Alan Mulally has changed course. His commentary on Ford’s first quarter financial results yesterday (26 April) was more about the cars than the numbers.
It’s a significant shift and a confident gesture. His focus in fielding the questions of analysts and journalists always used to be Ford’s financial position and the economic climate. Now suddenly he has moved on to emphasise that Ford’s future success is going to be all about the cars that he builds and the prices he can get for them.
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He coined the simple soundbite of ‘One Ford’ for his first years in charge. His mission was on getting all Ford plants in all countries to build decent cars on common platforms that could sell at keen prices in all markets.
Now it’s the time to sex up the cabins. He likes to call the car bodies the Top Hats and he firmly believes that what is inside the Top Hats is what will make him his margin. Do that and he can pay down some of his huge debt and re-establish Ford as an investment grade security.
“The heated leather seat is the most popular option in a Fiesta. This is a tremendous change. Our buyers are now making a lifestyle choice. This is something that we foresaw four years ago and are ready for.”
First stop was to get “world class competitive vehicles.” Now it’s content and the target is to get an average US$1,100 extra per car to pay for it and to chisel a bit more margin.
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By GlobalDataMulally was not too interested in questions about platform commonality and component sharing. That’s all Old Hat now though there is a small tremor of concern about parts availability as a result of the devastation in Japan and its knock-on effects.
The cabin enhancements start with Fiesta and Focus because that is where the greatest difference can be made across the biggest volume. Larger cars already have rich-ish content. In the present economic situation there is notable downsizing and he with the best-speced small car will win the business.
Three months ago, Ford missed the profit forecasts which city analysts had been led to expect and there was more than a little fuming and fidgeting from shareholders. This time chief financial officer Lewis Booth had left himself a bit of headroom and it was smiles all round. That in turn allowed Mulally to swing the chat to product.
First priority is to keep the pressure up on the cadence of product renewal. Consumers want new toys and he wants the freshest showroom displays around the world. Fiesta and Focus platforms combined now have 10 different Top Hats to wear and the process moves on to the C and D platforms. In parallel come fresher engines with thriftier fuel consumption and greener emissions.
Lewis Booth concedes that the initiative is a stretch because the cost of content is growing faster than prices; that’s both the price that customer can be charged for them and the cost of buying them from suppliers who find themselves in an unusually strong negotiating position when a client suddenly wants something special. Heated leather seats for a Fiesta come at a price and, while Ford may well be setting itself up to be a premium brand in its sector, the premium margin only comes when it can pin an Audi-esque badge on the front. That’s a trick that will take Mulally a little longer to think through.
