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Old 04-23-2002, 12:08   #1 (permalink)
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Ford underscores importance of PAG.....

Ford underscores importance of Premier Automotive Group as chariman departs


By MARK RECHTIN
Automotive News

LONDON -- In announcing the resignation of Premier Automotive Group Chairman Wolfgang Reitzle and the appointment of Mark Fields to succeed him, Ford Motor Co. made it clear last week that its recovery plan will continue to rely heavily on its luxury brands.

Negating speculation that the luxury group had lost its halo within Ford and could be broken up, COO Nick Scheele said he still expects Ford's luxury brands - Volvo, Jaguar, Land Rover, Aston Martin and Lincoln - to account for one-third of Ford Motor's pretax profits of $7 billion by mid-decade.

In 2000, Ford Motor posted pretax income of $8.2 billion, of which the luxury brands accounted for about 20 percent, or some $1.6 billion. If Scheele is correct, pretax profit from the luxury brands will need to grow by about 40 percent to about $2.3 billion in only a few years.

But for that to happen, Premier Automotive will need to quicken the pace of change.

The departure of the 53-year-old Reitzle comes as the brands are working hard to collaborate in the broad areas of purchasing and development while trying not to overlap in branding and product.

It's an area in which many feel Reitzle will be missed because the new boss, the 41-year-old Fields, who moves over from Mazda Motor Corp., doesn't have Reitzle's experience with luxury brands or his product savvy, dynamism or clout.

"We can't afford to lose him," a Premier Automotive manager said.

"It's fascinating what a difference he made at the brands. The attention he gives to the smallest detail, his engineering experience and his understanding of customer tastes and market trends make all the difference," the manager said.

"Cars like the S-Type with a six-speed gearbox wouldn't exist without Reitzle. Now the finance guys will start saving at every single nut and bolt again. And the Jaguar spirit, so credible reinstalled by Reitzle, will fade again," the manager predicted.

But in a conference call with reporters Friday, April 19, Scheele said Fields' success turning around Mazda was due in part to his ability to adjust to different cultures, which makes him the right executive to head Premier Automotive.

In his three years at the helm, Reitzle achieved mixed results at Premier.

Because product cycles have not lined up, there is little in the way of common purchasing. But the back-office operations, such as logistics, parts supply, distribution and administration, have been combined.

In the broader product-development and manufacturing sense, Land Rover, Jaguar and Aston Martin are working closely on similar procurement plans, although supplier commonality won't happen in earnest until next-generation redesigns occur, said Steve Jones, Land Rover/Jaguar purchasing director.

The same holds true for Volvo and Ford of Europe.

The biggest overlap could involve sharing powerplants, such as Land Rover using Jaguar's next-generation V-8 engine in its upcoming Discovery, and Jaguar borrowing diesel engine technology from Ford of Europe. Volvo will share major component sets with Ford of Europe on the upcoming 40- and 30-series vehicles.

"You don't just get wholesale resourcing and change your supplier base. But we are seeing an evolution with our new-model programs. Over time, we'll see a gradual convergence if the suppliers can deliver the needs of our technology," Jones said.

Reitzle set ambitious global sales targets for the near-term. He projected that Volvo would grow from 396,000 units in 1998 to 600,000 units annually; Jaguar from 50,000 units in 1998 to 200,000; and Land Rover from the 160,000 range in 1999 to 200,000 units.

So far, progress is mixed. Volvo global sales rose 4.0 percent from 1998 to 2001. Volvo expects new models such as the redesigned 40 series, XC90 sport-utility and 30-series supermini to boost sales considerably.

Jaguar global sales jumped 100.7 percent between 1998 and 2001. Land Rover global sales were off 1.3 percent between 1999 and last year and could drop again this year, according to projections from J.D. Power and Associates.

On the dealership front, Reitzle's plan to retail the Premier Automotive brands through single-stop centers has stalled on dealer resistance. American dealers are leery of investing the estimated $25 million each store would cost, and European dealers are not making any investments until the uncertainty surrounding new franchise laws is eliminated.

But Scheele said Friday that Ford Motor will continue to put luxury franchises, including Lincoln, in the same dealerships, "where it makes sense," in Europe and North America.

Reitzle gave laser-like focus to product development, but some Ford goals could run counter to his mission.

Plans for growth in unit sales can force the brands to enter unfamiliar segments and could overlap with other Premier Automotive marques.

For example, Jaguar jumped into the entry-luxury market with the all-wheel-drive X-Type, which is based on the Ford Mondeo. Then the brand moved further downmarket with a company-fleet model offering only front-wheel drive, which alienated many Jaguar purists.

Cost-cutting goals can hurt, too. The next Jaguar S-Type, which was to have been developed with the next Lincoln LS, will come from a Ford Division mass-market, large-car platform.

And Lincoln never was integrated fully into the Premier Automotive concept, despite Reitzle's strong effort. Insiders say he was furious at Ford's decision to kill his pet project, a BMW 3-series fighter.

It could be the intangibles that add up to victory or defeat.

By stretching their product offerings downmarket in a quest for volume, the luxury brands are attracting customers who wouldn't be in the same tax bracket as traditional buyers.

"Jaguar is bringing in a bunch of people who wouldn't be Jag owners demographically or psychographically," said Eric Noble, president of the Car Lab consulting firm in Santa Ana, Calif.

"Even if the X-Type is a strong product, it degrades the brand - not because of the product but because of the buyer."

It's an area Reitzle knew, and one Fields must learn.
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