Aug 30, 2012
If one has ever had any experience with the I Ching, the foundational book of Confucianism, one will know that perseverance is imagined as crossing the great stream. For Ford (NYSE:$F) this has been their path for the past 4 years after the financial crisis of 2008 finally broke the backs of the unsustainable business models of the big 3 U.S. car manufacturers. They have persevered through a complete restructuring of their business around the idea of One Ford, ensuring that product lines the world over share common components; streamlining and improving the versatility of their production facilities to meet new markets.
In our last profile of Ford the focus was on this need to play catch up with the Japanese and now Korean automakers that have proven themselves, even in the face of crushing adversity, to be nimble and resilient to changing demands while at the same time creating new markets with innovative vehicles, a la the Toyota (NYSE:$TM) Prius and Nissan Leaf. Regardless of what you might think of these technologies Toyota proved that a well-designed (and marketed) hybrid was a profitable venture, especially in the age of $100+ per barrel Brent Crude (AMEX:$BNO).
So nimble is Toyota that less than 1 year after Fukishima and flooding in Thailand they were back to producing and selling more cars than anyone else in the world, including GM(NYSE:$GM) whose sales are so very dependent on government and rental fleets. Make no mistake, sitting in a Toyota, while not the same experience it was 10 years ago, is still far better than sitting in an equivalent GM, no matter how hard the American press tries to tell people otherwise. The proof is in the sales figures. Toyota still has brand cache that GM will likely never retrieve, which is why GM is furiously looking to virgin territory to hawk their inferior cars.
Ford, on the other hand, is in a much different position and while they are still a commodity-level brand in much of the world, especially Europe, their cars and trucks of recent years have been very well-received, especially their improved chassis and EcoBoost line of engines. Ford’s karma is far better than GM’s and so are their vehicles. While the branding on these engines may be pure marketing department pandering their performance is anything but and it’s putting pressure on Toyota, especially in truck sales.
The difference in gas mileage between a smaller Toyota Tacoma and a Ford F-150 is much smaller than it was 10 years ago. As the truck has become a lower cost form of family hauler, the small truck segment has crashed in volume by a factor of 4.
This is part of the reason why Ford is resisting the urge to bring the new Ranger to the U.S. It may be a mistake. The new Rangers with their twin-turbo diesel engines are capable of more than 40 mpg. But because they would confuse car buyers in the U.S. (read: cannibalize F-150 sales) and Ford is trying to keep costs low, a slam-dunk million plus seller will not be available in the U.S.
Moreover, they were built to handle the flooding in tropical Southeast Asia. Talk about crossing the great stream.
And this is borne out in their sales in Southeast Asia. Ford has a long way to go to unseat the venerable Hilux from Toyota and the D-Max from Izuzu (which is a rebadged Chevy Colorado now), but the latest sales figures are showing a ton of promise, with 20+% year over year growth. Markets like Thailand (AMEX:$THD), especially, as well as Malaysia are important for Ford to be competitive in as the pickup truck is the dominant breed of auto sold. Per capita, no one buys more pickup trucks than Thais do, not even Americans. In a little more than a year Ford has sold more than 25,000 Rangers in Thailand, a market they had no real presence in before the re-design.
Ford’s guidance for the second half of 2012 was muted overall. Their business in Europe is at real risk because of their low status where #3 automaker Volkswagen (NYSE:$VW) saw sales shrink just 1.5% this year in a European market down nearly 7%. Ford faces a number of challenges yet. While they have made great progress the stream has not been fully crossed. Between a huge shortfall in pension funds and low growth in Europe and South America not to mention the possibility of an implosion of the U.S. economy it will be a while before Ford is worth a serious look, no matter how good their cars have become.