Losing Market Share, Ford Overhauls

If only turning around a car company were as easy as turning around a car - or an airline manufacturer.

The new chief executive of the Ford Motor Co., in his most recent role, successfully guided aerospace giant Boeing through a wrenching downturn as the 9/11 terrorist attacks reduced demand for air travel.

At Boeing, Alan Mulally gained experience dealing with union labor, a global supply chain, and building products that contain everything from sheet metal to complex electronics.

Those are skills that Ford desperately needs. The No. 2 US automaker confronts declining market share, mounting losses, and a major shift in consumer preferences toward fuel-efficient cars.

But some of Ford's biggest challenges are ones that Mr. Mulally never faced at Boeing.

Where commercial aviation is dominated by two companies, the auto industry has become a tangle of global rivals - with Chinese automakers now scrambling to become exporters alongside those from Japan, Germany, and South Korea.

Where Boeing and Airbus sell their planes to dozens of airlines, success in the auto industry depends on catering to millions of consumers.

"Boeing is not that much like General Motors" or Ford, says Peter Morici, a University of Maryland economist. Carmakers "produce a complex consumer good that has to be mass-marketed and has substantial branding issues."

The fierce competition puts pressure on Mulally, even though he's an outsider, to move quickly.

The challenge is twofold, analysts say: to cut costs and to rev up the pace of new products that can provide future revenues.

Perhaps you can provide some enlightenment on this topic (or maybe not, considering a NDA) - but my understanding was that parts were scrounged during prototyping while the internally designed system was still being developed (like Toyota with the Prius, it took awhile at Ford to get the thing to even start properly...) but that those were place to allow testing and prototyping, but replaced for production models. I could be wrong - but I've seen absolutely freakish blends of different vehicles slapped together just to get prototypes out on the road for testing of components.

From fastcompany.com's article (From: Issue 87 | October 2004 | Page 106 | By: Chuck Salter):

"Ford could have done things more simply. It might, for example, have bought part of Toyota's hybrid system, as Nissan has done. But in November 2002, less than two years from the scheduled start of production, Martens decided to develop the technology in-house. The only Toyota patents that it licensed, he says, were to avoid patent infringement. "That was a defining moment," he says. "It took away the safety net.""

The data collection systems used CAN bus connected sensors to collect 6 full CDROMs of data per car per day. A RIM modem was installed to get high priority alerts. We detected the left rear brake assembly on fire while the car was traversing a stretch of road in New Mexico. We called the test driver on his cell phone and directed him to use the fire extinguisher to put the fire out.

The database was almost 2.5 billion rows at the end of the study. The Ford engineers had total access to mine the database and draw their own conclusions. I can't disclose the results, but it caused a fundamental change in direction in their program.

An article here says it is a Ford/Volvo/Aisin AW collaborative effort. The vehicle we instrumented was a 100% Ford effort.

Thanks for the article...

For those uninformed, Aisin AW is a branch of Aisin Seiki, which is controlled by Toyota. It was formed as a joint venture of Aisin Seiki and Borg Warner (long time supplier to the Big 3 as well as others). Think of Aisin somewhat like Delphi is to GM or Visteon is to Ford. Aisin, Visteon, and Delphi all now get business from outside their originial owners. In fact, the 6 speed automatic used on V-6 equipped Ford Fusions is an Aisin AW product. It isn't the same 6 speed automatic transmission as used on the V-6 equipped Toyota Camry, though.

Which brings up a question (not to cast doubt on you, Myrddin, as you do appear to have some inside knowledge), but just because a product with the same goal is produced by the same supplier, can it be considered the same product? By using Aisin, do we consider Ford's design to be "bought" and not developed (Ford does use the Aisin T-030/T-031 transmission for the Hybrid Escape, for example)?

Do we say Toyota couldn't build a passive anti-theft system and thus had to turn to Ford by buying from Visteon? Or interior/exterior electronics and fuel systems? Or Honda couldn't build an instrument panel, so they had to turn to Visteon?

In the confusing world of joint ventures, spinoffs, etc of the modern automotive business, it is difficult to draw lines. Buying from a common supplier is not necessarily the same as buying a system....

Well, you're one of the few that didn't hear that complaint from what I hear all the time. When I tell people I have a Taurus, they tell me to get ready for its transmission to fail or for its head gasket to blow. Only when I explain design changes to them do they realize that their view might have been dated.

Did you look at the Fusion when you got the Accord? The Fusion really is the replacement for the Taurus - the Focus replaced the Escort. They really were repositioning the entire product line recently. It had been Escort/Contour/Taurus/Crown Vic. But the Crown Vic had a shrinking market, and Ford had no large sedan to compete against the likes of the Avalon. That is really where the 500 comes in. Its not quite as posh as an Avalon, but it is ever so slightly larger, gets equivalent gas mileage, and is cheaper. The Focus came in as an Escort/Contour replacement - trying to hit the same market as the Corolla. The Taurus had been larger than the Camry, and the Fusion really is trying to hit the Camry/Accord market in terms of size.

I think the resulting cars are better fits in terms of competition for the Corolla/Camry/Avalon than the old, regardless of name. I have no doubts that the Fusion is a much superior offering in competition than the Taurus was. I don't think changing the name was a bad idea, although they may have been able to rescue the Taurus name.

What I think was a bad idea has been their horrible marketing since. I still know people at work who don't even know there IS a car called the Ford Fusion. That's pathetic.

I saw the same press release. I bought Fords (25% more problems than Toyota) and my wife bought Chevys (36% more problems than Toyota). I can’t afford Cadillacs (9% fewer problems than Toyota), Buicks don’t appeal to me (15% fewer problems than Toyota), and Mercury (16% fewer problems than Toyota) had a good year. I did not write that styling did not matter – I wrote it was less important.

Maybe you can explain how Toyota can produce automobiles in the United States, giving Americans a decent middle-income living, and have fewer problems on a nameplate basis than anybody else producing cars here. And don’t use Lexus as the reason – it all counts, and Lincoln and Cadillac were in production for what, 75 or so years, before Lexus came along.

I’m sorry, but your experience with Fords and Toyotas is radically different than mine, and most everybody I know personally, and flies in the face of the data. Reread my post. I vigorously defended the domestics for 31 years until I finally got tired of failures I never saw in others’ Toyotas. I can’t buy based on promises forever.

Ok... I'll try... :)

First, it appears that you are writing off Mercury to just "having a good year". However, I would like to note that in 2005, Mercury beat out Honda and Acura, and finished just 1 point (194 to 195) behind Toyota. Lincoln finished higher yet, at 3rd place. In 2004, Mercury finished just behind Honda (209), Acura (212) and Toyota (216) at 224 pph. 2003 was similar, with a larger gap, Mercury finishing just behind Honda but 22 pph back. I would hardly call it "just a good year".

One other thing to note - there is a measurement of error in these readings. Any make can actually be higher or lower. All surveys have these problems. Let's take a quick look at the JD Power results. 2006 measured 2003 model year vehicles. That meant the Grand Marquis, Mountaineer, Marauder, and Sable for Mercury. Therefore, the difference between Mercury and Ford would have to be limited to lower dependability in the Econoline, Escape, Escort, Excursion, Expedition, F-150, F-250/350, Focus, Mustang, Ranger, Thunderbird, and Windstar. Well, you wouldn't think it was the Mustang, Thunderbird, F-150, F-250/350, or Ranger, all of which finished in the top 3 in their segments. You can eliminate the Escort, too, since it wasn't available for public sale and wouldn't have been measured by JD Power. That leaves the Econoline, Excursion, Expedition, Focus, and Windstar as the culprits.

But then Consumer Reports said they measured the 2003 Focus as the most reliable vehicle Ford made that year.

But wait... that leaces just the Econoline, Excursion, Expedition, and Windstar. The Excursion and Expedition could be worse than the F-150 and F-250, but THAT much worse? Remember, the more vehicles eliminated as culprits, the lower their dependability has to be. These vehicles didn't even make up that large of an overall chunk of Ford's sales.

The only other explanation is that certain markets, like trucks in general, are much less dependable to begin with. That way you could still finish at the top of the segment but end up dragging down the numbers.

So what do we actually know? Well, based on the measurements given, Mercury, Buick, and Cadillac *appear* to be more dependable than any Japanese make other than Lexus. We also know that there is a significant standard deviation in measurements. In other words, you most likely can't state with statistical certainty whether or not Mercury is above Toyota, or the other way around. You also can't state with certainty that Toyota is above Ford based on this data alone.

So what the heck do we know? We can't conclude with certainty that there is a large difference. What does that mean? Its basically a null hypothesis problem now, and given a large enough sample size, we can state with certainty that there is not a large difference between these brands. You have to look at brands with larger differences to find significance (ie, if you compare Saturn or VW to Lexus or Mercury).

So what should the consumer do? Check out the specific model for common problems (msnautos.com or partsamerica.com) and repair costs is one suggestion I would have. See if there are significant problems on the models you're considering (ie, intake manifold gaskets on GM 3.4L, automatic transmissions on Accords, Civics, and Odysseys, etc). Then just buy whatever the heck you want to. The odds of there being any significant difference in reliability is small if you avoid the worst problems out there.....

Going by JD Power's data, the AVERAGE vehicle built in 2003 was on par with Honda of 2000/2001.

As for my experience, it doesn't really fly in the face of any data when you consider the amount of error in the data, and the fact that there are quite a few domestic nameplates and models that finish at the top of their pack.

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