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Ford Accelerates Small Car Transition in North America

Ford1a
Second quarter operating results. In contrast to the losses in North America, Ford operations in Europe and South America were strong. Click to enlarge.

In the context of a just-announced $1.3-billion second-quarter operating loss for its North America operations, Ford Motor Company announced a significant acceleration of its transformation plan with the addition of new fuel-efficient small vehicles in North America and a realignment of its North American manufacturing away from trucks and SUVs to smaller cars and crossovers.

Under the “One Ford” plan, more than 40% of Ford’s North American entries in global segments (B, C, C/D and Commercial Van) will be shared with Ford of Europe by 2010, with 100% alignment achieved by 2013, according to Mark Fields, Ford Executive Vice President and President of the Americas.

While we have no intention of giving up our longtime truck leadership, we are creating a new Ford in North America on a foundation of small, fuel-efficient cars and crossovers that will set new standards for quality, fuel economy, product features and refinement.

—Mark Fields

The Ford, Lincoln, Mercury line in North America will be almost completely upgraded by the end of 2010. The new products for North American include six European small vehicles:

  • New European Transit Connect small multi-purpose van in mid-2009.

  • New European Ford Fiesta, in both four- and five-door versions, in early 2010.

  • New European Ford Focus, in both four- and five-door versions, in 2010.

  • New European small vehicle that will be a “whitespace” entry in North America in 2010.

Other product changes include:

  • 2009 Ford F-150, on sale in late fall with the most capability, most choice and most smart features of any full-size pickup, and with more than a 7 percent fuel economy improvement.

  • 2010 Ford Fusion, Mercury Milan, Lincoln MKZ sedans, on sale in early 2009, with Fusion’s and Milan’s four-cylinder fuel economy expected to top Honda Accord and Toyota Camry.

  • 2010 Ford Fusion Hybrid and Mercury Milan Hybrid, beginning production late this year and on sale in early 2009 with fuel economy expected to top the Toyota Camry hybrid.

  • New Ford Taurus sedan with EcoBoost engine and more advanced safety and convenience technologies in mid-2009.

  • New Ford Mustang—coupe, convertible, and glass-roof models—in early 2009.

  • New Lincoln seven-passenger crossover—with EcoBoost engine—in mid-2009.

  • New Mercury small car in 2010.

  • Next-generation Ford Explorer with unibody construction, EcoBoost, six-speed, weight savings and improved aerodynamics for up to 25% better fuel economy in 2010

The actions represent a considerable shift in Ford’s North American product plans and investments toward smaller vehicles and more fuel-efficient powertrains in both the near- and mid-term in line with rapid changes in customer buying preferences. The second-quarter —$1 billion more than the $0.3 billion loss in 2Q 2007—is more than explained by the drop in sales volume, said Alan Mulally, President and CEO.

In contrast to the North American results, Ford Europe, South America, and Asia Pacific & Africa all turned in a pre-tax operating profits in the second quarter—$582 million, $388 million, and $50 million, respectively.

Powertrain upgrades. With every new product, Ford expects to be the best or among the best for fuel economy. This drive will be supported by one of the most extensive powertrain upgrades ever for Ford. By the end of 2010, nearly all of Ford’s North American engines will be upgraded or replaced. In addition, within two years, nearly all of Ford’s North American lineup will offer fuel-saving six-speed automatic transmissions.

Coming in 2009 are the first applications of Ford’s new EcoBoost engines. EcoBoost uses gasoline turbocharged direct-injection technology for up to 20% better fuel economy, up to 15 percent fewer CO2 emissions and superior driving performance versus larger-displacement engines.

EcoBoost V-6 engines will be introduced on several vehicles next year, beginning with the Lincoln MKS and Ford Taurus sedans, and Ford Flex crossover. Four-cylinder EcoBoost engines will debut in 2010 in both North America and Europe. Ford will offer EcoBoost on more than 80% of its North American lineup by the end of 2012.

Ford also plans to double capacity for North American four-cylinder engines to more than 1 million units by 2011, to meet the consumer trend toward downsized engines for fuel economy.

In addition, Ford plans to double its hybrid volume and offerings next year, and is looking to expand further going forward. Production of the all-new 2010 Ford Fusion Hybrid and Mercury Milan Hybrid begins in December. With these new models, the Ford Escape Hybrid—now in its fifth year of production—and the Mercury Mariner Hybrid, Ford will offer four hybrid vehicles. That will make Ford the largest domestic producer of full hybrid vehicles in North America, second only to Toyota in sales volume.

Ford also is introducing six-speeds with PowerShift that offers the fuel economy of a manual transmission and convenience of an automatic; start-stop engines that shut off when the vehicle stops; electric power steering; direct injection, and Twin Independent Variable Cam Timing engines. These technologies will be progressively introduced within the North American lineup by 2012.

Manufacturing conversion. Ford is converting three existing North American truck and SUV plants for small car production, with the first conversion beginning this December.

The moves are in addition to Ford’s announcements in May and June that it is reducing its North American production plans for large trucks and SUVs for the remainder of 2008, as well as increasing production of smaller cars and crossovers.

Among the manufacturing realignment actions are:

  • Michigan Truck Plant in Wayne, Mich., which currently builds the Ford Expedition and Lincoln Navigator full-size SUVs, will be converted beginning this December to production of small cars derived from Ford’s global C-car platform in 2010.

  • Production of the Ford Expedition and Lincoln Navigator will be moved to the Kentucky Truck Plant in Louisville, Ky., early next year.

  • Cuautitlan Assembly Plant in Mexico, which currently produces F-Series pickups, will be converted to begin production of the new Fiesta small car for North America in early 2010.

  • Louisville (Ky.) Assembly Plant, which builds the Ford Explorer mid-size SUV, will be converted to produce small vehicles from Ford’s global C-car platform beginning in 2011.

  • Twin Cities (Minn.) Assembly Plant—which was scheduled to close in 2009—will continue production of the Ford Ranger through 2011 to meet consumer demand for the compact pickup.

  • As previously announced, Kansas City Assembly Plant this year will add a third crew to its small utility line for the Ford Escape, Escape Hybrid and Mercury Mariner and Mariner Hybrid.

In tandem with the realignments, Ford will continue to offer targeted hourly buyouts at its US plants and facilities, working with the UAW to secure competitive employment levels. Ford also said it remains on track to reduce salaried-related costs by 15% in North America by 1 August.

Ford North America still expects to reduce annual operating costs by $5 billion by the end of 2008—at constant volume, mix and exchange, and excluding special items—compared with 2005. In addition, the company said it plans to continue to reduce structural costs beyond 2008.

The company also confirmed Ford, Lincoln and Mercury will remain in its North American brand portfolio. Ford said it will work with its dealers to broaden and accelerate its dealer consolidations, which will result in a dealer network that reflects the changing industry size and model mix.

Ford also updated its current North American planning assumptions, which include:

  • US economic recovery to begin by early 2010.

  • US industry sales to return to trend levels as the economy returns to health.

  • Product mix changes are permanent, but some recovery will occur from the current share-of-industry for full-size pickups—though not back to levels experienced previously—as the economy and housing sector recover.

  • Oil prices to remain volatile and high.

  • No near-term relief from current level of commodity prices.

  • About 14 percent US market share for Ford, Lincoln and Mercury brands.

“One Ford”. Driving Ford’s product transformation is the company’s “One Ford” global product development vision, which will deliver more vehicles worldwide from fewer core platforms, further reduce costs and allow for the increased use of common parts and systems.

In the next five years, Ford will build more than 1 million vehicles a year worldwide off its global B-car platform and nearly 2 million units worldwide off its global C-car platform. With Ford’s global product development plan, all of the company’s vehicles competing in global segments will be common in North America, Europe and Asia within five years. In addition to B- and C-sized small cars, the company’s Fusion- and Mondeo-sized C/D cars and utilities will be common globally. The same will be true for commercial vans.

Resources

Comments

OldNeil

In the "ticking time bomb" category: I have to wonder how many SUVs and large pickups are currently leased and what's going to happen when those leases expire and nobody wants to buy those monsters with $5/gallon gas? I've never leased, who's left holding the bag?

Kevin

I think these are strong moves by Ford, and all in the right direction, but I wonder why they dont bring the Ka over to compete with Smart

Tom

Good for Ford. Maybe one american auto company will survive.
Now if they could only match Toyota's quality numbers, we might have something here.

Giant

@Tom

Maybe make that two that will survive. GM has already transitioned - I see dozens and dozens of Chevy Volts on the road here in where I live. ;-)

stas peterson

The comparison with 1973 is stark.

About 9 months and the entire product line looks like parsimonious Europe. Save for the polluting pig EU sardonically named, "clean" diesels.

Those will have to wait for more spread of T2B5 components, and actually acceptable emissions levels.

If the present fuel price anomaly lasts for a few more months, both GM and Ford are immeasureably helped.

The products needed worldwide, are reduced in number and unified. Larger volumes and fewer platforms can only go to the bottom line.

With lessened need for a distinct product profile for the North American market, (and Australia too), can only help to multiply the effect of the same sized engineering talent over fewer models and platforms.

That would indicate an opportunity for more refined and better cars, overall.

The sub A class micro-cars like the Ka are not likely to be much more than a passing fancy. Mercedes has lost bundles on them in Europe. I agree that whatever is lost in sales, could be readily re-achieved if the Smart is really successful.

Besides these kind of compromises seeking mileage, are not needed for long if at all. When a family sedan can achieve essentially zero gasoline consumption in a few years,(the Volt, Flextreme etc) or other similar PHEVs, who needs a Ka or Smart?

Nick

Ford is moving in the right direction, but is this too little, too late? If GM succeeds with its Volt gamble and plug-ins become the hot trend, will Ford have something to sell in that space?

I wouldn't buy Ford stock just yet.

allen_xl_z

Fiesta made in Mexico: As long as the growing chaos and violence doesn't interfere with this, the economics are attractive.

Third crew on Escape/Mariner line: More hybrids available, assuming battery supplies are adequate.

Fusion/Milan/MKZ hybrid sedan: If they compare favorably with the Camry, and they can produce in quantity, they could be high volume vehicles (in the Camry/Civic range).

Healthy Breaze

Well, not to gripe too much...but...they could have done this years ago.

In all the whining about how raising CAFE standards would hurt the big 3 US automakers, they complained about how difficult it would be.

Then, once the standards passed, they announced 6-speed autoatics would become standard, and cars that they make in Europe which already comply with the higher standards would become available in the US.

I know they had their disfunctional reasons for doing it, but analysts were saying a couple years ago that the world could not support 2 major auto companies, and that shakeout and consolidation were inevitable. The remaining car companies had to get more efficient, and reducing the number of platforms world wide, so that each platform sold a relatively high number of units, seemed like an obvious, inevitable result.

Ok, they deserve some credit for belatedly bowing to reality, instead of clinging to their past lies, but sheesh...how much credit?

Anybody know how privately-held Chrysler is doing with this transition?

Have they figured out what to do with their pension liabilities? Are they just waiting until things are really dire to take some machiavellian medicine, or what?

Healthy Breaze

Correction to above:
Analysts were saying a couple years ago that the world could not support *20* major car companies, and that shakeout and consolidation were inevitable.

ejj

Ford wants to have "best in class" fuel efficient cars now, but it has decades of experience of producing generic cars and trucks that are any but innovative. This is like transforming a lifelong alcoholic into an olympic athlete - good luck.

Gerald Shields, Seattle, WA

Finally, some smart moves by Ford. However, MORE HYBRIDS!!!!!!!!!!!!

sjc

"2010 Ford Fusion Hybrid and Mercury Milan Hybrid, beginning production late this year and on sale in early 2009 with fuel economy expected to top the Toyota Camry hybrid."

They could and should have done this years ago. This combined with much increased production of Escape hybrids would have closed their deficit gap.

bernard

Ford has tried this trick many times already.
Who here remembers the original North-American Escort and Fiesta, aka the "World Cars," or the Ford Contour? How about Merkur?

I wish them more success this time, however I wouldn't bet on it.

Axil

One of the biggest fuel wasters is fiction inherent in the internal combustion engine. The drag that they produce is huge as we all have witnessed when we down shift to slow on a down hill grade.

The serial hybrid eliminates this drag with a huge increase in efficiency. Ford has not added the type of vehicle to their product line. Why?

Raymond

A couple of things:

1) It is very clear that Ford's North American product line will look pretty much like its European product line by 2012--with the likely exception of the European-market Mondeo and North American-market Fusion (but both models sharing the same platform).

2) This pretty much confirms Ford will sell the second-generation Ka in the USA.

By the way, the Ka will be far more successful than the SMART ForTwo, since it's more "conventional" design attracts more buyers than the quirky design of the ForTwo.

In short, both Ford and GM should consider themselves extremely lucky they can fall back on their well-regarded European product line to rebuild their companies for the foreseeable future.

creativforce

duh. The light bulb went on in Detroit! I'm going to miss dodging lead sleds on the highway with my Toyota. Maybe in another 20 years they'll decide to build cars that don't end up in the junk yard at 85,000 miles. Nah...they've had 20 years to look at a copy of Consumer Reports and they haven't done it yet. If they keep planning obsolescence, they'll get their wish.

Elliot

I'm interested to see what happens with the Mustang. They've always sold a lot of those in certain parts of the country, and I'd like to see a hybrid version in place of the vanilla V6 they have now. If people are just buying the car because they like it, they could at least stop polluting so much.

BeGreen

America needs to stay FOCUSED, AWARE and EDUCATED.

History reminds us that every time oil prices peak and the North American market/consumers start to discuss alternative energy sources, the oil exporting countries start to trim down their prices. History also tells us that the oil exporting nations have been very successful in the past and in fact, we have lost our enthusiasm and dropped many of our alternative energy initiatives after oil prices are reduced.

WE need to stay focused this time.

1) Al Gore and his energy initiative is on course.
2) T. Boone Pickens and his wind power initiative is on course.
3) The BG Automotive Group mass production electric vehicle program is on
course along with their solar charging stations.
4) Richard Branson from the UK is on course.
5) The Gas Reduction Act of 2008 might not be the most environmentally sound
solution, but yet it shows that Congress has finally realized that we have an
energy crisis (again), and a real threat to our national security.

The continued dependence on foreign oil is a threat to our long term democratic values. We must become an energy independent nation, and with this, some sacrifices will have to be made by the American consumer.

Be aware!!
We are exporting approximately USD $700 Billion dollars per year of U.S. currency. The majority of this money is being transferred to the Trillion dollar “sovereign wealth funds”. This is USD $700 Billion not being spent on America’s educational system, health care and security.

The “sovereign wealth funds” are directly buying major interests (large blocks of stock) in U.S. companies, including most of the major banks. Also, billions of dollars of “sovereign wealth fund” money is being invested in our hedge funds, private equity firms, and the investment banking industry. A few of these firms are directly and indirectly investing large sums of money into our “gas combustion” automobile industry. Do we want our auto industry in the direct or indirect control of the firms that are supplying us oil? This is an interesting topic for an investigative reporter.

There are automotive consulting companies in Michigan (heart of our auto industry), lobbying States and our Federal Government, NOT to subsidize the Electric Vehicle industry. The latter seems to be contradictory to what the American public would like to see from our automobile industry. After the billions (excess of $20 billion) the automotive companies have lost in the past 6 months producing gas combustion vehicles, you would think they too would change course. Changing course is not adding 2-4 miles per gallon w/Hybrids. Drastic measures in our auto industry must take place and NOW!

Do not let the temporary reduction in oil prices push us off course….AGAIN.

Read, Read, Read- Stay on top of the issues. Let’s not be fooled again.

STAY FOCUSED, AWARE and EDUCATED!

BeGreen

America needs to stay FOCUSED, AWARE and EDUCATED.

History reminds us that every time oil prices peak and the North American market/consumers start to discuss alternative energy sources, the oil exporting countries start to trim down their prices. History also tells us that the oil exporting nations have been very successful in the past and in fact, we have lost our enthusiasm and dropped many of our alternative energy initiatives after oil prices are reduced.

WE need to stay focused this time.

1) Al Gore and his energy initiative is on course.
2) T. Boone Pickens and his wind power initiative is on course.
3) The BG Automotive Group mass production electric vehicle program is on
course along with their solar charging stations.
4) Richard Branson from the UK is on course.
5) The Gas Reduction Act of 2008 might not be the most environmentally sound
solution, but yet it shows that Congress has finally realized that we have an
energy crisis (again), and a real threat to our national security.

The continued dependence on foreign oil is a threat to our long term democratic values. We must become an energy independent nation, and with this, some sacrifices will have to be made by the American consumer.

Be aware!!
We are exporting approximately USD $700 Billion dollars per year of U.S. currency. The majority of this money is being transferred to the Trillion dollar “sovereign wealth funds”. This is USD $700 Billion not being spent on America’s educational system, health care and security.

The “sovereign wealth funds” are directly buying major interests (large blocks of stock) in U.S. companies, including most of the major banks. Also, billions of dollars of “sovereign wealth fund” money is being invested in our hedge funds, private equity firms, and the investment banking industry. A few of these firms are directly and indirectly investing large sums of money into our “gas combustion” automobile industry. Do we want our auto industry in the direct or indirect control of the firms that are supplying us oil? This is an interesting topic for an investigative reporter.

There are automotive consulting companies in Michigan (heart of our auto industry), lobbying States and our Federal Government, NOT to subsidize the Electric Vehicle industry. The latter seems to be contradictory to what the American public would like to see from our automobile industry. After the billions (excess of $20 billion) the automotive companies have lost in the past 6 months producing gas combustion vehicles, you would think they too would change course. Changing course is not adding 2-4 miles per gallon w/Hybrids. Drastic measures in our auto industry must take place and NOW!

Do not let the temporary reduction in oil prices push us off course….AGAIN.

Read, Read, Read- Stay on top of the issues. Let’s not be fooled again.

STAY FOCUSED, AWARE and EDUCATED!

Axil

@BeGreen

BeGreen, you forgot to mention that foreign money can never be permitted to gain control of our coal reserves, which would be an environmental disaster.

Sounding every day more like Jacques Nasser's Ford 2000 plan. A few years before his time I suspect and then he was replaced by HF2 to what effect other than wasting a few years before the hard work REALLY had to be done by drafting in Mullaly.

Hmm, wasted years at the Blue Oval I think...

R.

sjc

The Ford CEO said that they will sell the Fusion hybrid in 2009. They just might get it out there before they go broke. Hate to be such a downer, but they keep delaying action and making the wrong decisions, just when they need to make all the right ones. The Escape hybrid production should have been ramped from 20k to 100k over the years. The Fusion hybrid could have come out years ago. It is based on Escape tech from the Mazda 6 platform and was a slam dunk, it they had taken the opportunity. Instead they may come out years after the Camry and Altima hybrids and have to play catch up yet again. At least it is not a BAS kinda sorta hybrid like the Malibu.

FBerry

Indeed, one of the commentors is "right on", keep reading, keep on top of your leaders. We need to keep moving toward an economy that rewards investment in sustainable; whatever type is choosen.

Why can't we produce legislation like Germany with energy mandates, rewarding investment in PV/wind? The answer is,....we can, and we must if we're going to survive and then once again thrive as a United States.

Our planet deserves the "Carbon Break" that has been taughted and proven by the world's top scientists. NO CEO or top official will ever agree if "their" business were to tentatively lose money. We have no chioce now. None.

We change our Carbon footprint in this century or we die as a species within three or four more centuries.

Build electric cars, integrate current PV technologies into modular home and garage power stations for individuals that can power 2-5 kW of sustainable energy for homes and cars to recharge; problems quickly abate. This decreases CO2 by 30%.

Concurrently, keep the "Leeds" building moving forward with modern SIP's and ICF construction utilizing BiPV - thereby moving to 'net energy homes'. Not that hard to do actually.

Commercial buildings will utilized proper glass orientation with BiPV and other new technologies that create net energy buildings; they create 40-50% of our Carbon Dioxide.

End of problems. End of wars over oil, end of the major nonsense. Life will always have challenges, but we need to challenge ourselves as a species now beyond energy concerns; the time to push is NOW :)

All the Best,..

sjc

"Why can't we produce legislation like Germany with energy mandates..."

Because we have this "free market" mantra ushered in by Reagan in the 80s. Conservatives keep harping on less government, lower taxes and less regulation as if that were the cure for all evils. That gets us into debt and collapses whole industries and delays decisions and actions that could get us out of trouble.

stas peterson

The reason why we don't have Germany's answer is simply because it doesn't work. And Germany has admitted it. And has decided to adopt our course of action.

Nukes that were being phased out, now aren't any longer. New nuclear plants are on the drawing boards.

ind that would save all the problems has been revealed to have grid stability issues, really massive grid stability issues. The same grids stability issue biting T Boone Pickens in the arse. And the reason for his advertising campaign to have your dollars, save his arse.

Taxing everyone for Carbon only leads in practice to more bigger coal plants, and politicking and campaign bribes to ignore (expanded) existing coal plants. Wonderful examples of Cap-and-Trade in action; when the politicians can print indulgences.

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