels together. That would eliminate ugly welds, create a more rigid body structure, and result in better-fitting doors and less wind noise.

But the high costs involved nearly killed the change, which required buying a new $90 million stamping machine. Ford's manufacturing engineers also resisted, simply because it was different, Landgraff says. As debate wore on, the engineers tried to duck the issue by claiming it was too late to order the mammoth press. "It was bureaucratic drag," Landgraff says.

Months later, Landgraff discovered that it wasn't too late, after all. But they'd have to order the 7,000-ton press immediately. With Ford in the thick of a cost-cutting frenzy brought on by slumping auto sales, no one on the team could authorize such a huge purchase. So Landgraff asked Trotman to Ford's Design Center one evening in spring of 1992.

"TAKE IT FURTHER." When Trotman arrived, Landgraff and Kozak laid out the case: The new press would replace six body presses from the 1950s and result in much higher quality. The enormous expense left Trotman skeptical at first: "I said, `My God, we don't have $90 million,"' he recalls. But after a tough debate, Trotman surprised everyone by approving the purchase. "The quality argument was so persuasive that we all agreed we had to do it," he says.

Design work began about the time tepid press reviews of the modestly revised 1992 version were coming out. Critics lambasted Ford for spending $800 million on a car that looked virtually identical to the original. It fell to Gaffka, a 35-year-old designer from Ford's European operations, to fashion a knockout car that would appeal to youthful new buyers without alienating current Taurus owners. Early sketches were cautious and boxy, with square headlamps. But Trotman and other top executives urged Gaffka to "take it further." On seeing early sketches, he told Gaffka: "On the wow scale, this isn't there yet. Give us an absolute grabber."

Gaffka and his team soon found another source of support for bold styling: the Ford family members who control the company's board of directors. William Clay Ford Jr., head of the board's influential finance committee, argued that another minor facelift was out of the question: "You don't hit home runs that way," he said. And his father, director William Clay Ford, a design aficionado, often dropped by the Taurus studio at night to offer encouragement.

Egged on by the support from the big guns, Gaffka's designs--there were 17 versions in all--took on a softer, more oval shape. From Thanksgiving, 1991, through the spring, the design team sketched and carved clay like mad, taking only two holidays off. Toward the end, Gaffka's team dreamed up the oval rear window, last seen on a car in the 1940s. Finally, in April, Team Taurus won the go-ahead for its models from senior management.

Soon, interior experts such as Nevenka Schumaker--in charge of the Taurus control panel--went to work. With marching orders to make the panel equally distinctive, the Yugoslavian-born designer began looking for ideas outside the auto industry. Haunting garage sales and thrift shops, she collected boxloads of knobs and dials.

Schumaker had sketched out a futuristic oval pod to replace the traditional rectangular control panel but wasn't happy with how the dials ran straight across its face. The day before presenting final drawings to senior management, she made one last try. Her teardrop-shaped display, with big oval buttons curving across a sculptured surface, won hands down.

Meanwhile, Ford execs were still engaged in "a major struggle" over how much to jazz up Taurus. In late 1991, Team Taurus got help from an unexpected source: Toyota. After the Japanese carmaker's redesigned Camry made a big splash in the U.S., Landgraff's crew tore one apart. Their conclusion: Toyota was putting more, not less, into its cars. The sedan boasted a silky-shifting transmission, a premium, multivalve engine, and a floor pan made of the same vibration-damping steel-asphalt sandwich found in the Lexus. "Toyota had the craftsmanship," says George C. Bell, the Taurus chief engineer. "It was the car to beat." The disemboweled Camry became Landgraff's most powerful argument for more refinements. New signs went up at headquarters: Beat Camry.

Landgraff invited Ford's top brass to pore over the Camry results in late 1992. He brought along his own grunt-level engineers, plus mock-ups of snazzy new parts they had designed for the new Taurus. "It was a watershed," Landgraff says. The demonstration made believers out of Trotman and the other top executives, and they agreed to spend what was needed for the improvements.

EXPORT PLANS. Other changes were made in anticipation of shipping the new Taurus to Latin America, the Middle East, Russia, Japan, China, and elsewhere. While just 15,000 current Tauruses are sold abroad each year, Ford is aiming for foreign sales of 35,000 for the revised model. Rather than doing expensive retrofitting of finished cars for export, however, the team planned to meet overseas regulations from the start. In addition to building right-hand-drive versions for Japan, the new design includes hundreds of minor variations to meet local regulations--everything from emissions standards to safety rules.

As the design phase neared the end, a team of 120 factory workers from Atlanta and Chicago began arriving. They built more than 200 prototypes to test Taurus' ease of manufacturing. After Paul Harris, a veteran of Atlanta's chassis operation, noticed that he would need three wrenches to tighten different fasteners on a carbon canister, engineers made all three bolts the same. Howard Johnson, another Atlanta worker, said the air-bag cover had to be pounded on with a hammer. But he and other team members altered the cover so it could be pushed on by hand, saving time. Altogether, the workers came up with nearly 700 improvements.

Meanwhile, back at the factories, other changes were under way. To avoid losing $250 million in sales during the three-month changeover originally planned, Ford began moving new equipment into the body shops three years before launch. Little by little, they removed the old Taurus line and installed the new equipment, slowly working out the inevitable kinks.

Finally, the workers who had gone to Detroit to build prototypes returned home in early 1995 and began training others. By May, the first test Tauruses rolled off the line, mixed in with the old. The final model 1995s were built on Friday, June 16. Over the weekend, engineers put the last of the new equipment into place and starting Monday, workers assembled the first 1996 cars destined for the market.

Now, with stiffer competition on the way, the real battle will begin in the showrooms. General Motors Corp. will launch a flood of new midsize sedans for the 1997 and 1998 model years, and Honda will introduce a new Accord for 1998. But the toughest rival will likely be the new 1997 Camry, set to hit showrooms in little more than a year. Toshiaki Taguchi, director at Toyota in Japan, says Camry is one of the models his company is revamping "with cost very much in mind." Toyota is cutting parts in the new Camry by 30% and eliminating unnecessary steps such as painting the struts under the car. Analysts say the moves could slash the new Camry's price by up to $1,000, eliminating Ford's current price advantage.

Meanwhile, with its hefty development costs and added features, the new Taurus will cost Ford $750 more per car to build than the old, one analyst figures. And building one takes at least 12 hours, one more than its predecessor, adding about $45 per car in labor costs alone. Still, analyst Christopher W. Cedergren of AutoPacific Group Inc. in Santa Ana, Calif., expects the heavy expenditures to pay big dividends eventually: Five more vehicle lines will be based on the Taurus chassis and suspension.

Ultimately, Ford must learn to build better cars for less. Although Ford is expected to slash $1,800 in costs from each Taurus by 2000, that has hardly calmed fears that it is pricing its cars out of reach for many middle-class buyers. Ford executives give affordability concerns short shrift. Landgraff says Taurus prices were set to keep annual sales at 400,000. Beyond that, "If Joe Blow can't afford to buy a new car, I don't give a damn," he says. "Let him buy a used car."

Still, Ford's dealers have already forced the carmaker to give consumers a break at the expense of its margins. If Ford can succeed in replacing the low-margin fleet sales with full-price retail customers--and in getting more buyers to spring for the upscale LX--Cedergren estimates it will earn about $2,000 per car on the new Taurus, excluding rebates, compared with roughly $1,500 on the old. But if it fails to cut its dependence on fleets, Ford's price increases will do little more than cover the increased costs of producing the new Taurus. And even that depends on whether Taurus pricing holds--or whether as the market slows and rivals bring out improved models, Ford will have to pump up incentives.

The next two years are critical. If Taurus proves too pricey for cost-conscious families, Ford may be forced into expensive rebates that will cut into profits. On the other hand, if buyers take to the vastly improved Taurus as they have to Japanese rivals, a few years from now Toyota executives could be squirming in their chairs as they hear Americans extolling their new Tauruses.

FRONT END

A softer, rounded line with oval headlights and a sculptured hood.

ENGINE

Under the hood, the base model gets an improved six-cylinder engine that's quieter and vibrates less. The top-of-the-line model offers a new multivalve V-6 for a smoother, more powerful ride.

CONTROL PANEL

Controls for radio, heat, and air-conditioning have been built into a futuristic pod that plays off the Taurus' oval exterior.

WINDSHIELD

A lower windshield base gives a roomier, more open feel.

REAR WINDOW AND TAIL END

The stylish rounded rear window repeats the oval design seen in the taillights, headlights, door handles, mirrors, and interior controls. The tapered rear fender continues the look but reduces trunk space. An integrated spoiler built into the trunk lid improves aerodynamics and boosts gas mileage.

INSTRUMENT PANEL

Responding to customers' gripes about a "cheap" plastic look, Ford employed a more expensive process to give its one-piece molded dash a leather-like appearance.

DOORS

Triple rubber seals and inset doors provide a tighter fit, creating a quieter interior.

SIDE PANEL

From the taillights to just behind the front wheel, the entire side panel is stamped in a single piece, eliminating ugly welds and creating a more rigid chassis that improves the ride.By Kathleen Kerwin in Dearborn, Mich., with Edith Hill Updike in Tokyo and Keith Naughton in Detroit


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