The $250 Million Flop

Detroit had expected it for months; last week Ford Motor Co. finally had to make it official. The company dropped its medium-priced Edsel, introduced only two years ago. Said Ford, in a pained announcement: "Retail sales have been particularly disappointing, and continued production of the Edsel is not justified, especially in view of the shortage of steel."

Ford's hand was forced by a stock prospectus issued by the Ford Foundation, which plans to sell another 2,000,000 shares of Ford stock (worth some $155 million) in order to diversify its holdings. Included in a list of company products was a footnote on Edsel: "Introduced in September 1957 and discontinued in November 1959." Once that got out, Ford had to speak out, though it had planned to hold off until all Edsels in dealers' inventories were sold. It really did not make much difference. As of last week, only about 2,800 of the "all-new" 1960 Edsels had been made. To mollify those few customers whose cars are now orphans with low trade-in value, Ford offered a $300 certificate to be applied against the purchase of any other Ford product.

Right "Personality." What happened? As it turned out, the Edsel was a classic case of the wrong car for the wrong market at the wrong time. It was also a prime example of the limitations of market research, with its "depth interviews" and "motivational" mumbo-jumbo. On the research, Ford had an airtight case for a new medium-priced car to compete with Chrysler's Dodge and DeSoto, General Motors' Pontiac, Oldsmobile and Buick. Studies showed that by 1965 half of all U.S. families would be in the $5,000-and-up bracket, would be buying more cars in the medium-priced field, which already had 60% of the market. Edsel could sell up to 400,000 cars a year.

After the decision was made in 1955, Ford ran more studies to make sure the new car had precisely the right "personality." Research showed that Mercury buyers were generally young and hot-rod-inclined, while Pontiac, Dodge and Buick appealed to middle-aged people. Edsel was to strike a happy medium. As one researcher said, it would be "the smart car for the younger executive or professional family on its way up." To get this image across, Ford even went to the trouble of putting out a 60-page memo on the procedural steps in the selection of an advertising agency, turned down 19 applicants before choosing Manhattan's Foote, Cone & Belding. Total cost of research, design, tooling, expansion of production facilities: $250 million.

A Taste of Lemon. The flaw in all the research was that by 1957, when Edsel appeared, the bloom was gone from the medium-priced field, and a new boom was starting in the compact field, an area the Edsel research had overlooked completely. Edsel's styling, in particular the grille, which resembled an Oldsmobile sucking a lemon, was not much help, even after the lemon was removed. In its first six months Edsel made 54,600 cars, and then went steadily downward: 26,500 cars in 1958, fewer than 30,000 cars so far in boom-time 1959.

Actually, Ford will not lose its entire investment. Of the total, $100 million went for production facilities, which will be used to produce Ford's second entry into the compact-car field next spring. As a running mate for the Falcon, Ford plans a slightly larger, more luxurious compact model that it originally thought of calling the Edsel Comet. Now the new car will just be called the Comet.

As the Edsel died, Ford got ready to put more pep into the Ford line. Next month Ford will begin deliveries of a 360-h.p. engine that is topped among U.S. stock cars only by the 380 h.p. in the Chrysler 3OO-E. Ford's aim is to outdo both Plymouth (330-h.p. top) and Chevrolet (335-h.p. top) with its new engine.

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