Ford has much to prove with new minivan
By Doron Levin / Bloomberg News
CHICAGO -- Ford Motor Co. introduced its Freestar minivan Thursday with a campaign that will entail considerable expense and risk to erase one name from the public's memory and replace it with another.
Investors and lenders will watch closely as Ford replaces the Windstar model it introduced in 1994 with Freestar. They are eager to know whether the No. 2 U.S. automaker behind General Motors Corp. still can manufacture a quality vehicle and attract increasingly savvy buyers.
"It's a real difficult decision when you've got something that has that amount of name recognition," Brian Bruce, director of asset management for PanAgora Asset Management in Boston, which owns Ford and GM shares, told Bloomberg News last month. "I think it's a mistake."
Most importantly, Ford is betting that Freestar will be popular enough with buyers that it won't have to offer deep discounts, like the $4,000 cash rebate now offered on unsold 2002 Windstars. The base 2003 Windstar retails for $26,910.
Last month Ford announced it was willing to forgo up to eight monthly payments from Windstar lease customers who wish to return their minivans early, provided they agree to lease a new Ford.
Judging from the exterior of Ford's Mercury Monterey minivan -- a premium version of the Freestar shown at the Chicago Auto Show on Wednesday -- the new Ford minivan will closely resemble the vehicle it replaces. Ford says looks are less important to minivan buyers than function, noting that the important changes are contained in the Freestar's and Monterey's interior layout.
Honda Motor Co.'s Odyssey has been the acknowledged minivan leader since its introduction in 1999, mainly because of clever use of interior space and an engineering innovation that is being studied and imitated. Odyssey is the first minivan with a third row of seats that tucks under the vehicle's floor, maximizing flexibility for passengers and cargo.
The third row in Freestar also folds beneath the vehicle's floor and is easy to use. Production of the new model should start this summer with sales beginning in the fall.
"At least Ford now has something to talk about," said Jim Hall, automotive analyst for AutoPacific, an automotive marketing con******cy.
The decision to change names is agonizing because Ford has spent almost nine years advertising Windstar, searing the name into the consciousness of minivan shoppers. The investment in such advertising represents millions to create what marketers call brand equity, epitomized by the near-Pavlovian response that "Coke" elicits in a thirsty person.
Yet the name change is frank acknowledgement that Windstar hasn't been able to hold its own against much stronger competitors, in terms of features and use of interior space. Better, Ford reckons, to start anew than to try and alter perceptions.
Jim Cain, Ford spokesman, said "our new minivan will stake a claim for Ford; it's the state of the art," noting that the third row of seats folds away "without removing head restraints," which is necessary in the Odyssey.
Last year minivans accounted for sales of 1.13 million vehicles, off 4.3 percent, in a U.S. market of about 16.8 million vehicles. DaimlerChrysler AG's Chrysler unit, which introduced the first minivan in the mid-1980s, led the segment with about 36 percent of sales.
Ford sold 148,875 Windstars in the U.S. last year, down 17.1 percent from 2001. Ford also sold 16,442 Mercury Villager minivans, down 25.4 percent from the year before. (The automaker is dropping Villager, built in a joint venture with Nissan Motor Co., and selling Monterey in its place.)
Though Ford won't discuss profits and losses of individual models, its minivan operations appear to be marginal at best. The Oakville, Ontario plant where Windstar is assembled operates at more than 20 percent below its 240,000-per-vehicle capacity.
Compared to SUVs, whose sales comprise about a quarter of the entire vehicle market, minivans lately seem to be a segment that has stopped growing.
"There aren't enough Gen Xers to backfill baby boomers," said Hall. "Maybe Generation Y will buy minivans; we just don't know."
Toyota Motor Corp. last month introduced the latest generation of its Sienna minivan, which even Honda executives concede will pose tough competition because of refinements in quietness and packaging.
Ford -- which has posted losses of $6.43 billion in the past two years -- has a great deal to prove with its new minivan, created exclusively for the automaker's home market. Picking the right name matters, but less than restoring Ford's ability to design and manufacture vehicles the market will buy.
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My next Ford.....