Ford Zooms into the Fast Lane

By Alexander L. Taylor III

Bold but risky, its new European styling just might pay off

Only two years ago, Ford seemed to be racing Chrysler toward the bankruptcy courts. Between 1980 and 1982, Ford lost $3.26 billion and piled up an additional $2 billion in short-term debt. The company's share of the U.S. car market declined from 22.8% in 1978 to 16.9% (1.1 million vehicles) at the end of last year.

Suddenly, things are looking up, way up. During the last ten days of June, Ford registered a robust 76.8% increase in sales over the same period in 1982. The whole U.S. auto industry was whipping along in the fast lane during that time, in fact, with a pickup of 58.7%, and sales for the entire month were up 48% over June 1982. But Ford clearly outdistanced the pack.

That represents quite a turnaround from the late 1970s, when Ford earned a reputation for manufacturing stodgy-looking cars. Concedes Edsel Ford, 34, a product planner and great-grandson of Company Founder Henry Ford: "People thought we built boring cars." Buyers were turned off by the slab sides and flat roofs on models like the Ford Fairmont and the Mercury Marquis.

But new ideas and new models are helping the company to shed its old image. In the past year Ford has introduced ten new car and truck lines. Total development cost: $3 billion. The company has taken a risky course with its new models by moving away from prevailing industry styles. Instead of just turning out near clones of General Motors or Chrysler cars, Ford is developing models with radically rounded contours, much like its own successful European cars. Says Chief Designer John Telnack: "We didn't want to stay with the herd." The danger, though, is that Ford's aerodynamic models may be too far out in front of consumer tastes.

The most advanced of the new European-styled Fords is the $12,000 Thunderbird. Its looks have won raves from auto enthusiasts, but the car's performance in the showroom has been comparatively disappointing. Thunderbird sales for the second quarter of 1983 are up 203% over the same period last year, but sales of the Mercury Cougar, which has a similar but less radical profile, are up 447% compared with the same period in 1982. The public thus seems to want some change--but not too much.

The real test of Ford's bold move, though, will be consumer reaction to the new Ford Tempo and Mercury Topaz. These compacts are competing against General Motors X-cars, the Chevrolet Citation and the Buick Skylark, and Chrysler's K-cars, the Dodge Aries and the Plymouth Reliant. Developed at a cost of $1billion, the Tempo and Topaz were introduced in May. As part of an extravagant rollout, the cars were launched on the flight deck of the aircraft carrier Intrepid, docked at a Hudson River pier in New York City. Said Chairman Philip Caldwell: "We're in a fighting mood."

It is still too soon to know for certain how well the Tempo and Topaz, which carry a base sticker price of $7,238, will do, but early signs are good. Hertz bought 15,200 of them for its rental fleet, the biggest single purchase it has ever made, and during the cars' first month on the market, dealers sold some 20,000 models, 50% more than the company's internal sales projections.

Ford has still more changes coming in its showrooms. Due out this fall is a new Lincoln Mark VII, the replacement for the heavy, clumsy-looking Mark VI. Meanwhile, the company is dropping the Mercury LN7 model, a sporty two-seater car that was introduced in 1981. Says Ford President Donald Petersen: "A car has to fulfill its promise. The LN7 didn't. It was damned disappointing."

In addition to revamping styling, Ford is also stepping up its marketing efforts. One key target is California, which accounts for 10% of all new-car sales in the U.S. Ford's share of that prime market is only 14%, and, says Petersen, "We were on the verge of being a disappearing name there." To catch up, Ford has quadrupled its market research over eight years and is conducting elaborate consumer samplings. Says Executive Vice President

Harold ("Red") Poling: "Once we discover why we lost the market in California, we will prevent the same thing from happening to us elsewhere." To increase its West Coast visibility, Ford prominently displays pictures of the Mustangs it sells to the California Highway Patrol with the caption, "This Ford chases Porsches for a living."

Since American car buyers have become much more quality conscious, Ford has been racing to upgrade its products and hammering at the theme "Quality is Job 1" in advertising. As a result, the company trumpets that it now has fewer cars returned to dealers in the first year for serious defects than any other domestic competitor.

With the early returns promising, Wall Street analysts have begun boosting their profit estimates for Ford. They now think the automaker will ring up profits of $1 billion this year and could earn as much as $2.2 billion in 1984. Says Petersen: "These could be some very good years." The good outlook has helped lift Ford stock from last year's low of 16 5/8 to last week's close at 55. "We must be doing something right," quips Poling.

One huge question mark, however, still hangs over Ford: the $2 billion debt load built up during the lean years. Says Auto Industry Analyst Ann Knight of Paine Webber Mitchell Hutchins: "They can dig their way out of it, but the deterioration of their balance sheet is cause for concern." Yet after all those recent bad years, Ford is not thinking too much about the debt. With a few good years, the company could pay off its old loans--and more.

--By Alexander L. Taylor III. Reported by Paul A. Witteman/Detroit

With reporting by Paul A. Witteman This file is automatically generated by a robot program, so viewer discretion is required.