Ford’s Mark Fields talks about the future of the industry
with members of the Southern Automotive Media Association
Grand Opening of new Ford dealership, Gus Mahado Ford of Kendall
Photos & Text by: Ron Beasley
MEDIA: You’ve got to be happy with the performance of Ford stock in the last few days.
FIELDS: We’re focusing on delivering our plan and the financial markets are starting to notice, which is good. I think it’s a reflection that people understand that we’ve been working this plan for a while; it’s not something we drummed up overnight. Our first quarter results, I think, we still were in a loss position, which isn’t acceptable to us, but nonetheless, versus the fourth quarter, it’s a big improvement. So, we’re just keeping our nose to the grindstone, so to speak.
MEDIA: You seem to have taken some dramatic steps to prepare for the future while other manufacturers haven’t.
FIELDS: Our approach, first and foremost about three years ago, focused on the product and on the customer. Sometimes we take a company out-view of the world as opposed to a customer in-view of the world. From a product standpoint, at the end of the day that’s what a car company is all about and I wanted to deliver the message to the design team that they are all extremely important to our success going forward.
It all starts with product and we basically made a foundation of four pillars for our product:
Making sure of fuel economy; we’re either going to either lead or be among the leaders in every segment for every vehicle that we bring out in the future. And, you’re starting to see the fruits of those labors now with our new Fusion. The hybrid gets 41 mile per gallon and even the gas version is the most fuel efficient in the mid-size segment; it beats the Camry, beats the Accord.
Safety, that’s very important to customers. It kind of moves up on the purchase criteria that customers have when they purchase vehicles. We have more 5-star crash ratings than any other car company and more top safety picks from the Insurance Institute of Highway Safety.
Also, Smart Technology, which we haven’t been known in the past for leading edge technology, so that’s why we’ve worked very hard on things like Sync, which basically takes any Blue Tooth-enabled device you have and, when you get in your car, you can activate your phone or your MP3 player all by voice. So, if you want to call mom, you can call mom, and it’s totally hands free.
So, Fuel economy, safety, technology and, very important, quality. A number of years ago, we set out on a journey and said, ‘We want to be the best in the business.’ The good news three or four years later is that our internal studies show us that we’re better than Honda and tied with Toyota. And, just as importantly, the outside third-party experts – Consumer Reports, the J.D. Powers of the world – they’re confirming that.
So it all starts with great product, and when people bring a new car home and drive it up onto their driveway, we want the neighbors coming out and saying, ‘Wow! What’s that?’ That’s the goal. Have you had a chance to see our new Taurus? Peter Horburg and the team did a fantastic job on that. And that’s our approach going forward, product.”
MEDIA: The other manufacturers are talking plug-in electric, with Mitsubishi, General Motors with the Volt, and Nissan all coming out with electric vehicles next year. Does Ford have anything similar in the pipeline?
FIELDS: Yes. As a matter of fact, just this past Wednesday, we announced a very big investment in one of our plants in Michigan, about $550 million. That was a plant that used to build our Expedition and our Lincoln Navigator, our big SUVs. We’re converting it to build our next generation Focus, a smaller, more fuel-efficient car, and a battery-electrified Focus. It will have about a 100-mile range, so it’ll really be more of a commuter car for someone who’s obviously commuting less than 100 miles a day.
That will be our first full electric vehicle and we’re coming out with it in 2011.
At the same time, we’re not waiting until 2011, we just doubled our offerings of hybrid vehicles. We have the Escape Hybrid and the Mercury Mariner Hybrid in the marketplace right now, and we’ve just launched the Fusion Hybrid and the Mercury Milan Hybrid, and we’re also going to be introducing in 2012 a plug-in hybrid as well. So, gas-electric hybrid, full battery-electric vehicles and plug-in hybrids, we feel we have a really strong approach towards alternative powertrain technology for customers to choose from.
Regarding our Lincoln brand, Peter Horburg and his design team have really transformed that brand from one that was known as a big town car to a brand that’s now known for a great crossover, a new sedan, the MKS, and we’re coming out with a new entry into the market, the MKT, this summer. He’s done a fantastic job of redefining that brand.
MEDIA: Do you think the message about Ford’s hybrid technology, and also about the quality, is getting across to the American consumer?
FIELDS: That is our biggest opportunity going forward, how do we eliminate the perception, maligned perception more than reality? We realize that in the past we probably disappointed some customers and that residue is still out there to one degree or another. That’s why we’ve been so disciplined in making sure that we continue to invest in new product and invest in better and better quality because that’s the best evidence, the best foot forward you can put towards changing that perception. So, in our marketing and advertising we’re talking about the improvements we’ve made, but more importantly we’re talking about it from a third-party standpoint, as opposed to us being out there saying, ‘Look at us, we’re doing great quality!’ People aren’t going to believe that. So, the third-party folks are reinforcing that. And then, it’s word of mouth, and the good news is that over the past three or four years we’ve planted the seeds to change that perception, I think pretty rapidly. Of course, it always takes much longer than you
MEDIA: I heard someone say on the radio -- because of what GM and Chrysler have done -- that they were never going to buy another domestic car. Ford is not involved in this, but you are being affected by their actions.
FIELDS: That’s a really good question. I think people are. We’re hearing from our dealers that customers are coming into their showrooms, customers we haven’t seen before. At first they’re coming because of our products, but also the feedback that we’re getting is that they’re a little bit concerned about some of our other domestic competitors, and they’re saying that we like the fact that you guys are pulling yourselves up by your own bootstraps and not taking any of the taxpayers’ money. So, I actually think that hasn’t been hurting us and I think it helps highlight that first and foremost we’re delivering great products to the marketplace and customers are seeing that. But, we’ll have to see how this plays out over time. The good news is that what we’ve seen six out of the last seven months our retail market share is up.
MEDIA: Nobody can read the future, of course, but do you think Ford will have to ask for federal bailout money at some time in the future?
FIELDS: We are very much committed that we have no plans to take any emergency taxpayer money, based on our assumptions. We’re going to continue to execute our plan; we’re going to do it decisively, we’ve taken a lot of decisive action over the last couple of years, but mainly over the last six months, around debt reduction and modifying the contract with the UAW. But, no, we don’t plan to do it. We have sufficient liquidity to not only meet the needs of the business, but also to continue to invest in the products. So, no, we don’t have plans to take government funds.
MEDIA: Are you planning to bring the Ka to the U.S. market?
FIELDS: The Ford Fiesta is coming to the U.S. about this time next year. The Ka is smaller than the Focus, but there are no plans for the Ka to come to the U.S. market. We don’t rule out anything, but at this point we’re focusing on getting the Fiesta
here. We have a real opportunity with the Fiesta because we don’t have a product in that segment.
MEDIA: How do you see the industry changing?
FIELDS: For most of the decade, we’ve been running at 16-17 million units of sales on an annual basis. This year we’re running at about 10-10 ½ million units. So that gives you an indication of how revenues have fallen off for everybody. But, I think we’ll recalibrate what a healthy industry is going forward. Will it be 13 million? Will it be 15 million? Will it be plus or minus five-tenths on that? I don’t know, but I do believe that in the next number of years it will be below 16 or 17 million units. Part of that is because of the fall of easy credit. A lot of people used their houses as an ATM machine; they took home equity loans out and bought an extra car or rather than get a new car every four years they got one every two years. So I do think that will tamp down the industry. And, also, cars are lasting longer now; better quality. In our case, our quality is among the best in the business and our warranty costs have dropped dramatically, which means that customers don’t have to come into the dealership to get their vehicles fixed as often, if even at all.
We’re going to remain really focused on delivering our plan and bring great products to the marketplace. Good is not good enough.
on pictures to enlarge
Mark Fields, Ford Motor Co. executive vice president
and president of the Americas
MEDIA: Is there a market for the “Smart” car, or do people still want the big SUV?
FIELDS: People have different needs and there’s a whole spectrum of the types vehicles that people want. For example, the full-size SUV segment – Expeditions and Lincoln Navigators – the market is smaller than it used to be, but there’s still a need for it. Customers who have big families or want to haul a lot of stuff around with their families, they need that vehicle. So we offer that vehicle all the way to the Fiesta. Some customers are looking for a very fuel-efficient, entry-level vehicle, one that has a dash of style to it and also some technology. So our role as an OEM is to make sure that we’re offering product that the people want and prioritizing which segments that we want to compete
in. Fuel economy used to be number 11 on the list of things that people wanted. Then, when gas went to $4 a gallon last year, that item – depending on the segment – popped up to one, two or three. Fast forward to today and $2 a gallon, it’s still up there. I think people really understand that this is for real and it’s going to come back again. And, that’s our assumption, that prices are going to go back up. So we’re seeing changes there. We did see when gas was $4 a gallon, we saw small car sales shoot up, rapidly, more than I’ve seen in my 20 years, and sales of bigger vehicles shrank significantly, full-size SUVs and pickup trucks. Now, we’ve seen a moderation where small cars have come down a bit and pickup trucks have stabilized. But, actually, pickup trucks at a smaller level because one of the things that’s permanent in pickup trucks is that you have core work buyers; they buy the truck for either 100 percent fulltime work, as a work truck, or work and personal use. Then you have the pure discretionary buyer, the folks that like the image of the pickup truck, they’ll never use the bed or use the towing or the payload capability, ‘But, man, I like looking good in my truck!’ There’s a lot less of those folks now in that segment. They’ve moved on to other vehicles. So, we have seen some changes in preferences and in purchases, how people go through the purchase decision, and we’ll continue to see that move and change.
MEDIA: Do you really care about what the fuel economy is in a truck?
FIELDS: We’ve done a lot of studying of truck customers; we’ve been doing it for years and years and years, and that’s why we’ve been able to stay the truck leader. When you look at truck customers, first and foremost the truck has to fulfill the job that it’s asked to do. It’s got to have a certain payload, it’s got to have a certain amount of towing capability, low-end torque to be able to get up and go. So, it has to fulfill the functional needs. But what we’re also seeing is that fuel economy is very important. So, if you look at our new F Series, it is unsurpassed in fuel economy, it’s one of the top two in terms of fuel economy in the segment. As we think of our trucks going forward, we’re going to continue to work on fuel economy because a lot of customers view that and they wrap it up into overall operating costs. But we’re never gonna cross over to where we err on the side of just total operating costs, but it doesn’t get the job done. The customers want more and our opportunity – getting back to one of the pillars of our strategy, fuel economy, and being the best or among the best in the segment, we’re gonna stay true to that and give them the functional capability.
MEDIA: What do you think of Carlos Ghosn’s statement …
FIELDS: Which one?
MEDIA: … that it’s time to retire the internal combustion engine?
FIELDS: Well, we all know that oil is a non-renewable resource. So, at some point, this planet’s gonna run out of it. My personal view is, going forward in the industry, this is not like the old Betamax versus the VCR clash or BluRay versus HiDef. My view is that there’s gonna be a whole spectrum of solutions for customers. The internal combustion engine is gonna continue to be a piece of the landscape, I think, for a considerable period of time. I think there’ll be hybrids that will play a piece of it; there’ll be full battery-electric vehicles that will play a piece of it; there will be plug-in hybrids that will play a piece of it. Somewhere down the road, hydrogen may play a piece of it. But, I do think there’s gonna be multiple solutions. Sure, the internal combustion engine’s days are numbered, but the next question is what time frame? I think in the next 20 years you’re still gonna see the internal combustion engine be a piece of the landscape.
MEDIA: I read a story this morning that 57 percent of Americans believe that the U.S. government has granted Chrysler and GM unfair advantage. Do you see your company competing not against other companies, but against the U.S. government?
FIELDS: Well, we’re in some pretty unprecedented times right now. I think our approach is going to be very consistent with the approach we’ve taken over the last couple of years. We are gonna work with all of our stakeholders to make sure that Ford remains competitive and is not disadvantaged. That’s why we took very decisive actions on our UAW contract, where we modified that before others. We reduced our debt by $10 billion last month; we are working with our dealers to make some changes in terms of costs in servicing our dealers. We’ve taken action on management compensation. So our approach is be decisive and always monitor what’s going on outside with our competitors and if we see that we’re gonna be at a competitive disadvantage, then we’re gonna have to address that. We’re gonna control the things that we can control and we’ll see how -- it still is yet to unfold how the situation is gonna work out on how Chrysler and GM are gonna be managed, but our take is to be very consistent in saying we’re gonna be very decisive. And that, to be quite honest, one of our advantages is that we’re not gonna be distracted. That’s the focus on our plan.