Ford gambles on making a big push to build more small cars

Ford’s plan is to introduce a bunch of small-car models from Europe — including these Fiestas, which workers prepare for launch in Cologne, Germany. The plant is the first to build the new car, which is expected to reach North America by 2010.

Ford Motor Co. expects to run assembly plants in Louisville, Ky., and Wayne on three shifts, making up to 300,000 vehicles a year at each, after converting them in 2010 to make small cars and crossovers instead of big pickups and SUVs, said Joe Hinrichs, Ford’s top manufacturing executive.

“That’s the scale we need to get to” if Ford is to make small cars profitably in the United States, Hinrichs said in an interview Wednesday.

That kind of volume — at plants operating on only one shift today — suggests that Ford could be adding thousands of production workers if the small-car designs it’s bringing from Europe sell briskly in the United States.

That’s a big if, of course, which puts tremendous pressure on Ford designers and marketing chief Jim Farley to deliver big sales increases, reversing a decade of slumping sales and market share for the Dearborn automaker.

Hinrichs, 41, Ford’s group vice president for global manufacturing and labor affairs, was in Traverse City to receive the Shien-Ming Wu award for manufacturing excellence at the Management Briefing Seminars automotive conference.

Mark Fields, 47, Ford’s president for the Americas, said in a speech Tuesday that Ford has created a 40-person team to create more hands-free electronic features in its cars. The Sync system, which integrates cell phone service with in-car music and GPS navigation, has helped boost Ford Focus transaction prices by $750 per car, Fields said.

Thanks to the spike in gas prices earlier this year, Hinrichs said, Ford could sell 300,000 Focus models in the United States this year if it had capacity to build them. But only 138,649 were sold in the first seven months, indicating that total output of the Focus — Ford’s only U.S. small-car offering — will be limited to about 240,000 this year.

Ford’s recently announced plans to bring in a slew of new small-car models from Europe — including the Fiesta– suggest that Ford could soon be making nearly 1 million cars annually in North America that are Focus-size or smaller.

Which begs the question: How do you sell that many little cars when your business has been geared to selling F-150s, Explorers and other big trucks and SUVs for many years? Will mileage-conscious customers automatically flock to Ford showrooms to check out the new fuel-efficient cars and crossovers?

Moody’s Investors Service, which downgraded General Motors Corp.’s debt rating Wednesday, expressed skepticism about the Detroit Three’s ability to quickly boost car sales after relying on trucks for so long.

“The most difficult challenge facing GM and the other domestic producers will be accelerating the introduction of fuel-efficient vehicles, and convincing consumers that these vehicles offer as good a value proposition as Asian products,” wrote Bruce Clark, senior vice president of Moody’s.

Fields said Ford can’t simply bring popular small cars from Europe to the United States and assume that consumers will choose them over well-established models from Toyota, Honda and other Asian automakers.

“Good isn’t good enough,” he said at a dinner with journalists Tuesday night. “We realize we have to surprise people with Ford designs.”

Ford hasn’t had much success lately in snatching sales away from other brands. Its share of total U.S. vehicle sales has skidded from 25% in the late 1990s to 15.3% so far this year. Ford’s U.S. sales have fallen 14% in the first seven months of 2008, compared with last year; the overall market is down 10.5%.

Ford executives have said that U.S. customers moved rapidly to more fuel-efficient cars, and away from SUVs and trucks, when gas prices zoomed past $3.50 a gallon in the spring.

Now that gas prices have fallen back from their high of $4.25 to around $3.80, Fields said the lower prices may help boost consumer confidence and help revive overall car and truck sales. But he said he does not expect that buyers will suddenly turn their backs on fuel efficiency and revert to buying big gas hogs again.

In light of Ford’s huge commitment to retooling for small cars, Fields had better hope he’s right about that.

source:Freep

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