Nov 4, 2008

Ford Sticks With Small Car Plans

Ford CEO Alan Mulally kicked this week off by saying that the Detroit carmaker will not veer from its previously stated strategy of bringing small, fuel-sipping cars to the marketplace.

Ford is betting that fuel prices will stay relatively high, and that consumers will continue to adopt small cars. The company might bring the Ford Ka to the United States, after its debut in Europe in 2009.

Mulally’s assertion comes during a dramatic decline on fuel prices which have re-energized sales of larger SUVs and trucks. Ford has been touting its 2009 F-150 pickup truck with an aggressive advertising campaign focused on Sunday NFL games. Mulally, however, believes that the drop in fuel cost is temporary. “Prices are going to stay relatively high,” Mulally said in Automotive News, “even though they’re down right now.”

Ford’s small car plan starts with bringing its European models, the Focus and Fiesta, to the US in late 2009. There has also been talk of bringing a redesigned, rebadged version of Ford’s microcar, the Ka, to the US marketplace. The Ka will hit the streets of Europe in the spring of 2009. “If it proves to be a success, the Ka could find itself on our shores by mid-2011,” a company spokesperson told Mulally did not confirm this move.

“It will be really interesting to see how far down we go in size.”

Alan Mulally
chief executive, Ford

The challenge for Mulally comes down to a question of dollars and cents. How can small cars be made to be more profitable? Most sub-compacts and microcars have profit margins of $2,500 to $3,500. By contrast, most SUVs can provide $8,000 or more in profit for the manufacturer. Mulally believes there should be a degree of balance throughout the brand. He said that small cars and larger ones should compliment one another.