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March 26, 2010

GOLDING’S TAKE: Ford UK dives back in the trenches

It had been the standard-bearer for so long, Ford has become used to its leadership position in the UK. In terms of market share, it is still 30% ahead of the pursuing herd despite a scare from Vauxhall a couple of years ago.

It had been the standard-bearer for so long, Ford has become used to its leadership position in the UK. In terms of market share, it is still 30% ahead of the pursuing herd despite a scare from Vauxhall a couple of years ago.

And the job of market leader is to set prices. Ford recognised this responsibility early last year and so whacked on a four per cent rise. It liked the idea so much that it whacked in another rise…and then another until Ford prices were standing proudly 12 per cent taller than they had been a year earlier.

But when it looked behind to check that its industry followers had followed…shock-horror; no-one there. It was odd. Without a single word of complaint from the trade or consumer, Ford was high and dry.

How to retreat with tail between legs and still look dignified?  Today we have the answer. Ford has come up with what it hopes looks like an elegant solution. It has cut its elevated list prices, cut its discount habit and then pointed out that transaction prices are unchanged.  Same result; different way of getting there.

To the car buyer, it may all look like a lot of fuss about very little, but it is a huge step for Ford. In the words of fleet director Kevin Griffin it is a revolution that has been thirty years in the making.  Why would you deliberately publish prices that you were never going to charge and then spend your working day giving away the bit of the price that you knew that you never needed (or expected) in the first place.

He is taking the lead by readjusting the prices to fleet buyers first. Ford is just cutting the list price on S-Max, C-Max and Mondeo to start with because they are the fleet cars and it is easier to carry the message to the professional audience. The retail market will be addressed later when the professionals are all squared away. The discount involved incidentally is between £2,500 and £3,000 for these three.

The grand Ford plan was to make better cars, put in a lot more whizzy toys, provide some emotional content, tell the consumer, and then push the whole brand image upmarket. Ford was sick of being told that Audi, BMW, Volkswagen and Toyota made better cars because its own tear-down shops and reliability studies suggested that it was all perception and no reality.

What was to have been the final move in Ford’s shift from ho-hum to yum-yum would be to lift the list prices so that the consumer would be forced to consider value afresh. Not anymore. It’s back to where it was in the pecking order. There is little doubt that Ford product deserves a re-rating but it ain’t getting it this time. It’s just getting a smack on the nose.

It is a set-back for Nigel Sharp who runs Ford in the UK. Protection of UK market leadership has cost a lot of money over the years and last year the red ink on the accounts looked like rivers of blood. Alan Mulally, Bill Ford’s hired hand back home in Detroit, has said that the folly must end, and soon. The assumption of better retained profit was key to that.

Sharp is disappointed, though he won’t go so far as to say that he wishes he had not pushed so far and so fast for price.

And at the end of the discussion, he suddenly remembers Mulally and the profit target for the UK. “We really needed that December price rise,” he laments.

 

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