Mercury axed, Mazda and Volvo gone. Alan Mulally’s One Ford is almost a reality. But some links may be harder to untangle, writes Mark Bursa
Ford’s decision to close Mercury was hardly the biggest shock of recent times. It was perhaps more surprising that the brand had limped on for so long. Recent internal Ford market research showed that the demographics of Mercury customers were identical to those of Ford customers. Perhaps the theory that only Ford family sentimentality had kept Mercury’s life support system running for the past few years has some credence.
Now only Lincoln survives alongside the blue oval – just two-brands in a portfolio that stretched to double figures not so long ago. Lincoln will stay – Ford’s US dealers need the volume and the profitability from the luxury brand. The challenge is to take it into uncharted waters, making smaller cars and SUVs to replace the axed Mercury offerings.
At least the concept is not too alien for a luxury brand – Lincoln may have never made smaller cars before, but rivals are downsizing too – if Audi can make the A1, or Lexus the CT200h, why can’t Lincoln compete in smaller segments too?
So Ford CEO Alan Mulally’s ‘One Ford’ will end up as ‘One-and-a-bit Ford’. Lincoln will be fully integrated from a product development point of view – the trick will be for Ford to leverage its platforms and parts bin to produce plausible small Lincolns – a trick it failed to pull off with Jaguar, though it was well on the way to achieving this with Volvo.
Sorting out the platforms is crucial to the success of One Ford. It’s necessary too, as the departure from the Ford family of Mazda and Volvo in particular gives an opportunity to develop a more streamlined platform portfolio.
Pretty much the entire Volvo range uses Ford platforms, and under the terms of the recent US$1.8bn sale to China’s Geely, Ford said it would continue to supply powertrains and platforms to Volvo for an unspecified time. However, one of the reasons the deal has taken so long to complete was said to be Ford’s concerns over intellectual property. So you can imagine the supply of information going forward will be somewhat limited.
Volvo will have to leverage its own in-house engineering expertise to develop its own next-generation cars in Gothenburg – and it’ll have to do it quickly. Hopefully Geely’s chairman Li Shufu will realise this and allow the Swedes to get on with it. At least, as with Jaguar Land Rover, Ford has left Volvo with a handsome dowry of new models – S80, S60, XC60 are all recently launched or upgraded, and an XC30 small crossover is expected soon, to compete with the BMW X1 and planned Audi A3.
Volvo’s access to China will surely become easier via Geely. Volvo has always struggled to get its volumes up to the sort of levels it needs to achieve – up around 800,000 units a year globally, roughly twice its typical volumes over the past decade. China can bring that volume: Volvo would offer a 100% Chinese-owned alternative to the likes of Audi, which does very well in China through its JV with FAW. Geely is certainly ambitious – it is planning a 300,000-unit Volvo plant in China, and talks of 1m Volvos a year globally in five years’ time.
While Ford’s links with Volvo are likely to diminish over time, there seems to be no endgame for its relationship with Mazda. Indeed, while the relationship has changed – and is still changing – since Ford sold most of its controlling stake in Mazda in November 2008, there are many areas where Ford and Mazda are inextricably linked.
One of these is small cars. Ford of Europe has been praised for offering new small cars in a recession-hit market – though in fact the timing of the launch of the new Fiesta and Ka models was nothing more than fortuitous. And while both are undoubtedly good cars, neither is really a Ford. Apart from Ford body styling, the Ka is a Fiat 500, made by Fiat in Poland, while the Fiesta is a Mazda 2, designed in Hiroshima.
And this part of the relationship will continue, according to senior Mazda executives. Not just to avoid duplication of product development effort. Ford and Mazda are locked in to the successful AutoAlliance joint venture in Thailand, which has been making pick-ups for the past 12 years and is now expanding into small car production.
AutoAlliance has recently completed a passenger car plant in Thailand, to build the Mazda 2 and Ford Fiesta. This is part of Thai government-backed incentives to build small cars in the country, effectively an attempt to repeat the success of the incentives of the 1990s, which made Thailand a global centre for 1-tonne pick-ups.
The new plant increases the total annual production capacity at AAT to 275,000 units (including CKD units). The Mazda2 and Ford Fiesta cars will be sold in Thailand and exported throughout the Asia-Pacific region, and it would make little commercial sense to unravel the joint relationship.
Other aspects of the Ford-Mazda relationship are coming apart, however. Notably, the three-way JV with Chinese automaker Changan looks like it will morph into something else. Mazda is currently a 15% shareholder in the business, with Ford holding 35% and Changan 50%. It’s complicated, and not particularly favourable for Mazda.
What is being proposed is two separate 50:50 JVs – Changan-Ford and Changan-Mazda. Ford’s JV would be based in Chongqing, while Mazda’s new JV would be based in Nanjing. Ford recently broke ground for a new US$500m third China plant; this would become part of the Changan-Ford JV, which would be a larger enterprise than Changan-Mazda.
Mazda would gain further traction in China by expanding its relationship with FAW into a full 50:50 JV. Mazda started making the Mazda 6 in China in March 2003 through a technical co-operation pact with FAW Group, effectively a licence agreement in which Mazda had no stake. Sales of Mazda models in China hit 179,679 in 2009- 40% via Changan, 60% via FAW. This is a lot less than Ford, which sold 440,619 vehicles in China last year, up 44% from 2008.
All this requires Chinese Government approval – but there are no real obstacles, and a simplified set of relationships would be likely to gain approval. Issues such as cross-supply of engines between the two Changan JVs could easily be addressed through simple supplier agreements.
The other area where Ford and Mazda will drift apart is in mid-size platform supply. This centres around the Mazda6, a Hiroshima-developed platform that, as the Ford CD3 platform, provides the basis for much of Ford’s mid-sized North American range – Ford Fusion, and sundry Lincolns.
By the next model cycle, these cars will be based on Ford’s European mid-size platform, EUCD. This is the basis for the Mondeo, S-Max and Galaxy. Sensibly, it’ll be the basis for the next-generation of US equivalent-sized cars. We’ve been here before, of course, with the Mk1 Mondeo-based Contour and Mystique of the mid-’90s (or the Detour and Mistake, as they became known). But Ford’s current activities with Focus and Fiesta suggests at last that it has mastered the process of making US and European versions of the same car.
Making more cars off EUCD will also replace lost Volvo volume in time, as the same platform underpins S60, XC60 et al.
All these changes are very much to Ford’s benefit, as you’d expect. For its newly orphaned former subsidiaries, the way forward will be harder. Mazda will still produce a mid-size platform for the Mazda6. But it’ll not have the extra economies of scale from supplying that technology to Ford.
Perhaps Mazda should collaborate with Geely on Volvo. Now where would that leave Ford’s concerns over intellectual property? My head hurts just thinking about it.
Mark ‘Coolbear’ Bursa
Dave Leggett speaks to Mark Bursa