Reaching your centenary should be a cause for celebration. But for US motor giant Ford, which reached the landmark this year, 2003 is proving to be a far from happy birthday.
Instead of popping champagne corks, Ford of Europe’s president and chief operating officer, Martin Leach, left the company last week, leaving a trail of speculation about his sudden departure. The company insists Leach “elected to leave to pursue new opportunities”, but the timing of his departure – a month after revealing heavy European losses – perhaps sheds some light on the reason for his exit.
Although Ford has seen its global pre-tax profits fall by $282m (&£177m) year on year for the second quarter of 2003, to $718m (&£452m), the performance of Ford Europe has been even more horrific. It posted a $525m (&£330m) pre-tax loss, compared with an $18m (&£11.3m) deficit a year earlier. In the same period, global revenues declined to $40.7bn (&£25.6bn) from $42.2bn (&£26.6bn) for the same period in 2002, although in Europe they rose by six per cent to $5.2bn (&£3.3bn).
Ford’s problems run deep, according to Professor Garel Rhys, director of the Institute of Automotive Research at Cardiff University Business School. “Ford’s current state is a catastrophe and it matters little whether Leach jumped or was pushed,” he says. “The company has been in long-term decline since the early Nineties and its brand value and status have slowly eroded.”
Ford has been trying desperately to get back on track, with a revival strategy that has seen the launch of a new array of cars – 35 new products since 2000 – which many say is its strongest line-up for some time.
But Rhys believes this is not enough and says that Ford needs a radical rethink if its strategy is to lead to a recovery. He says: “People bought Fords in the past because they offered quality low-cost motoring. This is no longer enough: every other car manufacturer has become stronger and can offer this too.”
In an effort to strengthen its position in the UK, Ford has appointed John Hitcham to the new position of director of strategy (MW last week). His role will be to develop the company’s future marketing and distribution direction, complementing the work of Ford of Britain marketing director Peter Fleet.
Although Ford is the market leader in the UK, Hitcham is faced with a falling market share, which has slipped from 21 per cent in 2001 to 20.3 per cent in 2002 and stands at 16.7 per cent so far for 2003.
Across Europe, where the Ford group lags behind Volkswagen and Peugeot, Ford’s market share has fallen from 11.5 per cent in January to July last year to 11.3 per cent for the same period this year, according to the Society of Motor Manufacturers and Traders.
Ford can, of course, blame wider market problems for its troubled state. Conditions in the European car market are becoming ever tougher as competition increases on style, quality and price. Falling demand is a problem for all as is the strength of the euro against the dollar and the pound. Indeed, Ford is not the only car manufacturer to have fallen upon hard times: Fiat remains Europe’s weakest major manufacturer.
But, as already mentioned by Rhys, there are problems with the status of the Ford brand and its failure to keep up with the growing aspirations of today’s car buyers.
UK sales of Ford’s Focus have suffered as premium brands have launched models priced below &£20,000 – such as BMW’s 3-series and the Audi A4 – to target aspirational drivers.
“Premium brands such as BMW, Audi and Mercedes have all moved into the smaller car market and are cutting into Ford’s market share,” says one advertising agency source. “Ford is an outdated brand in the context of where the market is heading.”
However, this is not a problem solely for Ford. The launch of more affordable ranges from the premium brands will also have affected Volkswagen and Peugeot. Where Ford in particular has fallen behind is in its innovation.
Few would criticise the engineering or quality of the many cars that Ford has launched as part of its revival strategy, yet the vehicles have failed significantly to boost consumer demand for the brand.
This year’s major model launches are small multi-purpose vehicles, the Fusion and the Focus C-Max. But DRI Automotive research manager Vik Barodia says: “The Fusion and C-Max are too late on the scene, behind the Renault Scenic and Vauxhall Zafira. Ford has struggled to keep up with niche markets and has entered too late when there is little premium left to take.”
Critics will say that not only has Ford been slow to exploit new markets, but it has failed to adopt a consistent marketing strategy for products such as the Ford Fusion.
One industry observer says: “The campaign began by focusing on the advantages of a higher seating position, but it has now shifted to ‘The small car that commands respect’.”
An agency source claims that the brand fails to stand for anything: “The advertising slogan ‘Designed for living: engineered to last’ shows that Ford is not turned on to the consumer mindset. Ford does not stand for much at all at the moment.”
Perhaps some of this perceived incoherence is a reflection of Ford’s relationship with its marketing suppliers, which became unsettled earlier this year. Ford began an internal investigation in March over whether its chief operating officer Sir Nick Scheele infringed company outsourcing policies by ordering all of Ford’s marketing and advertising business to be directed to WPP Group.
But with the issue seemingly resolved, Ford’s European advertising agency, WPP-owned Ogilvy & Mather, has hired creative talent James Sinclair from Lowe to reinvigorate the work on its &£95m Ford account.
If Ford is to have more cause for celebration come its next major anniversary, it will need to rediscover the art of innovation, both in terms of product and marketing.