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Ford expects luxury line to deliver profit by 2005

Automaker hopes models produce third of earnings
January 9, 2003


Ford Motor Co. executives said the automaker's luxury-vehicle division will meet a goal of increased profit by 2005, after U.S. sales for some of the brands declined last year, and Jaguar had a $500-million loss.

That effort "is absolutely on track," chief operating officer Nicholas Scheele said at the North American International Auto Show in Detroit. "That strategy was spot on."

Chief executive officer William Clay Ford Jr. counts on the Lincoln, Jaguar, Land Rover and Aston Martin luxury brands to produce a third of profit under his turnaround plan announced last year. The automaker is cutting jobs, closing plants and introducing new models to generate $7 billion in annual pretax earnings by 2005 after a $5.45-billion net loss in 2001.

Some analysts are skeptical after the luxury brands' setbacks last year. U.S. sales of Lincoln and Volvo, the largest sellers among them, both declined. Jaguar's loss was the result of a delay to ensure the quality of the new XJ sedan, which is debuting this year instead of late 2002.

Ford's luxury brands are "not close to delivering the kind of profit they expect," said David Cole, executive director of the Ann Arbor-based Center for Automotive Research.

The shares of the world's second-largest automaker have lost a fourth of their value since 2000, the year Ford bought Land Rover for $2.73 billion to expand its luxury lineup. The previous year, Ford spent $6.45 billion for Volvo's car business.

The automaker's Premier Automotive Group, which includes Volvo, Jaguar, Land Rover and Aston Martin, "will see some profit" this year, said executive vice president David Thursfield, who oversees the unit. He wouldn't provide a figure.

Ford also doesn't provide figures for the Lincoln division, which the company took out of Premier last year to concentrate on Lincoln's U.S. sales instead of trying to expand worldwide.

Lincoln, Ford's largest luxury brand, had a 5.6-percent decline in U.S. sales to 150,057 last year after an 18-percent drop in 2001. Sales of General Motors Corp.'s Cadillac, Lincoln's traditional rival, surged 16 percent to 199,748 behind its Escalade light trucks and new CTS car.

"GM's plan is to feed off Lincoln's decline," Cole said.

Lincoln expects to improve because of its renewed focus on the United States now that the division no longer is grouped with the European luxury brands. Lincoln also counts on the four new or redesigned models, including the Aviator sport-utility, introduced in 2002.

Lincoln "is engineered and focused right here in North America," Scheele said in an interview. The European brands are sold worldwide and "have a different role to play," he said.

Jaguar's financial performance will improve as the all-aluminum XJ reaches showrooms this year, Scheele said. "That will flip Jaguar into a wholly different profit picture this year," he said, without elaborating.

British-based Jaguar increased U.S. sales 37 percent last year to 61,204, helped by the first full year for the $30,000 X-Type.

Volvo banks on new SUV
Volvo, whose U.S. sales fell 12 percent last year to 110,670, has introduced its first sport-utility vehicle, the XC90, which the Swedish-based unit expects to increase sales this year. The XC90 has a starting price of $35,100.

Volvo is profitable, chief executive officer Hans-Olov Olsson said in an interview, declining to provide figures. "We take profit before volume," he said, adding that Volvo is trying to avoid incentives and discounts.

Land Rover, a British maker of sport-utilities, had a U.S. sales gain last year of 51 percent to 40,987 vehicles, largely because the new $25,000 Freelander widened the brand's customer base. Ford previously forecast that Land Rover would break even and hasn't disclosed its 2002 results.

"Our competition won't let us expand at the rate we're expanding," said Bob Dover, chief operating officer of the Aston Martin Jaguar Land Rover unit. "It's going to be tougher for us to make inroads."

Aston Martin, which makes cars costing $200,000 or more, sells only 1,500 vehicles worldwide annually.

In the United States, Ford wants dealers to combine outlets for Jaguar and Land Rover. Jaguar has about 150 U.S. retailers and Land Rover has about 140, with 44 percent of dealers already operating combined dealerships. Ford seeks to raise that to 65 percent by 2004.

"By putting Jaguar and Land Rover together, it improves a dealer's profitability," said Mike O'Driscoll, president of Aston Martin Jaguar Land Rover of North America. Ford wants dealers to invest profits in features such as valet services and customer lounges to attract buyers.

My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.

My next Ford.....
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