U.S.Ford loves its big, V-8 cash cows
By Earle Eldridge / USA TODAY
Contributing: David Kiley
There is nothing like loyal, non-demanding, cash-paying, repeat buyers to earn a company big money.
And that's what Ford Motor Co. has with buyers of Ford Crown Victoria and its twin, Mercury Grand Marquis.
Throw in no competition, and watch the dollars roll in like a snowstorm.
The Crown Vic and Grand Marquis show how an automaker can make money on a low-volume, niche vehicle with a loyal following. Ford sells about 165,000 Grand Marquis and Crown Vics a year, much less than the 413,000 Camrys that Toyota sold last year.
But Ford earns $7,000 to $10,000 on each Crown Vic and Grand Marquis, which sell for about $23,000, according to estimates from Wall Street analysts. Not bad for a car that hasn't had a substantial redesign in over a decade. Ford officials won't disclose earnings for the models but acknowledge they are very profitable.
Anything above $7,000 would make the Crown Vic and Grand Marquis among the most profitable vehicles sold and close to the estimated $10,000 or more some automakers earn on their biggest earners, full-size trucks and sport-utility vehicles.
"This is a huge profit center for Ford," says Tom Libby, director of industry analysis with the Power Information Network, an affiliate of J.D. Power and Associates.
Ford earns big money on the cars because it's the only automaker selling a non-luxury, full-size, six-passenger, rear-wheel-drive car with a V-8 engine. It's the kind of car that best describes Detroit's heyday 30 or 40 years ago.
The Crown Vic is the car of choice for police, taxi and government fleets. That's where it gets about 80% of its sales. In fact, Ford is considering selling it only to fleet buyers.
The Grand Marquis is the car of choice for drivers over age 65, who tend to pay cash and don't demand the latest gadgets or upgrades. Grand Marquis has the oldest average age of buyers of any model, according to the Power Information Network.
Ford also makes big money on the models because expensive start-up costs to develop them and configure a plant to build them were spent in the early 1970s. Ford long ago got a return on that investment.
The base — or platform as the industry calls it — was derived from the old Ford LTD of the 1970s.
In the '70s, most cars were designed as a body sitting on a frame. Today, Crown Vic and Grand Marquis are among the last cars that use body-on-frame design. Most automakers have switched to building a car as one total unit — or unibody — to reduce weight. But the body-on-frame design gives a quieter ride because designers can isolate the interior from the rest of the car. That's popular with the older drivers who buy the Grand Marquis for its large size, quiet ride and uncomplicated design.
The models have been tweaked and significantly upgraded over the years. But the design remains recognizable. For 2004, the Grand Marquis gets a hood ornament, the first on the model since 1991, and an optional two-tone paint scheme.
Tom Estes, 55, of Corpus Christi, Texas, recently bought a 2003 Grand Marquis to replace his 2000 Grand Marquis. "It's full size, it has plenty of room, and it's got a great safety record," Estes says. "I'm from the old school. I like American products, and I like Ford."
Kevin Smith, editor-in-chief of Motor Trend magazine, says many seniors keep buying Grand Marquis because it's easy. "It's the path of least resistance. They don't have to do a lot of research. They can go to the same dealer, and there isn't going to be a lot of changes to complicate the car."
Beyond quiet and comfort, the body-on-frame design is great for heavy-duty service, which is why police departments favor the Crown Vic. With its bulk — it weighs over 4,000 pounds — and V-8 engine, it's great for pushing stranded cars off the road.
With no competition and little demand for change, Ford officials doubt they could justify spending hundreds of millions of dollars to redesign the cars.
"We have a refreshing to do in 2006," says Eric Ledieu, marketing manager for the Grand Marquis. But it will continue to have its body-on-frame design.
"Our customers like the reliability of the Grand Marquis and the consistency of the design," he says.
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My next Ford.....