Ford's New `World Car' Secures Sales in Europe
KANSAS CITY, MO.
THE Ford Motor Company has a lot riding on its new Contour sedan.Skip to next paragraph
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With Ford President Ed Hagenlocker behind the wheel, the first Contour rolled off the assembly line last week. It marked the culmination of a $6 billion project aimed at developing Ford's first ``world car,'' a vehicle the American automaker can sell around the world with only minor changes to cater to local tastes and needs.
The project, known internally by the corporate codename CDW27, serves as a role model for Ford's recently announced global reorganization. It provides insight into how the company must change - but also a warning about what might go wrong in the process.
``It is no longer efficient to develop distinctly different products on both sides of the Atlantic,'' Mr. Hagenlocker noted at the ``Job One'' ceremony marking the start of production.
In the case of the CDW27, Ford designers and engineers developed a single compact platform off of which it is marketing three separate models. The Ford Mondeo went on sale in Europe in the spring of 1993. Within months, journalists there voted it ``European Car of the Year.''
Despite the Continent's draining recession, the Mondeo quickly carved out a profitable niche, outselling its nearest competitor by almost 50 percent.
In 1992, the old Ford Sierra accounted for just 217,000 sales. In 1993, Ford volume surged to 315,000 in the segment, even though Mondeo production did not hit full stride until late in the year.
Now, however, Ford faces an even tougher challenge. The Contour and its sister vehicle, the Mercury Mystique, are being launched into one of the most competitive niches in the United States auto industry.
The compact segment is dominated by imports such as the Honda Accord. But competition is getting even tougher with the introduction of a restyled Chevrolet Cavalier, the all-new Chrysler ``cloud cars,'' the compact Chrysler Cirrus, and the Dodge Stratus models.
``It will be a very tough challenge,'' says Joe Phillippi, auto analyst with Lehman Brothers.
New models cost $1,000 more
With prices starting in the $13,000 range, the Contour and Mystique cost about $1,000 more than the vehicles they replace - the aging Tempo and Topaz models. Even with that added to the sticker price, analysts such as Mr. Phillippi warn that Ford will have a hard time turning a profit on the new vehicles.
Ford has spent more money bringing the CDW27 project to market than on any other vehicle in its history. Company officials bridle when the $6 billion figure is raised and insist that they have gotten a lot for their money.
For example, there are three retooled assembly plants in Belgium, the US, and Mexico. There is a new engine and an all-new automatic transmission. Several other component facilities have been radically upgraded.
Despite their public protestations, however, Ford insiders acknowledge that, in the future, they will have to drastically cut the price tag of similar programs. That is one of the key goals of the reorganization Ford announced in April.
The company combined its North American and European carmaking units into a single entity, Ford Automotive Operations.
Under the new structure, Ford has five Vehicle Program Centers, each focusing on a specific market segment. One group, based in North America, will develop large, front-wheel-drive vehicles such as the Ford Taurus. Another center, based in Europe, will handle smaller products such as the CDW27.
Ford will still produce niche cars
``Where it makes sense, we will have a single product strategy,'' a vehicle that can be sold all over the world, Hagenlocker explains. But he cautions that Ford will still keep building products like the Mustang - niche vehicles that meet the demands of a particular market.
Hagenlocker admits that the CDW27 taught Ford a lot about trying to bring together German engineers, British designers, and American accountants. ``Change is always difficult,'' he says, especially when someone's cherished turf is being challenged. ``It's always easier to do what you did yesterday again tomorrow.''
In the short-term, Ford will have its corporate hands full trying to win over skeptical buyers. To instill some confidence, the automaker is stressing quality as it slowly cranks up production of the Contour and Mystique models.
At the Cleveland engine plant, Ford has set a target of roughly one-fifth the number of engine failures of a comparable Toyota plant.
``The big challenge will be to actually get people into the car and try it,'' acknowledges Mercury marketing executive Bonnie Kohler-Gaunt.
A lot of American motorists will have to buy, not just try. With its two North American plants, Ford will have the capacity to sell roughly 400,000 units a year at full-line speed. And based on the company's initial $6 billion investment, it will have to sell every one of them in order to earn a profit.