Ford Slashed Ad Spending by $200 Million

Also Reported Record Quarterly Net Loss; Said 'Small-Car Offensive' Is in the Works

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DETROIT (AdAge.com) -- Ford Motor Co., which today reported a record global net loss of $8.7 billion in the second quarter, slashed spending on worldwide auto marketing in the period by $200 million to only $100 million.
Ford cited its unfavorable volume and mix of full-size pickups and traditional SUVs, along with negative net-pricing, as reasons for a pre-tax loss of $1.3 billion on its North American auto operations in the last period.
Ford cited its unfavorable volume and mix of full-size pickups and traditional SUVs, along with negative net-pricing, as reasons for a pre-tax loss of $1.3 billion on its North American auto operations in the last period.

To put in perspective that worldwide outlay, which includes advertising and sales promotion (but not incentives) for all Ford brands, consider that a single new-model launch in the U.S. alone routinely reaches as high as $100 million. Toyota Motor Sales USA, for example, spent that much to introduce its latest Tundra pickup last year.

But the economy continues to drag down Ford Motor, which posted a pre-tax loss of $1.3 billion on its North American auto operations in the last period, $1 billion worse than the same period in 2007. The automaker cited its unfavorable volume and mix of full-size pickups and traditional SUVs, along with negative net-pricing, as reasons for the loss.

Good news outside U.S.
Outside the U.S., the picture is brighter: Ford reported improved pre-tax profits for its European auto business of $572 million, up from $262 million a year ago; $388 million in South America vs. $255 million a year ago; and a $24 million gain for its Asia-Pacific-Africa region to $50 million.

"No one knew what the tipping point would be" for Americans to react to fluctuating gas prices, Ford President-CEO Alan Mulally said in a conference call with analysts today. After gas hit the near-$4-a-gallon mark a few months ago and Americans rapidly shifted to buying smaller vehicles, Ford "decided then to aggressively accelerate our transformation" by leveraging its global assets, he said.

Mark Fields, corporate exec VP and president of the Americas, said the automaker will start a "small-car offensive" by adding six small vehicles to North America from its European lineup starting in 2010. Ford will tap into its global capabilities with the European Ford Focus and Fiesta, which will be adjusted to meet U.S. federal requirements.

Mr. Fields said Ford will double its hybrid vehicle line from two to four models, plus double hybrid production in 2009. A new Mustang arrives here early next year. In December, Ford will start converting three large truck and SUV plants to make small cars: the Ford Fiesta in early 2010, a new Ford Focus that year, an undisclosed small car and a new Mercury small car. He said Ford is also upgrading or replacing nearly all its engines for better fuel efficiency in North America, which will be done by the end of 2010.

Global-sharing plan
By that date, Ford North America will have more than 40% of its models shared with Ford of Europe and 100% by 2013 compared to none today, Mr. Fields said. The automaker aims to have every new model for North America be best in class or "among the best in class" in fuel economy in its segment.

Ford's latest turnaround plan is based on its conclusion that the U.S. economy won't turn around until early 2010. Mr. Fields said Ford projects the full-size pickup market here will rebound, but not to the earlier levels. Ford will launch its next-generation F-150 pickup late this year, and Mr. Fields said the new model will have improved fuel economy of 7% over the outgoing model.

Mr. Mulally said Ford can realize profits on small cars using its new global-sharing plan, dubbed "One Ford," because a single model could account for 1 or 2 million units in annual sales worldwide. He said that kind of volume "is going to drive continuous improvement in quality and costs. It's a different business model."
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