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Ford: Is Caution Killing A Comeback?


A year ago at the Detroit Auto Show, Ford Motor Co. (F) kicked off its much-hyped "Year of the Car." In 2004, the auto maker proclaimed, it would roll out a bevy of new models to reverse the decline it had suffered in the passenger-car market. It also aimed to shore up its position in the crucial family-sedan segment that it once led with the Taurus. But with little improvement to show since the new cars arrived in showrooms last fall, Ford's big comeback looks less than convincing.

Sure, two sexy low-volume models, the Mustang and the GT sports car, are selling briskly. But the trio of family sedans -- the Ford Five Hundred sedan, the Freestyle crossover wagon, and the Mercury Montego sedan -- are off to a slow start. In January all three sold fewer than 11,000 units, far shy of the 20,000-plus clip Ford needs to hit its annual goal of 250,000 cars. And while dealers say the Five Hundred is generating showroom traffic in parts of the U.S., inventory is piling up. Ford now has 122 days' supply of Freestyles on hand -- about twice the level carmakers typically like to have in stock.

Why? They are, in a word, dull. "The Five Hundred and Freestyle are not bad cars," says Global Insight Inc. analyst John Wolkonowicz. "They just blend into the woodwork." Ford insists that because the cars are less in-your-face than, say, the hot-selling Chrysler 300, they'll take a little longer to find an audience. "Already, this month, the Five Hundred is beating its objective," says Ford Div. President Stephen G. Lyons. But the auto maker's recent actions belie its public posture: It is planning a face-lift for the Five Hundred -- two years earlier than usual.

Tepid reactions have also ratcheted up the pressure on Ford's design staff. A recent executive shuffle puts the burden of improving Ford's styling squarely on the shoulders of Peter Horbury, the Briton behind Volvo's renaissance who was named chief of North American design in December, 2003 Global design chief J Mays, who embodied Ford's American design efforts for six years, moved to London at the end of 2004 with an added title: chief creative officer. The move led to widespread speculation that Mays had been moved aside. Mays flatly denies that, saying he lobbied for 18 months to relocate to London, currently ground zero for hot car design. "I'm doing exactly the same thing as before," Mays says. "I'm just putting my head on a pillow in a different place."

TOPPLED CROWN

So how did Ford wind up with three snoozers to lead its planned revival? The story begins in the mid-'90s. That's when the redesigned Taurus, with its radical ovoid styling, hit the market with a thud, losing the crown of America's best-selling car. Stung by the flop, Ford designers turned cautious. Bland styling works for the segment-leading Toyota (TM) Camry and Honda (HMC) Accord, they reasoned. Why not for Ford? At the same time, Ford, awash in profits from its hot-selling trucks, decided to go upmarket. Giddy planners thought the Five Hundred and its kin would compete with Toyota Motor Corp.'s $26,660 full-size Avalon. "They went for premium product at premium prices," says a source close to the process.

When Ford bought Volvo in 1999, engineers seized on the Swedish company's flagship S80 sedan as a basis for their new cars. The Volvo platform, although costly to build, offered lots of safety features and an all-wheel-drive option. But the platform's unusual dimensions made it tricky to design around. Horbury rose to the challenge at Volvo: pulling off a sleek sedan that turned heads. Mays, widely praised for helping design the New Beetle in his previous job at Volkswagen, oversaw the team working on Ford's three new cars. But the team struggled to find an elegant way of draping the sheet metal over the S80's strange shape, say people involved in the project. And despite a ho-hum response from focus groups, several of these people say, the models got the green light amid management turmoil in 2001.

Ford got its first jolt of bad news last summer. The "buff books" yawned -- when they weren't trashing the new models. Wrote Pulitzer Prize-winning auto reviewer Dan Neil of the Los Angeles Times: "There is no soul to this car, and it's about as sexy as going through your mother's underwear drawer." Of course, much the same has been said about the looks of the Camry and Honda Motor Co.'s Accord. But they have such a strong reputation for quality that buyers are willing to overlook their bland styling; to dislodge them, Ford needed to offer something much more interesting.

The Five Hundred also hit the market soon after DaimlerChrysler's (DCX) new family sedan, the Chrysler 300. Not only did the 300 sport the brash styling and horsepower that car buyers crave, but Chrysler also priced the new model to start at $23,595. That pressured Ford into dropping the Five Hundred's base price to $22,795, nearly $5,000 less than originally planned, one source says. Worse, the new cars sit in dealer showrooms alongside older models boasting rebates of $2,500 or more. Says James Hall, vice-president of consultant AutoPacific Inc.: "You end up competing with yourself."

Ford execs insist there's nothing wrong with the Five Hundred and its siblings. But they concede there's room for improvement. "In hindsight, would we have preferred more of a bold statement?" asks Darryl B. Hazel, president of Lincoln-Mercury. "I think so." Enter Horbury. Ford hopes the man who made Volvos stylish can work the same magic on its U.S. brands. And Horbury clearly knows more distinctive styling is a must. "My job is riding on it," he says.

Ford is betting its cars will gather momentum in the spring, when many people look for new wheels. But if sales don't pick up, Ford's Year of the Car could turn out to be another Year of the Rebate.

By Kathleen Kerwin, with David Welch, in Detroit


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