Ford Motor Co. (F) Chief Executive Officer Alan Mulally has suggested that his stylish new Fusion sedan is seeking sales supremacy over Toyota Motor Corp. (7203)’s Camry. That’s not exactly what the boss wants, executives said.
Ford can’t make enough Fusions to outsell the Camry, the top car in the U.S. for the past decade, according to researcher IHS Automotive. Instead, with Fusion, Mulally is aiming for a balance between commanding top dollar for each car and selling a lot more of them.
“Between price and volume, we’ll sort out the right mix,” Jim Farley, Ford’s global marketing chief, said in an interview. “I don’t think we’re very enamored with being No. 1 just to be No. 1. We’re much more enamored with getting the right price point and the right kind of people to buy the car.”
Ford’s approach with Fusion stands in contrast to the industry’s quest for sales crowns. General Motors Co. (GM) regained the No. 1 global rank last year, dethroning Toyota, while Volkswagen AG (VOW) says it will become the leader by 2018. Daimler AG (DAI)’s Mercedes-Benz and Bayerische Motoren Werke AG (BMW)’s BMW fought to replace Toyota’s Lexus as tops in U.S. luxury sales, while they continue to battle VW’s Audi for the global title.
The Fusion demonstrates that there is still a careful line between maximizing sales and maximizing profits.
Accolades and attention poured in for the Fusion after Mulally introduced it Jan. 9 at the Detroit auto show. The family car’s sleek redesign, which borrows styling from the Jaguar and Aston Martin brands Ford once owned, generated so much buzz the week it was shown that interest in the Fusion jumped 49 percent on the Edmunds.com car-shopping website.
Inevitably, comparisons were made to Dearborn, Michigan-based Ford’s Taurus sedan, which was the top-selling car in the U.S. from 1992 to 1996. When Mulally was asked if the new Fusion could finally topple Camry, he appeared to answer in the affirmative.
“Fusion last year set a sales record and with this new family of vehicles, we believe we can build on that success,” he told reporters just after introducing the car. “I think we really will be preferred in that” mid-sized car segment.
Within hours, Mulally’s executives began parsing his prediction.
“Alan’s right, that is our hope,” Derrick Kuzak, Ford’s global product-development chief, said in an interview. “But we’re not about sales races. And we’re certainly not about sacrificing our profitability for a sales race.”
Added Farley, who is in charge of selling the 2013 Fusion: “He didn’t necessarily say that our ambitions are to be the segment share leader.”
Ford is boosting factory capacity to build the Fusion by adding a shift of production of the car at a factory in Michigan, augmenting the two shifts of workers already assembling the car in Mexico. That will give Ford the capacity to build 400,000 Fusions annually, said Mike Jackson, a forecaster at IHS Automotive in Northville, Michigan.
Toyota has the ability to build more than 500,000 Camrys a year at factories in Kentucky and Indiana, said Mike Goss, a spokesman for the Toyota City, Japan-based automaker’s North American production unit.
Neither Ford nor Toyota is likely to use all that capacity, Jackson said. U.S. vehicle sales may rise 5.6 percent this year to 13.5 million, the average estimate of 10 analysts surveyed by Bloomberg. That’s 20 percent less than the 16.8 million car and light truck sales the U.S. averaged from 2000 to 2007, according to Autodata Corp., based in Woodcliff Lake, New Jersey.
North American production of the Fusion will grow to 310,000 this year, from 294,000 last year, while the Camry surges to 408,000 from 308,000 in 2011, Jackson said. Next year, Fusion output will grow to 345,000, still 17 percent behind the 414,000 Camrys that Toyota will build in North America, he said.
“I’m sure Ford is evaluating the prospect” of beating Camry, Jackson said. “But they’ve become far more disciplined in going after pricing and sustainable share, as opposed to a trophy.”
Last year, Toyota sold 308,510 Camrys in the U.S., down 6 percent, while Ford sold 248,067 Fusions, up 13 percent, according to Autodata.
Toyota will make a strong push this year with its freshly redesigned Camry as the automaker and Honda Motor Co. (7267) recover from the Japanese earthquake and tsunami that hobbled production last year, Jackson said.
Fusion Rank Falls
That’s why the Fusion will fall to the No. 4 selling car in the U.S. this year, from No. 3 in 2011, said Jessica Caldwell, sales analyst with Edmunds.com. Camry will maintain its lead, while Honda’s Accord will move back into second from fourth after recovering from the earthquake and Thai floods, she said. Nissan Motor Co.’s Altima will be third, she said.
“It’s going to be hard to outsell the Camry,” Caldwell said. “Camry has been on top so long they’ve built up a huge, loyal owner base. Just from the sheer numbers, Camry is hard to beat.”
Ford also has to be concerned about taking sales from its Focus compact or Fiesta subcompact by lowering Fusion prices. Focus sales fell five consecutive months last year when Ford discounted the current version of the Fusion as it neared the end of its life cycle.
“There is a tremendous amount of cross-shop” in the Ford showroom among Fusion, Focus, Fiesta and the Escape small sport-utility vehicle, Ken Czubay, the automaker’s U.S. sales chief, told analysts Jan. 4. “There is movement around the various car lines.”
Ford’s strategy is to get higher prices for each of its models by outfitting them with technology for which consumers will pay a premium, Farley said.
When the new Fusion goes on sale in the second half of this year, it will be offered in hybrid and plug-in hybrid versions, as well as with turbo-charged gasoline engines that get as much as 37 miles per gallon.
“As a marketer, the most important part of this product is its technology,” Farley said of the Fusion. “Having 37 mpg, a 47 mpg hybrid and a 100-mpg plug-in to talk about could really change a lot of people’s minds.”
Selling more-expensive, tech-laden cars added about $900 million to Ford’s automotive pretax operating profit of $1.3 billion in last year’s third quarter, according to an Oct. 26 presentation to analysts.
The Fusion’s new look also could generate greater demand from consumers willing to pay more for it, said Caldwell. The Fusion was named the Detroit auto show’s best designed production car by a panel of 25 auto stylists, from rivals such as GM, Chrysler Group LLC and Honda.
“The new Fusion looks like a vehicle that is much more expensive than it really is,” said Caldwell, who is based in Santa Monica, California. “It will do well in non-traditional Ford markets, like California and coastal areas.”
The comparison to the Camry, with its staid styling, plays into Farley’s plan to build buzz for the curvy new Fusion.
“You will see us spend, especially in the digital social space, a sizeable amount of our launch budget before the vehicle even goes on sale,” said Farley.
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