Ford Keeps the Pedal to the Metal

As the lone U.S. “Big Three” automaker to refuse government bailout, Ford Motor Co. isn’t resting on its laurels.
Ford Keeps the Pedal to the Metal
(Karen Bleier/AFP/Getty Images)
8/29/2009
Updated:
10/1/2015
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 (Karen Bleier/AFP/Getty Images)

NEW YORK—As the lone U.S. “Big Three” automaker to refuse government bailout, Dearborn, Mich.-based Ford Motor Co. isn’t resting on its laurels.

As the auto industry experiences a glimmer of recovery hopes, Ford sees a rare opportunity to capture market share in the hyper-competitive industry.

Mark Fields, Executive Vice President of U.S. Operations, was in New York on Aug. 28 to talk about the company’s present plans and how it expects to capitalize on the market’s improving perception of the Ford brand.

The federal government’s recent “Cash for Clunkers” program was a godsend for an industry that saw its sales last year tumble to roughly half of the expected amount. “It’s very clear that [“Cash for Clunkers”] jump started auto sales,” Fields said at an event sponsored by the New York Press Club. Ford is among the top five automakers in “Cash for Clunkers” sales, and served to clear dealer inventory of a lot of vehicles.

As expected, the program was directed towards smaller vehicles with good fuel economy—Toyota, which specializes in small vehicles, was the top seller under the “Cash for Clunkers” program.

Vehicle sales were mixed in July, but the end of July saw a huge boost of auto purchases from consumers taking advantage of “Cash for Clunkers.” Fields shared that as of Aug. 27, Ford has already eclipsed its total August sales from 2008 with one more weekend to go.

Even so, Ford doesn’t see the recent jump in auto sales as merely a blip, but a signal that the auto industry is finally turning the corner.

Fields said that Ford increased third quarter production by 18 percent to 495,000 vehicles, and plans another 33 percent jump in production for the fourth quarter in anticipation of a rebound in auto sales. Most of the increased production is allocated for the Ford Focus, Fusion, and other hybrid offerings. In addition, Ford’s subcompact Fiesta is expected to make its way to U.S. shores. Fiesta has been a top-selling vehicle in Europe.

The company’s Dearborn, Mich. plant, which produces its F-Series pickup trucks, will bring back a third shift to ramp up production. The move will put 900 employees back on the payroll, Fields said. Ford’s Kansas City plant is shifting its F-Series personnel to produce Escape SUVs, which get better fuel-economy.

For all its efforts, Ford has increased its U.S. market share to 16.2 percent as of July 31, up from 15.4 at the same time in 2008.

‘Inflection Point’ of the Industry

Earlier this year, General Motors Corp. and Chrysler declared bankruptcy and are now majority-owned by the U.S. government and the United Auto Workers (UAW) union. But Ford’s surprising ability to navigate the choppy waters of recession was also due to a little bit of luck.

“We secured $23 billion in loans a couple of years ago, when the capital markets were behaving normally,” Fields said. “We used the money for three things. One was the actual restructuring of the company... and also to build up a fund for a rainy day.”

“And obviously that rainy day turned into a perfect storm,” he continued. “For us, it’s all about not getting distracted in an industry that’s at an inflection point.”

Ford is fully supporting its rivals through their tough times, which is customary in the industry, as the “Big Three” share a host of common suppliers and service organizations. A healthier industry is a boon for everyone.

According to Fields, the company is focusing on three key areas going forward: “Cost, quality, and fuel-economy.”

“We realized that we weren’t competitive in cost,” Fields said, referring to the automaker’s high legacy costs that became a disadvantage as Asian automakers moved in with non-unionized labor and a cheaper operating structure.

The company has shaved $14 billion in expenses in 2009 compared to four years ago, which includes painful reductions in its blue-collar and white-collar workforce. Ford recently renegotiated its contract with the UAW to align its costs to what Toyota and Honda are paying their U.S. workers.

On the quality front, Field believes that the U.S. automakers are still hamstrung by “dated perceptions of quality.” Ford and GM are now among the highest rated in initial quality by J.D. Power & Associates, an industry research organization.

The company believes that fuel economy is paramount in its ability to compete in the future. “We actually invested $14 billion in advanced fuel technology over the next seven years, when others cut down on investments,” Fields said. Ford is currently working on its EcoTrain line of engines, which seek to produce V-6 fuel-economy with V-8 power.

“To me, it’s one of the most energizing times in the business,” Fields said.