Ford CEO: Luxury market has room for Lincoln

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Associated Press

Posted on January 13, 2013 at 3:01 AM

Updated Sunday, Jan 13 at 11:02 AM

DEARBORN, Mich. (AP) — Ford thinks the luxury car market is missing something.

Luxury buyers sobered up during the recession, the company reckons, and they now find German brands to pricey, Cadillac too showy and Japanese brands too boring. Ford hopes its Lincoln brand will fill a hole: premium but moderately-priced, elegant but not ostentatious, sporty but smooth.

"There's a whole market that's not served," Ford CEO Alan Mulally told The Associated Press in a recent interview. "I was just driving a $98,000 (competitor's) car yesterday. A $98,000 car. Well, we're not going after them."

Lincoln is in the midst of a revamp that will see four new models over the next four years. The first, the MKZ midsize sedan, arrived in showrooms in December. It starts at just under $36,000 — a little less than its closest competitor, the Lexus ES — but offers some premium features the Lexus doesn't, like a panoramic glass roof.

Lincoln will give a glimpse of its next product at the Detroit auto show this week. The MKC small SUV is critical, since it will compete in the fastest-growing segment in the luxury industry. Sales of other small luxury SUVs, like the BMW X3 and the Acura RDX, saw big jumps last year as younger buyers entered the market and older buyers traded down from larger SUVs.

The MKC concept hints at what will hit showrooms by the end of this year. It shares the MKZ's panoramic roof and spare, highly sculpted lines. But it has a more dramatic grille thanks to the use of two shades of metal and a trunk that's cut to allow one long, thin, uninterrupted taillight on the rear. There are touches like shiny wood flecked with silver flakes and Lincoln logos stitched into the seats and floor mats.

Ford wants to keep Lincoln in the public eye this year, starting with the brand's first Super Bowl ad. In early spring, Lincoln dealers will start offering date nights to prospective customers, letting them borrow an MKZ and treating them to dinner.

Mulally and Jim Farley, a former top Lexus executive who now leads the Lincoln brand, sat down with The Associated Press recently to talk about Lincoln. Below are excerpts, edited for length:

AP: Lincoln dealers say they love the new vehicles but need them to get to the showrooms more quickly. Do you need to move faster to turn Lincoln around?

Mulally: We are going as fast as we can. I know that sounds maybe too easy, but this is a company that turned the corner and now is growing. We're going up in production, all those new launches and all that product development. And it's a real balance to deliver those vehicles. I think we think we'd like to go faster, but the most important thing is to deliver on this brand promise that we've made.

Farley: I think building a world class premium brand, especially a brand like Lincoln where our vision is to serve all the customers, you have to be very thoughtful about the kind of products, when they come out and how you build in the capability at the dealership level. And that takes time. I remember how anxious everyone was for the (Ford) Fiesta to launch, and we said, "We need a little time to get ready for this launch." Our dealers weren't used to dealing with Honda trade-ins. We didn't know how to sell a small car. We were selling Expeditions and Explorers. They didn't know how to quote used-car prices for a Civic or a Fit. If you want to be truly a luxury brand that competes and differentiates in the U.S. market, with the kind of competition out there and the kind of expectations, customers have, to get the plumbing and the wiring and the software and the people side of the dealership takes time. It takes time for us to consolidate the dealer network. Our team, and Alan, always really made sure that when we did things that we had real proof. The Lincoln dealers, for many decades, were told many things. And this is a team that believes deeply that when we say something, we're going to do it.

Mulally: We helped our reputation and our credibility because of what we did with Ford. We couldn't have done this without Ford. They know that we're serious about it. We know how to do it.

AP: How long will Lincoln's turnaround take? When will you start making a dent in the Germans' dominance of the luxury market?

Farley: We had the benefit of seeing how the luxury industry changed after the recession, because we were imagining and executing all these products right after that. And what we found in the recession was a fundamental reset button on price points, on expectations, on why people buy a luxury car — to treat themselves rather than to show off. We are seeing that play out right now. Like for example, when I was with another brand, more than 25 percent of our sales were with a high-end, rear-wheel-drive sedan. Today, that vehicle's less than 10 percent of their sales. The recession fundamentally changed the sales.

Mulally: It's just a huge change in the number of people who want premium but they want affordable premium. That's the answer to your question, because you've got these guys up here (holds hand up high) and you've got these huge numbers in between.

Farley: And on the time side, we think of it kind of like "Get Smart," where you're walking through all those doors. The first step of the journey requires the transformation of the lineup, all new products, completely differentiated, exclusive drivetrain and exclusive dealership facilities and people who are only selling Lincolns. And until you do those, you really aren't starting the journey to being a really premium player. We are totally focused on that first step. I don't know how many doors — opportunities — we have. Our sights are not to be the biggest, to sell 200,000 to 300,000 units. That's not our goal. Our goal is to take the solid footing we have from Lincoln and now start that march toward a really premium brand.

Mulally: We're not in a hurry. The dealers are in place. We make a reasonable return on the Lincoln vehicles. It's not like anybody's panicking.

AP: Ford recalled the Escape four times after it went on sale for various safety issues. The Lincoln launches will have to be flawless. How do you ensure that?

Mulally: I would say that your comment is absolutely right. It has to be, across Ford and Lincoln. Ford is so excited on one hand. You know how many years these companies have been declining. We've turned that corner. We were the first ones to turn it. We're growing now. The growth is spectacular, here and around the world. So now we're turning the corner, adding production, adding third shifts, second shifts, and last June we weren't able to keep up with the demand. And then we have all these launches, because we made a commitment that we are going to have the best-in-class quality, fuel efficiency and safety. So every time we don't, then we're going to stop just like we did. We'll come pick them up, we'll do whatever it takes. We'll get it right for you right away. I think the most important thing is our commitment to quality. But it's an exhilarating time.

AP: You just changed Lincoln's name to the Lincoln Motor Co. and began a new ad campaign. What impact are you seeing?

Farley: More important to me than how is it affecting demand for Lincoln vehicles is that more and more people are talking about Lincoln. We're getting more online discussion. A lot more people are saying, "Lincoln. What is that? Who are they? What are they doing?" That is good. That was very much part of the initiative of the Lincoln Motor Co. When I talk to Gucci and Burberry, brands that were very big in the '70s and then recommitted themselves, they all said the same thing to me: "Jim, make sure that you start a conversation around Lincoln." And that's part of our expectation for the Super Bowl.

AP: There are a lot of naysayers out there, including GM's CEO Dan Akerson, who have suggested Lincoln has fallen too far to be revived. What do you say to that?

Mulally: I just believe Jim's vision that he laid out, when we decided to focus on Ford and Lincoln, so we had a great volume brand for everybody and a premium brand. And then let each one do the talking. I wouldn't go out and bad mouth things. Let each of them do their thing and tell everybody that this is the brand promise. You can't get in that car (hybrid MKZ) and operate it and get out of it and not go, "Wow. That's a different experience." And there are people — there are a lot of people — who want that experience, they want that innovative technology and they want to access it. They don't want to pay $100,000. And Ford can do that. Ford can really do that.

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