Ford’s Mulally Flexes American Muscle for European Repair

To cure its ills in Europe, Ford Motor Co. (F) is turning to some classic American iron -- sport-utility vehicles and Mustangs.

Ford, which has said it will lose more than $1 billion in Europe this year, said yesterday it will unleash its Mustang sports car on Europe soon and is tripling its SUV offerings in a continent that once spurned such vehicles as symbols of U.S. excess. Now Ford sees Europeans embracing more modern and fuel-efficient versions of guzzlers gone by.

Chief Executive Officer Alan Mulally dramatically announced the Mustang news by flashing a symbol of its galloping pony logo on an overhead screen at the end of a new model show for dealers at the Ziggo Dome in Amsterdam. As a disembodied Mustang engine roared over the loud speakers, so too did the dealers.

“You saw that reaction just from putting the Mustang symbol up,” Mulally said in an interview afterward. “We’ve always talked about taking the Mustang outside the United States. In Europe, it makes a good business case because so many people want it.”

Ford rose 2.3 percent to $10.14 in New York, the highest closing price in more than two months.

The business case for selling SUVs is just as compelling as the Mustang, Mulally said. Ford expects the market for SUVs in Europe to double by 2017 and the Dearborn, Michigan-based automaker expects to sell more than 1 million of the models in the region over the next six years.

Photographer: Jock Fistick/Bloomberg

Ford Motor Co. Chief Executive Officer Alan Mulally said the stigma of SUVs as monsters of the motorway is going away because Ford is bringing smaller, leaner models to Europe. Close

Ford Motor Co. Chief Executive Officer Alan Mulally said the stigma of SUVs as monsters... Read More

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Photographer: Jock Fistick/Bloomberg

Ford Motor Co. Chief Executive Officer Alan Mulally said the stigma of SUVs as monsters of the motorway is going away because Ford is bringing smaller, leaner models to Europe.

“I don’t see an Edge-sized vehicle or a Mustang as being particularly high volume products in Europe.” said Ed Kim, an analyst for industry forecaster AutoPacific Inc. in Tustin, California.

Stigma Outdated

Mulally said the stigma of SUVs as monsters of the motorway is going away because Ford is bringing smaller, leaner models to Europe. It’s adding the subcompact EcoSport SUV, just four meters (13 feet, 1 inch) long, and the Edge midsized utility to its European lineup, which already includes the Kuga compact, known in the U.S. as the Escape.

“Now an SUV is seen as big and gas-guzzling,” Mulally said. “But these are wonderful fuel-efficient smaller vehicles with all this versatility.”

European attitudes began changing after Toyota Motor Corp. (7203) introduced the compact RAV4 and Honda Motor Co. debuted the CR-V small SUV in the last decade, said Jim Farley, Ford’s global marketing chief and a former Toyota sales executive. Those models, along with the Kuga and Volkswagen AG (VOW)’s compact Tiguan, made it socially acceptable for Europeans to drive an SUV.

“There wasn’t as much guilt about owning those,” Farley said in an interview.

Segment Growing

SUVs are gaining share in Europe’s collapsing auto market, Farley said. Auto sales are falling to a 17-year low in the region as a sovereign-debt crisis saps consumer confidence. The only growing auto segments are luxury cars and sport-utility vehicles, which both sell for premium prices, he said.

“The people who are left in the market are rich people,” Farley said. “They tend to buy the newer models or the very nice cars. That’s why in Europe you’ll see the luxury manufacturers are still doing OK.”

Ford is no longer in the luxury-car business in Europe, having sold its Jaguar, Aston Martin, Land Rover and Volvo brands over the last five years. So it’s playing to its historic strength in SUVs, which it helped pioneer in the 1990s with the Explorer, among the first of the breed and a top seller.

“Explorer changed the world,” Mulally said. “We own that space, right? Everybody knows that we understand SUVs.”

Mustang Muscle

Ford also pioneered pony cars with the introduction of the Mustang in 1964, and it appeared in Switzerland in that year’s James Bond movie “Goldfinger.” Such models, though, never seemed a good fit in Europe, where gasoline prices can top $10 a gallon.

Ford now offers a version of the Mustang with a 6-cylinder engine that gets 31 miles (50 kilometers) per gallon on the highway, while still generating 305 horsepower. It also offers the $42,200 Mustang Boss 302 that gets 15 mpg in the city from its brutish 444-horsepower V8.

“It’s an open secret that the next-generation Mustang will include an EcoBoost engine and that would certainly enhance the appeal in Europe,” said Kim, the analyst, referring to the automaker’s direct-injected, turbocharged engines that reduce fuel consumption by as much as 20 percent while adding power.

Mulally is mum on which Mustang he’ll bring to Europe and exactly when it will show up. What he is clear about is his conviction that Europeans are eager for some American muscle.

“The Mustang has been wanted everywhere around the world,” he said. “It’s iconic, everybody knows about it.”

To contact the reporter on this story: Keith Naughton in Amsterdam at knaughton3@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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