Lack of new launches leaves Ford playing
catchup with GM
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[May 25, 2017]
By Paul Lienert
DETROIT (Reuters) - James Hackett spent the
last year plotting Ford Motor Co's long-term self-driving car strategy.
In his first week as chief executive, he has more immediate concerns:
stopping a skid in North American sales and fending off a market share
grab by resurgent archrival General Motors Co.
The U.S. No. 2 automaker is stuck in a product drought that shows no
signs of easing until 2019, according to two sources who track Detroit's
launch plans. Given the auto industry's long product cycles, it is not
clear what Hackett can do immediately to get Ford out of its
predicament, which can be traced back to decisions by former CEOs.
Hackett was tapped to run the company's autonomous car and ride-sharing
unit a year ago. On Monday he unexpectedly found himself at the helm of
the whole company as Ford axed CEO Mark Fields.
He now has to face up to a void of new vehicles, partly caused by former
CEO Alan Mulally, who focused much of the company's resources on an
expensive 2014 redesign of Ford's crown jewel, the F-Series pickup.
That safeguarded America's longtime best-selling vehicle, but it
prevented Ford from developing other hits. Given that it typically takes
three to four years for a new or redesigned vehicle to get into
production, the full effect of Mulally's narrow focus is now being felt.
Mulally also gambled heavily on making an expensive shift to aluminum
from steel to lighten up trucks and make them more fuel efficient, a bet
that looks questionable in retrospect, as gas prices have remained far
lower than anyone expected.
If Fields had immediately started pulling forward product launches when
he took over from Mulally in July 2014, the first of those would likely
reach the market in the autumn of 2018 at the earliest. As it is, Ford
must wait until early 2019 for its first big slug of new models to hit
There is not much Hackett can do about that. Any product moves he makes
today would not likely show up in the market before 2021.
"Ford needs to move faster," said RBC auto analyst Joseph Spak.
Hackett, only three days into his new job, has not yet laid out his
plans for Ford publicly.
Ford spokesman Michael Levine side-stepped questions of a short-term
product drought. "We're bullish on our strong pipeline of all-new cars,
trucks and SUVs coming in the next five years," he told Reuters. "What's
more, the vehicles that we are launching ... will continue to deliver
high transaction prices and good business."
For a graphic on Ford and GM spending, click
PROFIT PER VEHICLE
For much of the past decade, Ford has benefited from management and
marketing problems at GM, including GM's 2009 bankruptcy and a safety
scandal that hobbled the company in 2014.
Now, however, Ford confronts a crosstown rival largely free of debt and
focused on grabbing market share from Ford, particularly in the truck
and SUV segments which account for most of both companies' profits.
GM, the No. 1 U.S. automaker, is in the midst of a prolific four-year
patch of new vehicle launches, many approved by Mary Barra, the
company's former head of global product development who was named CEO in
In hindsight, GM benefited from its bankruptcy, as it emerged
essentially debt-free and able to spend more on new products. Ford did
not seek bankruptcy during last decade's auto industry crisis, and
instead borrowed heavily to survive it, leaving it short on cash to
invest in new vehicles.
[to top of second column]
Newly named Ford Motor Company president and CEO James Hackett
answers questions from the media during a press conference at Ford
Motor World Headquarters in Dearborn, Michigan, U.S., May 22, 2017.
That result of that disparity is now becoming evident. A Reuters
analysis shows that over the past two years GM has surpassed Ford in
pretax profit per vehicle in North America. In 2016, Ford made
$2,981 (2,296 pounds) per vehicle, calculated by dividing pretax
earnings by the number of vehicles sold, compared with $3,044 for
GM. And GM plans to solidify that lead by rolling out a volley of
new models aimed at the heart of Ford's lineup.
GM has invested billions of dollars over the past three years to
overhaul many of its best-selling truck and SUV models, including
the full-size Chevrolet Suburban and Cadillac Escalade SUVs that
dominate their sector and typically boast pretax margins of $20,000
GM also has boosted its share of the U.S. truck market with the 2014
launch of the mid-size Chevrolet Colorado and GMC Canyon pickups.
Ford's rival to the Colorado - an all-new Ranger pickup - is not
expected to debut until early 2019.
Over the past five years, both companies have spent roughly the same
- about 8 percent to 10 percent of revenue - on capital equipment,
engineering, and research and development, Reuters analysis shows.
But GM has brought far more new and redesigned vehicles to market in
the United States in the past three years.
"GM seems to be getting more for its money and realizing the results
sooner," said Joe Langley, an analyst with IHS Markit.
To see a comparison of Ford and GM's expected new and redesigned
vehicles over the next four years, click on
Earlier this month, Ford's U.S. sales and marketing chief Mark
LaNeve acknowledged the company had missed an opportunity by "not
participating in" the mid-size truck and compact crossover segments
where GM is well positioned.
Ford also has lagged in redesigning its eight-year-old Expedition
and Navigator SUVs, which go up against GM's Suburban and Escalade,
and finally will be overhauled this fall.
One of the biggest challenges for Ford will come next year, when its
market-leading F-150 truck will be challenged by GM's redesigned
Chevrolet Silverado and GMC Sierra pickups.
A year after that, GM is expected to launch new heavy-duty editions
of the Silverado and Sierra to challenge Ford's F-Series Super Duty,
which is one of the industry's most profitable vehicles.
Altogether, GM plans five launches in 2018 and eight in 2019,
according to industry sources familiar with the company's plans. In
comparison, Ford expects to unveil only two redesigned vehicles in
2018 and will only reach some kind of parity with six launches in
(Reporting by Paul Lienert; Editing by Joe White and Bill Rigby)
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