As Ford Motor Co. (F) makes its boldest bid yet to lure younger buyers to its laggard Lincoln line, incoming Chief Executive Officer Mark Fields has a chance to show he has the turnaround touch of predecessor Alan Mulally.
Lincoln, with U.S. sales down 65 percent from a 1990 peak, is such a big money loser for Ford that Mulally suggested killing it last year, according to two people familiar with the internal discussions. Chief Operating Officer Fields, set to become CEO tomorrow when Mulally retires, convinced his boss that Lincoln was worth saving, to give Ford buyers a luxury brand to move up to when they’re ready to spend more, said the people, who asked not to be identified because the discussions were private.
Now Lincoln, known mostly for Town Cars ferrying business travelers to the airport, is going after young strivers with the MKC, a small sport-utility starting at $33,995, the lowest price among compact luxury SUVs. And Fields -- who has upscale experience from managing the European luxury lines Ford sold -- can demonstrate whether he can make good on the promise he sees in Lincoln.
“Our team is so enthused about Mark becoming CEO,” Matt VanDyke, director of global Lincoln, said in an interview. “Mark really understands and has instilled in all of us the strategic importance of the luxury business. It’s a small part of industry sales relatively, 8 percent and growing, but the contribution to the overall bottom line is a much higher percentage.”
The new MKC, which is still being stocked in showrooms, won’t make a big dent in June U.S. auto sales results announced tomorrow. Total light-vehicle sales may slip 2.6 percent to 1.37 million for the month with one fewer weekend than a year earlier, according to the average of 10 analyst estimates compiled by Bloomberg. Adjusted for seasonal trends, the annualized selling rate may rise to 16.3 million, the average of 14 estimates, from 15.9 million a year earlier.
Sales for General Motors Co. and Ford are projected to decline, while Chrysler Group LLC and Nissan Motor Co. may report the biggest increases, the data show.
Ford financed its own restructuring and managed to avoid the bankruptcies and bailouts that befell GM and Chrysler Group in 2009. The second largest U.S. automaker revived the Ford brand with a focus on design and fuel economy, resulting in its most competitive models in a generation, such as the Fusion sedan, which commands higher prices than Toyota Motor Corp. (7203)’s Camry, the top selling car in America.
Lincoln, though, is nowhere near contributing to Ford’s bottom line. Lincoln languished for years as a chromed up version of everyday Ford models. The luxury line was robbed of resources over the last two decades while Ford invested in its Premier Automotive Group that included Jaguar, Aston Martin, Land Rover and Volvo, which Fields oversaw from 2002 to 2005.
“Ford starved Lincoln of unique products for a long, long time,” said Michelle Krebs, an analyst with researcher AutoTrader.com. “Rebuilding the Lincoln brand is a long road.”
After arriving from Boeing Co. in 2006, Mulally sold the European luxury brands to raise cash to help Ford survive the recession without resorting to bankruptcy. Then he invested $1 billion to overhaul the Lincoln lineup with models that look less like the Ford models from which they are derived.
First came the MKZ sedan, which got off to a fitful start last year, followed by the MKC now arriving in showrooms. Next year, Lincoln will roll out a redesigned MKX mid-sized SUV, to be followed by a replacement for its large MKS sedan.
Yet after the MKZ’s troubled debut last year, Mulally began to wonder out loud if Lincoln was worth the effort, said the people familiar with the situation. Fields and Jim Farley, head of Lincoln and Ford’s global marketing chief, convinced Mulally of Lincoln’s viability and came up with a plan to avoid future problems with new model introductions, the people said.
VanDyke denied that Mulally ever wavered in his support of Lincoln.
Mulally and Fields “have unique backgrounds and experiences and brought different perspectives,” VanDyke said. “But they’ve both been completely, completely in unison on the strategic importance of Lincoln to Ford Motor Co.”
Last year, quality problems at the Mexican plant that made the MKZ caused Ford to quarantine early models at a factory near Detroit to fix misaligned trim. As a result, the car arrived on dealer lots long after Ford had spent millions reintroducing the Lincoln brand and its comeback car in a splashy ad campaign that included spots on the 2013 Super Bowl.
“Mark was passionate about really understanding what happened last year on the MKZ and putting in place substantial, meaningful changes in our processes to ensure that we didn’t have the kind of product delays and holds we had last year,” VanDyke said.
Those changes included more personal oversight by Fields, Farley and Joe Hinrichs, Ford’s president of the Americas, VanDyke said. Now, the MKC rollout is “on plan,” VanDyke said.
Yet, the path back to pride and profits will be long. Lincoln’s U.S. sales have climbed 21 percent this year to 37,251 models, though that’s compared to last year’s first half when the brand’s sales fell to a 32-year low. Lincoln ranks eighth among luxury brands sold in the U.S. and it is outsold by nearly two-to-one by GM’s Cadillac luxury line. A year’s worth of Lincoln sales would not fill half a Ford factory.
“Getting people to pay attention to Lincoln -- which has always been associated with grandpa’s car -- is going to take a lot of clever advertising,” said Joe Phillippi, president of AutoTrends Consulting, who drove, and liked, the MKC in California this month. “They’re going to have to spend a lot of marketing money to impress upon people that this is different.”
The difference starts with the sheet metal. The MKC has a design that is 85 percent different from the Ford Escape SUV with which it shares a mechanical foundation, VanDyke said.
“This product was not, ‘Let’s start with an Escape and make some changes to it,’” VanDyke said.
The MKC is loaded with technology, including a feature that automatically parallel parks the car and pulls it out of the space without the driver touching the steering wheel. The interior and dashboard is wrapped in soft-touch leather that Ford said undergoes a 12-hour process to make it supple, six times longer than the standard softening technique.
It will also debut a new 2.3-liter turbocharged 4-cylinder EcoBoost engine that kicks out 285 horsepower. It’s mated to an all-wheel-drive transmission that Ford said gives the MKC better driving dynamics than its German and Japanese competitors. The engine also is rated to achieve 29 miles per gallon on the highway, better than the Audi Q5, BMW X3 and Acura RDX, Ford said.
While a similar engine will show up in Ford’s redesigned Mustang coming to showrooms later this year, such sharing will become more seldom in the future and Fields has promised that Lincoln will eventually receive exclusive features, technology and engines, VanDyke said.
“For luxury, exclusivity is key and that’s where we’re finding our way right now,” VanDyke said. “Lexus and Toyota do a great job of it. Audi and Volkswagen do a great job of it. I can tell you that we have to up our game on Lincoln.”
Ford widened and lowered the MKC compared with the Escape, which gives the car better handling in winding roads such as those near Santa Barbara, where Phillippi and automotive journalists drove the car this month.
“The car corners, drives and handles extremely well,” Phillippi said. “The car really does have a premium look and feel to it. It’s not just a badge-engineered Escape.”
Yet convincing BMW owners to ditch their X3 and X5 SUVs will be tall order for a brand as faded as Lincoln, Phillippi said.
“They’re fighting the propeller,” Phillippi said, referring to BMW’s logo that’s based on the propeller of an airplane. “And the propeller is hard to beat, it has a certain cachet.”
VanDyke said Lincoln hopes to attract buyers from Cadillac, Honda Motor Co. (7267) and its Acura brand, Toyota’s Lexus luxury line and from Ford buyers who want to move up.
“We’ll be able to attract younger, first-time buyers, either young couples or those with small families,” VanDyke said. “Equally, we’ll attract a number of empty nesters we see continuing to trade down from large and medium utilities.”
Lincoln may have its best shot with the MKC, which it is also introducing in China later this year, Krebs said. The small luxury SUV niche is among the fastest growing categories in the car business and this is Lincoln’s first foray into that territory.
“It’s another step in a very long journey, but this is a big step because the MKC is in a growing segment and they’re an early player,” Krebs said. “But it’s going to take a long time to convince people, especially younger people, that it’s OK to buy a Lincoln.”
To contact the editors responsible for this story: Jamie Butters at firstname.lastname@example.org Young-Sam Cho