Tag Archive | "Ford Motor Co."

Lincoln Dealers Reluctant to Upgrade Their Stores

Lincoln dealers say they are reluctant to invest in pricey upgrades to their stores until Ford Motor Co. reveals more details about Lincoln’s future lineup.

Ford is asking some dealerships to spend more than $1 million to remodel buildings and make other improvements to meet new standards that have yet to be spelled out, several dealer sources say.

“I say show me the money,” said Larry Taylor, owner of Beau Townsend Ford-Lincoln Mercury in Vandalia, Ohio.

“They told us there would be no new products for about 24 months. I don’t know how the stand-alone Lincoln dealers are going to make it, especially those dealers who have to spend $2 million on their upgrades.”

Taylor is also a member of the Ford Lincoln Mercury National Dealer Council.

Ford plans to cut at least 200 of 1,200 U.S. Lincoln franchises, mostly in the top 130 metro markets, reported Automotive News. It wants to rehabilitate the sagging luxury brand with fewer, more profitable dealerships.

Ford has begun offering some Lincoln dealers cash – in one case about $1.5 million and in another just over $300,000 – to give up the franchise if they’re not in a “preferred location” or won’t make the recommended improvements.

“My facility is in excellent shape,” one dealer said. “I plan on doing nothing here but selling Lincolns – unless Ford comes up with a lot more money.”

Some dealers see tough negotiations ahead with the factory. Some are rejecting buyout offers as too low. And others wonder about the commitment to product. Ford has said it will spend $2 billion to upgrade Lincoln’s lineup.

No to status quo

Lincoln spokesman Christian Bokich said the “status quo is not an option” when it comes to the changes Lincoln wants to see in stores. If the dealers decline to meet new standards for facilities and customer service, they can negotiate a price to give up the Lincoln franchise.

If the two sides can’t agree on a price, the legal options become murky. But Ford’s real leverage could come from getting tough with incentive money if dealers refuse to comply.

At an October meeting with Lincoln dealers, Ford said Lincoln stores not in compliance with upgrade requirements by fall 2011 would face limitations on incentive money.

The negotiations come at a time when Ford is paying down $27.3 billion in debt, and the company intends to play hardball in forcing dealers to make a decision. But some dealers insist that Ford can’t make them invest or exit — especially if the settlement offers are unreasonable.

Ford has started meeting individually with Lincoln dealers to outline expectations for facility improvements and to offer cash compensation to some who choose to leave. Some stores would require more extensive investment than others.

The dealers who have met with Ford say the automaker wants a decision before Dec. 31.

2 cases in point

In one major metro market, a dealer said Ford offered him about $1.5 million to relinquish his Lincoln franchise.

The dealer asked for anonymity because he plans to keep selling Lincolns. But the dealer says Ford’s offer for Lincoln is “very low.” He owns a large Lincoln-Mercury dealership and sells nearly 1,000 new vehicles a year. The dealer earns nearly $2 million in annual profits. Ford’s offer, the dealer says, should be closer to $5 million.

“So they’re just offering me one year of earnings,” the dealer said. “For some stores that’s fair because they’re losing money, but for us, it’s not.”

The dealer rejected Ford’s offer and says he will not comply with Ford’s requested $2 million in facility changes.

A second dealer in the same market estimates Ford’s desired remodeling would cost at least $1.5 million. Ford offered that dealer just more than $300,000 to give up the franchise.

“‘Insulted’ isn’t a harmful enough word to describe it,” the dealer said. “It’s asinine. I’m getting my numbers together and going back. I’m not going to accept this.”

A Lincoln spokesman says there is no formula for compensation offers because offers are made on an individual and market-by-market basis.

Ford does have a Mercury formula, though. It’s based on the average number of new vehicles sold at a dealership from 2007 through 2009, times a per-unit amount that ranges from $1,500 to $2,500 depending on the dealer’s average percentage of Mercury sales as compared with the store’s total sales.

Some dealers are refusing Ford’s exit offers and are hesitant to upgrade stores because Ford has yet to reveal its future Lincoln products. Dealers say they can’t make a business decision without the facts.

At the October meeting, Ford told dealers it will take about two years to rebuild the Lincoln lineup and at least four years for many buyers to add Lincoln to their consideration lists.

Lincoln now sells three cars, two crossovers and a full-sized SUV. Supplier and company sources say Lincoln will add a vehicle based on Ford’s global compact car platform.

As Ford continues to meet with Lincoln dealers, it will slowly roll out specifics on the dealership requirements, dealers say.

“They showed us pictures and renderings, but nothing specific,” said Bob Tasca Jr., a Rhode Island dealer and head of Lincoln Mercury’s dealer council. “A lot of these details will be rolled out over the next year. There will be a plan and some type of time line.”

Specifics wanted

At the meeting, Ford told dealers that maintenance for four years or 50,000 miles, such as oil changes, will be included in the price for all Lincoln vehicles. Also, beginning Jan. 1, a new slate of owner privileges, such as providing the same Lincoln model loaner vehicle for Lincoln warranty work, better roadside service and a dedicated team of Lincoln customer service people will kick in.

Dealers also must agree to wash and detail every Lincoln vehicle at every service visit.

Ford is telling dealers that it would like a distinct look for Lincoln showrooms, but Ford and Lincoln franchises can share a rooftop.

Lincoln spokesman Bokich said: “The key to success is consistency.”

But an East Coast Lincoln-Mercury dealer said: “They cannot force us to upgrade. So you’ll get a stalemate that results in two classes of dealers — the fools who upgrade and the ones who are at acceptable levels but haven’t upgraded.”

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Ford to Buy Back Some Older Model Windstars

WASHINGTON – Ford Motor Co. has agreed to buy back some of its recalled older model Windstars that have corroded axles, reported The Detroit News.

In August, Ford said it would recall 462,750 1998-2003 Ford Windstar minivans over concerns that rear axles could corrode and fail.

This week, Ford told dealers it would buy back some vehicles — rather than repair them.

“At our discretion, the remedy we offer may involve repurchasing a customer’s vehicle at a price we believe either matches or exceeds market value,” Ford said in a fact sheet posted on the government’s website.

Ford is notifying owners of the repurchase possibility in letters currently getting mailed.

Ford currently expects to have replacement axles in the first part of 2011. Until then, it is providing rental cars to customers to those with cracked or perforated axles noting it poses an increased risk of a crash. Customers will get to use the rental cars at no cost until the parts are available for the fix.

Ford won’t buy back any vehicle purchased after Aug. 26 and will discontinue the repurchase offers as more replacement axles become available. Ford said it plans to repurchase primarily the oldest vehicles — and ones that have cracked or perforated axles.

Ford dealers have the parts to fix vehicles that don’t have cracked or perforated axles.

The recall covers vans sold or registered in 21 “Salt Belt” states — including Michigan — and Washington, D.C.

Ford spokesman Wes Sherwood said Friday it wasn’t clear how many vehicles Ford would buy back. He said the decisions would be made on a “case by case” basis.

The recall also covers about 113,000 Windstars in Canada.

Under the recall, Ford dealers will inspect and install rear axle reinforcement brackets in most cases.

In May, the National Highway Traffic Safety Administration opened an investigation into the 1999-2003 Windstar after receiving 234 complaints alleging rear axle failure in Windstars, including two alleging that the failures resulted in minor crashes.

Many of the vehicles have more than 100,000 miles and there are concerns that after years of running, “corrosion can weaken the rear axle” and possibly crack it, leading to crashes.

In a Detroit News interview this week, NHTSA Administrator David Strickland praised Ford’s action.

“With Ford making the decision to buy back (some) Windstars from this axle issue, we asked them to take a look back in August,” Strickland said. The decision — and others by other automakers — show they are putting the safety of customers first.

NHTSA said 96 percent of the complaints were from “Salt-Belt” states — where state road agencies treat roadways during the winter.

The states covered by the recall where the vehicles were originally sold or now registered are: Connecticut, Delaware, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New York, Ohio Pennsylvania, Rhode Island, Vermont, West Virginia and Wisconsin, plus Washington, D.C.

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Millions of Fords Recalled for Engine-Fire Risk Still Unrepaired

WASHINGTON – About 8.4 million Ford vehicles that can possibly catch fire remain on the road because of lack of owner information even after the largest U.S. safety recall ever, Automotive News reported.

The National Highway Traffic Safety Administration urged owners of the 14 million vehicles recalled between 1999 and 2009 for leaky cruise-control switches to take their unrepaired vehicles in to dealers. The switches on those vehicles may leak into the antilock brake system, Ford has said.

“If not repaired, the vehicles can catch fire, even if they are turned off, parked and unattended,” NHTSA’s statement today said.

A NHTSA spokeswoman said that about 60 percent of the 14 million recalled vehicles — or 8.4 million – have not been brought in for repair by owners.

Typically, about 30 percent of recalled vehicles are not returned for repair within a year-and-a-half of the announcement, said the spokeswoman, who asked not to be named.

Today’s statement singled out used-car owners who may not know whether the vehicles they bought had ever been returned to dealers for needed repairs.

It also urged owners “to watch for potential warning signs of an imminent fire.”

Those signs include a cruise-control system or brake lights that stop working, low brake fluid and the illumination of brake warning lights on the dashboard.

Ford has notified owners about the recalls a number of times, company spokesman Wesley Sherwood said.

The repair rate for the Ford models has been “likely lower than typical” because of their age, he added.

NHTSA praised the automaker’s notification efforts as “diligent.”

Among the models that have been recalled over the years are 1992-2003 E series, 1993-2003 F series, 1995-2003 Windstars, 1995-2002 Explorers and 1995-2003 Rangers.

Ford’s series of eight recalls for the same defect amounted to the largest-ever U.S. recall, according to NHTSA data. The 14 million vehicles recalled are nearly double the size of the next biggest.

Ford’s most recent recall of 4.5 million vehicles for leaky cruise-control switches was in October 2009 after customer complaints of 72 fires.

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Technology Helps Ford Increase its Average Revenue Per Vehicle 14%

DETROIT – Ford’s growing reputation as a technology-driven brand is helping the automaker wring more money out of every car it sells, the automaker’s vice president of product development, Derrick Kuzak, said today.

During a speech to an auto electronics show here, Kuzak said Ford’s average revenue per vehicle jumped 14 percent from 2008 to 2009, to $26,100, Automotive News reported. He attributed roughly one-third of the increase to new technologies such as the Sync in-car communication system, which gives drivers hands-free ability to operate the media system and mobile devices.

“Technology has been fundamental to our improved brand and business,” Kuzak said.

Other reasons for the increase in revenue per vehicle, he said, are improved pricing and more customers opting for pricier trim levels.

Kuzak said one-third of people who bought a Ford, Lincoln or Mercury said the Sync system helped sway their decision. He said Ford will continue to use technology as a differentiator – including its new MyTouch system, which runs on the next generation of the Sync platform.

MyTouch, now offered on the Ford Edge and Lincoln MKX crossovers, provides navigation, entertainment, Bluetooth and climate controls all connected through a touch screen.

Kuzak said Ford plans to offer MyTouch on 80 percent of its vehicles within five years, including the 2012 Focus.

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Marketer of the Year: Ford Motor Co.

NEW YORK – It was arguably the darkest hour for American automakers: Struggling with the collapse of the global economy, the U.S. government in 2008 bailed out General Motors Co. and Chrysler Group with generous loans that incited rancor and debate across the country. Not so with Ford.

It seemed rather a risk for the iconic marketer to turn down the Troubled Asset Relief Program; it wasn’t as though the brand that Henry built wasn’t in trouble like its Detroit counterparts – it lost $14.6 billion in 2008, reported Advertising Age. But turning down the funds turned out to be a sage move.

When asked just how much declining TARP funds was worth, Ford marketing chief Jim Farley doesn’t hesitate: “I think it was worth more than $1 billion of coverage and customer interest,” he said. “If I had to go out and advertise, it would be that kind of bill in paid media. It’s a once-in-a-lifetime thing.”

Most top marketing officers would kill for $1 billion in free goodwill. But for Mr. Farley, that was just the beginning of a long road that helped the grand dame of automakers survive the Great Recession – with a little bit of luck, a little bit of timing and a little bit of chutzpah. Ford is now firmly entrenched back in the No. 2 spot for U.S. sales among automakers, with 17% of the U.S. auto and light-truck market in the first nine months of 2010, behind GM, according to Automotive News, an Ad Age sibling.

The company’s products are better than ever, promoted and marketed by a revamped strategy headed by Mr. Farley. U.S. yearly sales are up 17% through August, which is more than double the industry-wide gain of 8.4%. Ford’s $4.7 billion profit in the first six months of this year is the company’s largest since 1998.

Meanwhile, Ford’s ability to secure the commercial loans that helped it avoid a government bailout has led to huge perception gains. An Oct. 1 Rasmussen Reports survey, for example, found 55% of survey respondents said they are more likely to buy a Ford because the company did not take TARP funds, a stunning figure nearly 18 months after the fact.

“This is a scrappy team, a surviving team,” Mr. Farley, 48, said of the marketing group that he took over in 2007. “When they got some crazy new leader, they stayed with him.”

Back in 2007, when CEO Alan Mulally was trying to recruit Jim Farley from Toyota, where he had led marketing for the luxury brand Lexus, they met in Dearborn, Mich., and Mr. Farley was impressed with the plan the new CEO had in mind.

“He pulled out a document and there were, like, 200 individual models on it. But he said to me, ‘You see this blue oval? We are going to focus on Ford, and take Ford and integrate it globally,'” Mr. Farley said of his meeting with Mr. Mulally. “As a competitor, I was always scared that Ford was going to do that.”

But the bigger concern was a cultural one. Mr. Farley, a self-described “freak,” was worried he wouldn’t fit in at Ford.

“By ‘freak,’ I mean that I like bottom-up ideas, creative thinking at the client, not the agency. I expect our team to come up with new ideas and I expect that to flow up from the bottom. I was worried the culture would reject me like a bad organ,” Mr. Farley said. “Alan just said, ‘Jim, we’ll stand back to back. Like Wyatt Earp.'”

Instead of wondering whether he would fit in with the culture of Ford, Mr. Farley changed the culture.

“Some people here thought we should talk about technology or history – ‘We need to talk about Henry Ford!’ – instead of telling the consumer how good the product is,” he said. So Ford reprised its “Swap Your Ride” campaign, where it has Honda and Toyota owners test drive Fords, and used the testimonials in its advertising. It launched the 2011 Explorer crossover on Facebook and created a campaign called the Fiesta Movement, which loaned out the small car to young social-media-savvy bloggers across the country to let them seed and spread the word long before the car was set to launch in the U.S.

“Jim Farley has done a superb job,” said longtime automotive advertising and marketing executive Peter DeLorenzo, who now runs AutoExtremist.com. “When he came to Ford, he came at the perfect time. The company was already focused on a new course thanks to Alan. Farley took all the constituents of marketing and got them on the same page. He took some risks with the advertising, and Ford’s products are getting better by the month. It worked out. The marketing and advertising has all come together nicely.”

Among the bigger risks? A truck campaign for the F-150, which went against everything one is used to seeing in an ad for a pickup truck, Mr. DeLorenzo said. “It’s witty, it’s well written, and it makes tremendous use of Denis Leary’s voice-over. It’s almost cerebral in a way.”

Ford actually cut U.S. ad spending in 2009 as it consolidated its focus on the Ford and Lincoln brands, though it raised network TV, print and internet spending, according to Ad Age DataCenter. U.S. measured media spending for the first half of 2010 was $530.2 million, up 10.9% from $478.2 million spent in the same period of 2009, according to Kantar Media.

It also merged advertising and public relations; gone is the church-and-state separation. “We’re now praying together,” said Mr. Farley.

Its commercials, featuring everyman Mike Rowe, the host of Discovery Channel’s “Dirty Jobs,” are a hit and it tapped social media to launch the Fiesta in China – a move that inspired the U.S.’s Fiesta Movement.

“Other than Facebook, China has the largest social-media sites in the world,” Mr. Farley said. “So we imported 100 Fiestas and started a campaign that asked people to take a picture of themselves with the Fiesta if they saw it on a street, and spread it around.”

Some of those same practices will be adopted globally and domestically when Ford launches the next-generation Focus.

Meanwhile, Ford’s ad agency, Team Detroit, a consortium of five WPP shops, has its roots in JWT’s first efforts for Ford a century ago. And at a time when the single-holding-company model is often knocked in the ad industry, Mr. Farley and Team Detroit Chief Creative Director Toby Barlow enhanced a model Mr. Farley developed at Toyota called Train, in which the agency taps the best talent it can find – even if it means dipping outside of WPP.

“Toby is the coach of a fantasy league and he gets to pick the dream team every time we have a project,” Mr. Farley said. “It allows us to have a freshness in the agency-client relationship over and over again.”

Mr. Farley said it could be as diverse as bringing in a creative who worked on a Harley-Davidson motorcycle campaign to work on a Ford F-150 truck assignment, or hiring an artist who does country-western CD art to work on a brochure.

“It hasn’t been perfect,” said George Peterson, president of the automotive research firm AutoPacific, citing Lincoln. “The Lincoln launches, even though they threw a lot of money around, it still doesn’t seem to have resonated yet with people around the country. There are examples of launch-and-leaves out there where Ford just cannot keep enough weight on a product.” For instance, Ford Flex was launched in the first week of the recession and isn’t nearly up to the level of the other models.

Still, Mr. Peterson, a Ford owner himself, said he likes what he sees.

“One, they have focused their marketing message,” he said. “Two, they are not only marketing to prospective customers, but to their present customers as well. I receive plenty of direct mail and emails from Ford. Three, their outreach has never been better. They’re probably doing more television than anybody expected, especially with the Mustang and the Fiesta.”

Ford is also an industry leader in onboard technology with its SYNC in-car communications and entertainment system, co-developed with Microsoft. Mr. Farley called mobile marketing the most underrated technology right now.

“People are spending hours on their devices with all this cool data and content, and we’re not part of the conversation,” he said. “There hasn’t been this kind of moment in modern marketing since TV in the 1950s. We haven’t seen such a quick flip of media consumption like that, and we as marketers haven’t caught up. The smart companies, like General Mills, are going to application people and making it work.”

Mr. Farley said he envisions a day where something like SYNC “becomes a revenue platform. Not only for us, but for companies that develop applications. Five to 10 years, tops. Who would have believed we’d be talking about us, a car company, being a leader in that technology?”

Mr. Farley pauses for a moment.

“Can you imagine?” he says. “My grandfather was an employee of this company [he owned a Ford dealership]. I love the brand, I love the products. This is for the marketing and PR team at Ford who all responded to a crisis in a way that no one could predict. The fact that we’re sitting here talking about [this] is the coolest thing I could ever think of.”

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Sumitomo Mitsui to Overtake Ford as Mazda’s Top Shareholder, Chairman Says

Sumitomo Mitsui Financial Group Inc. expects to overtake Ford Motor Co. as the largest shareholder in Mazda Motor Corp., according to the bank’s chairman.

The company will become the leading shareholder in Mazda by the end of this year, Masayuki Oku, chairman of the Tokyo-based bank, said today. Ford, Mazda’s largest current shareholder, owns about 11 percent of the Hiroshima, Japan-based automaker. Sumitomo Mitsui Financial Group owns at least 2.9 percent, according to data compiled by Bloomberg.

Ford, which held a controlling stake in Mazda until two years ago, has joint ventures in Thailand and the U.S. with the Japanese company, while the companies plan to dissolve a partnership in China, Bloomberg reported. Ford has reached a tentative agreement to reduce its holding, worth about $515 million, by selling shares to Sumitomo Mitsui, Sumitomo Corp. and suppliers of the Japanese automaker, Nikkei English News reported Oct. 16, without saying where it got the information.

“There might be a gap between Mazda and Ford in their affiliation strategy,” said Takeshi Miyao, an analyst at consulting company Carnorama in Tokyo. “Ford should focus on strengthening business in developing countries like China or Thailand and shift production to South East Asia,” while Mazda has been trying to reinforce its domestic production, he said.

Mazda fell 0.9 percent to 212 yen in Tokyo, after earlier declining as much as 4.7 percent.

Capital Relationship

The Nikkei report about a change in the capital relationship between the two automakers is speculation, Mazda said in an Oct. 16 statement. Ken Haruki, a spokesman for the automaker, declined to comment further when contacted by Bloomberg News today.

“Ford’s ownership stake in Mazda remains unchanged,” Mark Truby, a Ford spokesman, said Oct. 15. “Ford continues to have a close strategic relationship with Mazda, and we cooperate in areas of mutual benefit. We have no further comment on the speculation.”

Ford is not releasing Mazda shares because it needs the finance, Sumitomo’s Oku said earlier today. The business tie-ups and spirit of the Ford-Mazda alliance won’t change, he said.

’Good for Mazda’

The bank will hold on to the Mazda stake it plans to buy by the end of the year “for a while,” Oku said.

“Having a bank as the largest shareholder is good for Mazda to ensure its financial status,” said Tatsuya Mizuno, a director at Mizuno Credit Advisory in Tokyo. “Mazda needs to find a new auto partner in the long term.”

Mazda had 64.4 billion yen ($793.6 million) in long-term borrowing from Sumitomo Mitsui, according to the automaker’s annual financial report. Mazda is considered part of Sumitomo’s network of Japanese corporations, or keiretsu, that typically own stakes in one another.

Ford owns more than 195 million Mazda shares, valued at about $515 million, based on last week’s closing price in Tokyo.

The second-largest U.S. automaker has signaled it intends to end developing cars and trucks jointly with Mazda. Ford’s new Fiesta small car is based on the mechanical foundation of the Mazda2 subcompact. Ford’s Fusion family sedan is based on the Mazda6 platform and its new Ranger pickup truck is built alongside its mechanical twin, the Mazda BT-50, at a factory in Thailand that the automakers jointly own.

“For a lot of designing and engineering, we’re going to be focused on Ford,” Mark Fields, Ford’s president for the Americas and a former Mazda chief executive, said last December. “Our efforts will be focused on the Ford system, as opposed to relying on others such as Mazda.”

In China, the world’s biggest auto market, Mazda and Ford are dissolving a joint venture with Chongqing Changan Automobile Co., Chief Executive Officer Takashi Yamanouchi said on July 1. A restructuring of the venture, currently 35 percent owned by Ford, 15 percent owned by Mazda and the rest held by Changan, will result in Mazda and Ford each forming 50-50 ventures with Changan, he said.

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