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Poor miles per gallon hurt sales of the once-popular Ford Explorer. It now has a car-like ride and a smaller engine, and so far buyers seem interested
Ford (F) is the world's most profitable carmaker. Not Porsche (POAHY:US), not Toyota (TM), not Honda (HMC). Ford. Through this year's third quarter, Ford earned a somewhat stunning $6.37 billion. Stunning, perhaps, if one is a financial analyst covering Ford. That is because most analysts have underestimated Ford's progress over the past three years. If any of them actually bothered to drive Ford's splendid, completely revamped, and totally refined 2011 Explorer SUV, they might have revised their earlier opinion. Ford's is on a hot streak—the company is quite simply making some of the best cars on earth—and probably the best automobiles in its entire history. The new car-based, seven-passenger Explorer is the strongest sign yet that the automaker has completely seized its destiny and is on the right track. Explorer's Tumble
Not that it will be smooth sailing from here on out, especially in the case of the Explorer. While Explorer generally has a positive image in the public's mind, according to IHS Automotive analyst Aaron Bragman, and, he says, male customers would prefer "SUVish" models to softer-looking minivans and crossovers, Ford's Explorer sales have tanked in recent years. The once mighty SUV, perhaps the best-known of its breed, sold at a 400,000-plus clip from 1999 to 2002, and more than 6 million were made in its 20-year history. But for 2010, the last year it will be built on a truck-based chassis, not a car-based one, Ford will be lucky to move 60,000. Although 4 million Explorers remain on the road, most of the 140,000 units traded in annually don't convert back into new Explorers. The reason can be summarized with one acronym: mpg. Recent spikes in gas prices to between $4 and $5 a gallon caused potential SUV buyers (aka parents) to run the other way, toward car-based crossovers that typically return superior fuel economy. (The 2010 Explorer with AWD and V-8 motor gets a weak 13 city/19 highway fuel economy.) Crossover Trend
This caused carmakers to fatten their crossover offerings. Smaller brands that were never a significant part of the crossover segment just a few years ago, such as Mazda (MZDAY:US), Kia (KIMTF:US), Audi (NSU:GR) and Volvo (VOLVF:US), are now selling tens of thousands of units annually (Kia's Sorrento will top 100,000 units in 2010), and mass brands that were already in crossovers, such as Honda/Acura and General Motors' (GM) Chevy/Buick, have increased their "soft road" model ranges. All of which means Explorer not only faces stiffer competition, but what buyers wanted back in 1999-2002 is not what they want today. Ford's own research shows that only 17 percent of Explorer owners drive off-road. Most don't even know that their trucks have off-road-specific features, such as Four-Wheel Low (a secondary gear range), or what such vernacular means. And while a truck platform may be mandatory for a vehicle meant for 4x4 driving, if the competition is giving its seven-passenger vehicles a more car-like ride and ditching the truck platform (which also happens to be heavy, hurting fuel economy), Ford would have to follow suit. Especially since customers also dinged the old Explorer for poor ride characteristics, and because it's exceedingly costly and difficult to make a solid-axle truck ride like an independently suspended car. Out With the Old
The way ahead for Explorer would seem obvious: Junk the truck chassis and vastly improve fuel economy through weight savings and replacing the antiquated V-8 and V-6 motors. The latter, though highly revised and tweaked over several decades, dates all the way back to 1968. The chassis part of the equation was relatively risk free. By shifting to the Taurus-based car platform and integrating a fully independent suspension, Ford was also able to eliminate the heavy, overwrought off-road all-wheel-drive system and adopt something lighter, without a low range, but with enough sophistication to allow for off-road adventure. That, in turn, could differentiate the brand enough from milder crossovers that are less capable. This would allow Explorer to appeal to those buyers put off by wagon-like crossovers and minivans, while still giving customers a smoother ride in all driving conditions. Based on my test drive of both the outgoing and the new Explorer, Ford nailed the ride and handling makeover. Through Mud Bogs
While the former truck has a rigid, darn near arthritic feel that's stiff-kneed in corners and slow to steer, the new vehicle is absolutely fluid, cornering more like a car, steering accurately and smoothly, and delivering a far more comfortable ride overall. Off road, through sand dunes and mud bogs, the new Explorer has more than enough capability for almost any buyer. (Note: Ford will also sell a front-wheel drive model that is clearly targeted at buyers who never foresee bombing through mud bogs.) And while Ford might call the Explorer an SUV, this vehicle is now being built just like every other crossover on the market—except that the steering, ride, and handling are superior to what you'll find in a Honda Pilot or Chevy Traverse, vehicles that will combine for roughly 200,000 sales in 2010. While the chassis update was obvious, the engine swaps are somewhat of a gamble. Ford's not selling a V-8 Explorer, while Chrysler's Jeep Grand Cherokee (not necessarily a competitor, since it's a five-passenger vehicle) and seven-passenger Dodge Durango each offer Hemi V-8 motors. Ford says it has the correct strategy, based on the aforementioned gas-guzzling concerns. It also argues that the new 3.5-liter V-6 is good for 290hp, which is within 2 horsepower of the outgoing V-8, yet delivers 25 percent better fuel economy: 17 mpg city/25 on the highway. Meanwhile, the Grand Cherokee's Hemi gets a tree-trunk-yanking 360hp, but it mainlines gas: 14 city/20 highway. The seven-passenger Durango's V-6 matches Explorer's 290 horsepower but is nearly 300 lbs. heavier, and unsurprisingly trails the Explorer's V-6 on fuel economy: 16 city/22 highway. Go for the Hemi instead, and you get the same 360hp as the Jeep, but an abysmal 13 city/20 highway fuel rating. Smooth and Responsive
This reviewer's take: Tromping on the throttle of the 3.5-liter V-6 in my XLT Explorer tester, I found a very responsive engine as well as a very smooth shifting, six-speed automatic transmission. But I didn't get to test the Ford Explorer with its yet riskier motor, a smaller, 2.0-liter inline four cylinder that Ford will offer as an option in mid-2011. The thinking: Ford aims to beat crossovers at their own game. While Ford manages to preserve a much more aggressive, SUV-like image with the new Explorer (more on this below), to get to higher sales volume the vehicle has to compete across a broad swath of crossovers and even against minivans. One way to do that is with class-leading fuel economy among all seven-passenger crossovers. With its small, EcoBoost technology (turbocharging plus direct injection), the 2.0-liter engine allows 237hp and 250 lb.-ft. of torque, and the latter gumption kicks in nearly right off idle, which should make that model feel quick enough. Ford is promising 30 percent better fuel economy and 27 more horsepower than the antiquated V-6 it's replacing, which would put the 2.0-liter at around 21 mpg, combined city/highway. That would be great, says IHS's Bragman, but he still calls the EcoBoost effort "a huge gamble. It will only matter if fuel prices continue to climb well into the $4.00-per-gallon range. Americans want better fuel economy, but they also want power." A Look Already Selling
Even though the Explorer won't be delivered until early 2011, Ford has already racked up 15,000 units in advance sales, more than double the automaker's expectation. The majority of these early takers have opted for all-wheel-drive and the full-spec, Limited edition, which tops out near $40,000, suggesting Ford may be winning over former drivers of luxury or "near-luxury" SUVs and crossovers. One clear reason the formula is working: looks. If parents are still wary of wagons and minivans—and some crossovers are so much like wagons you'd be hard-pressed to make a distinction—the Explorer is a classic SUV. The vehicle is 5 inches wider than the prior model, so it looks beefier and better planted as well as more athletic. But there's a touch of class, too. There's also a lot of Range Rover here, with a visor-like feel to the windshield as it wraps seamlessly backward to meet the door glass (the metal pillars between the windshield and the front and rear doors are blacked out to heighten this effect), and this slightly softens the huskiness of the truck, giving the roof a lighter appearance. The Explorer also gets a clamshell hood that overlaps the fenders, which is also reminiscent of Range Rover. Measuring up to Audi
A not-incidental selling point: The cabin is gorgeous. Seriously. Ford targeted Audi as the benchmark during the redesign of the Explorer and drilled down to refine every cabin surface, especially interfaces such as lock controls, door handles, buttons, and dials. Hard plastics and cheaper-feeling toggles are replaced with softly dampened switches, and cold, rigid plastic knobs are gone, usurped by materials more pleasing to the touch. The central instrument panel and navigation system are also brilliant. Such controls as fan speed, temperature, audio tuning, and so forth all get large, obvious buttons, instead of burying these in a menu-based system. And the matte plastic IP looks and feels more BMW (BAMXY:US) than Ford—or perhaps more Denon audio rather than Panasonic. That's no accident, as Ford partnered with Sony (SNE) on the look, feel, and electronics of this unit. Ford also continues to refine its Sync infotainment/navigation system, created in tandem with Microsoft (MSFT), and the latest incarnation, called Sync with MyFord Touch, seamlessly integrates with smartphones, even reading back incoming texts via voice control. The Verdict
If the new Explorer sinks rather than gets along swimmingly in today's rough crossover/SUV waters, it will be easy to explain. No V-8. But it's probably going to a winner, and the reasons are pretty easy to pinpoint. This may be a crossover in truck clothing, but it looks like the latter, not the former. It also drives better than nearly any seven-passenger crossover save the Audi Q7, a much more expensive competitor, and nearly as well as the best minivan-like crossover, the Acura MDX. And by the way, both of those vehicles are stunning sales successes—and neither comes with a V-8.