The world auto industry provides an amazing example of the power of competitive capitalism to provide consumers with dramatically improved value for their dollar. Unless, of course, you’re the CEO of an auto company that has not been a winner in this race, or even keeping up with most others.
In a June 2005 column, “Car Wars,” I wrote that “General Motors and Ford have always been global companies whose corporate headquarters happen to be in the United States. Daimler-Chrysler is a global company whose headquarters happens to be in Germany.” A Toyota Camry or Honda Accord has a much higher domestic content (80 percent) than a Chevy Tahoe (67 percent) or Ford Mustang (60 percent).
Last summer, it was GM’s difficulties that made the headlines. This summer was Ford’s turn on the public pillory, as rating agencies dumped the company’s bonds even deeper into the junk pile and Toyota outsold Ford in July.
Everyone has been offering unwanted advice to Ford’s new CEO, Alan Mulally. A few weeks ago, the former CEO of Land Rover and Mazda, Charlie Hughes, co-authored a powerful Wall Street Journal piece with William Jeanes of Car and Driver magazine. They proposed that Ford sell Land Rover and Mazda, as well as Aston Martin, leaving just three venerable brands — Ford, Volvo and Jaguar — which date back to 1903, 1927 and 1922, respectively.
I don’t see how Ford could sell Mazda, since the Ford Focus and Fusion are heavily dependent on Mazda’s excellent underpinnings, including engines. But there need not be seven Mazda models or Ford clones of every Mazda. Hughes and Jeanes would shut down both Lincoln and Mercury, which sell expensively repackaged Fords.
Most important, when it comes to luxury and sport, Hughes and Jeanes would let Jaguar be Jaguar. That is certainly true of the awesome new XKR, for example, but not the middling Ford-based X-type (an embarrassment that should be ended). An Aug. 26 Wall Street Journal article about Ford contained a misleading graph labeled “Sore Spot: New models such as the XK haven’t helped Jaguar sales in recent years.” But that graph ended with June, before the first XK was sold.
The new model that really matters will be the redesigned S-Type for 2008, which will be positively gorgeous.
Just as Jaguar’s iconic brand can compete with the best from Germany and Japan — much better than Lincoln could ever hope to — improved Volvos could likewise fill in the middle range once intended for Mercury. Aside from my caveat about Mazda, Hughes and Jeanes offered a bold and brilliant plan.
My own free advice is less ambitious, about such mundane matters as advertising, warranties, styling and rapid response to reported product flaws.
When it comes to advertising, the goal must be to sell cars, not public relations imagery. Ford began wasting millions of ad dollars in June with endless reruns of a cloying TV lecture by former CEO Bill Ford about the alleged corporate virtue of producing 250,000 more flexible fuel vehicles to “help save you money at the pump.” That ad made no effort to persuade anyone to buy a single unnamed and undescribed vehicle.
Besides, it is finally becoming widely understood that all such ethanol blarney is just another corporate welfare scandal. The latest Consumer Reports cover story, “The Ethanol Myth,” notes that switching from 10 percent ethanol to 85 percent (E85) cuts gas mileage by 27 percent, which mean E85 costs about $4 a gallon on a gasoline-equivalent basis. If E85 were made from cellulosic sources such as switchgrass, Consumer Reports figures the gasoline-equivalent price would top $6 a gallon.
Ads from other car companies, notably those using Daimler-Chrysler’s CEO Dieter Zetsche, provide interesting information about their cars. Mr. Ford, by contrast, seemed to be engaging in a pathetic apology for his company’s most popular vehicles (pickup trucks), while keeping its cars’ virtues a secret.
The self-consciously dowdy Ford 500, for example, is a competent car with one unique virtue — ample headroom and visibility. No Ford ad tells you that. The economical little Ford Focus (classed as an import) is surprisingly fun to drive, yet Ford has also kept that a secret.
My second bit of advice is to offer powertrain warranties based mainly on miles rather than years driven. GM appeared to escalate the warranty wars in September by offering such a warranty for 100,000 miles or five years, whichever comes first. Unfortunately, that five-year limit makes all those extra miles useless for most drivers. My wife and I put 6,000 miles a year apiece on two cars, so we run out of warranty coverage years before we reach the mileage limit.
That is particularly annoying with luxury cars, such as the piddling four-year (50,000-mile) warranty on a BMW or Jaguar. The easiest way to tilt buyers away from a BMW 650 to a Jag XK would be to simply offer a 60,000-mile warranty on upscale Jags with at least six years before expiration. That would be no better than Nissan, Toyota and Honda, aside from the added year. It would also help alleviate consumer trepidation about Jaguar’s uncertain future — due to Ford’s blunder of allowing speculation that Jaguar may be sold, perhaps to the likes of Renault.
My third suggestion is to exempt the most talented designers from Ford’s cost-cutting plans. To put that same point in reverse, my cost-cutting advice to GM would be to fire everyone responsible for designing or authorizing the remarkably ugly Pontiac Aztek. Ford has avoided such extreme styling blunders through timidity — by keeping most Fords dull and nondescript, although an anticipated facelift for the Focus and 500 might help. If Ford cannot attract and retain competitive domestic designers, they should outsource more styling to artists at Jaguar or Volvo.
Finally, Ford should consider hiring a few gung-ho car enthusiasts, or at least inviting their advice. Leading car mags say the Ford Focus needs more power, for example, so why not offer the turbocharged four from its sister, the Mazda 6? Consumer Reports says the Explorer needs an inside grab handle to close the door more easily, so why not add one ASAP? Car-smart critics can be your best friends, Mulally, and they all wish you huge success with the grand marques now entrusted to your care.
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