DEARBORN - Ford’s best-ever third quarter 2012 pre-tax operating profit of $2.2 billion, driven by a stellar performance in North America, was welcome news to the packed WHQ auditorium at Tuesday’s Americas Business Review.
Ford North America achieved its highest quarterly profit and operating margin since at least 2000 when the company started reflecting the region as a separate business unit, with third quarter pre-tax profit of $2.3 billion.
“Check that number out -- $2.328 billion,” said Americas President Mark Fields to a thunderous round of applause, noting that that figure is nearly $800 million higher compared with a year ago. “It was an all-time record in North America for profits and operating margin.”
Ford’s operating margin for the third quarter was 12 percent, up 3.4 points compared to last year.
“I was reading one of the analyst’s reactions and they’re very good with words. They’re very professional. And the quote was, ‘The operating margin in (Ford) North America was ‘insane,’ ” said Fields. “But if that’s insanity, we’ll make that into sanity. It is just a fantastic performance.”
South America was slightly profitable in the third quarter, marking its 35th consecutive quarter of profitability despite a very tough business environment.
Europe reported a loss of $468 million amid continuing economic challenges in that region.
“It is a very difficult market environment there that the Ford of Europe team is taking on,” said Fields.
And Asia Pacific earned $45 million as Ford continues to invest and grow in that part of the world.
Fields highlighted key product launches in the third quarter, which he referred to as the company’s “life blood,” including the all-new Fusion and the new C-MAX Hybrid.
“I think the C-MAX Hybrid is going to be a real surprise to us,” said Fields. “The feedback we’re getting from the dealers is fantastic on this vehicle.”
Fields also noted the significance of the recent integration of the Flat Rock Assembly Plant – where the new Fusion will be built – into the Ford manufacturing system.
Fields also congratulated the Ford Manufacturing and Labor teams for successfully concluding the Canadian Auto Workers negotiations.
“We led the negotiations and came up with a very good agreement for our employees and also for improving our competitiveness,” he said.
Rebecca Lindland, director of Research for IHS Automotive, was a guest speaker at the meeting. She shared her outlook for the global light vehicle industry, noting that the biggest threats to the global recovery are the lack of momentum in the U.S. and the European sovereign debt crisis.
Lindland said that even in the face of significant competitive intensity, product makes all the difference.
“Global growth is there. There are some risks, but there are opportunities out there,” she said. “Emerging markets – while they’re not immune to the Eurozone – there are a lot of consumers who are getting a car for the first time, and your goal every day in The Americas and beyond needs to be ‘Let’s make that first car a Ford.’ ”
The remainder of Tuesday’s meeting focused on three of the six strategic priorities for The Americas: Growing Margins and Profits, Successful Launches and New Lincoln Products.
Growing Margins and Profits
K.R. Kent, executive director and controller, The Americas, began his presentation by reiterating that Ford North America’s third quarter operating margin was an all-time record 12 percent, up 3.4 points compared with a year ago and 3.2 points compared with the One Ford Plan.
“This is really a testament to what the team in North America has done,” he said.
Though Ford posted strong operating margins in North America, Kent reminded the group that the company needs to improve in its other business units in Asia Pacific Africa, South America and especially in Europe.
Kent said Ford’s strategy for recovery in Europe is based on a three-pronged approach that includes accelerating product, strengthening the brand and cutting costs.
“This is the exact same thing we did in the U.S. with the One Ford plan,” he said. “It’s just going to take a little time.”
Kent says the company projects to achieve profitability in Ford’s European operation by mid-decade.
Jim Tetreault, vice president, North America Manufacturing presented an update on manufacturing and new product launches.
“We’ve launched more vehicles, powertrains and probably more importantly more new parts than we’ve ever launched in a single year,” he said. “And in support of all of those product actions we had to increase our capacity fairly dramatically.”
Tetreault cited new product launches at the following Ford manufacturing plants:
• Chicago Assembly Plant – Significantly updated Ford Taurus and Lincoln MKS as well as the new Police Interceptor vehicle
• Louisville Assembly Plant – 2013 Escape
• Hermosillo Assembly Plant – All-new 2013 Fusion, 2013 Lincoln MKZ
• Michigan Assembly Plant – Focus Battery Electric Vehicle, C-MAX Hybrid, C-MAX Plug-in Hybrid and the Focus ST.
Tetreault described the Michigan Assembly Plant as “the ultimate in flexibility” and recognized the facility for being named “Assembly Plant of the Year” by Assembly magazine.
New Lincoln Products
Jim Farley, group vice president, Global Marketing, Sales and Service, discussed Lincoln’s strategy in the U.S.
“As much as the Ford story in the U.S. has been exciting, the Lincoln journey is just beginning,” he said.
Farley said the key to Lincoln’s transformation surrounds gaining conquest customers through a new brand strategy that focuses on the product and the dealership experience.
Farley pointed out that while Lincoln leads other luxury competitors – like Lexus and BMW – in the Great Lakes and Central Market regions of the country, the key markets for luxury vehicle brands in the U.S. are New York, Miami and Los Angeles.
“Those three markets alone make up 50 percent of the market. For us to grow, we have to take some of that share. We have to attract those buyers,” he said. “We cannot grow with our current customer base. It’s just math.”
Farley says Lincoln’s strategy to gain conquest customers starts with new products. He says Lincoln will introduce seven products – four of which are all-new – within the next four years.
“Lincoln will have the most aggressive refresh rate of any luxury competitor between now and 2017. We intend to refresh all of our cars 167 percent. That’s almost twice of any of our competitors, and we’re doing it in key segments,” he said. “But the most important thing for the revitalization of our product is the product’s DNA – the way that it is executed.”
According to Farley, the key attributes that will set Lincoln apart from its competitors are design, world-class quality and the way the vehicles drive.
Another key element of Lincoln’s transformation is the dealership experience.
“Our vision is not to be a mass retailer like BMW or Lexus,” he said. “We want to want to be a small, personalized brand like a tailor or a local spa where the people who you are.”
Farley says Lincoln will accomplish that through three key initiatives: the Lincoln Academy; the Luxury Tour, which brings hospitality training to all dealers; and the Consumer Experience Movement.
Lincoln also will become the first luxury brand to offer a live personal shopper on Lincoln.com 24-hours a day, seven days a week. And Lincoln will offer customers the opportunity to “date the brand.”
“It’s called ‘Lincoln Date Night,’ and if you qualify, you get to drive a Lincoln for a weekend and we’ll buy dinner. We’re the first brand ever to do that,” said Farley. “And we have to surprise people like that because they’re coming out of experiences that are world-class.”
Farley also hinted that Lincoln will launch its largest-ever advertising campaign in December.
“It’s going to be a big deal,” he said. “I can’t wait to give you all the details.”
As he ended his presentation, Farley asked people to keep in mind that when it comes to Lincoln, the best is yet to come.
“The luxury business takes time. It takes consistency. It takes excellence and talent. We have all of those things,” he said. “The most important thing is to have a vision of where you’re going.”