Monday, October 4, 2010
Ford Motor Co. must establish Lincoln as a solid luxury brand in the United States before taking it abroad, CEO Alan Mulally said Thursday.
That could take five years -- enough time for Lincoln to introduce seven new or refreshed models.
"Once we get Lincoln going in the U.S. and people appreciate it, I think there will be a lot of customer pull around the world for Lincoln," Mulally told reporters at the Paris Motor Show.
Lincoln has fallen from the top-selling luxury brand in the country, with peak sales of 231,660 in 1990, to No. 6 in 2009, with sales of 82,800, according to Autodata Corp.
Key to reviving Lincoln's appeal, and elevating its status, is reducing the number of U.S. dealers -- 1,187 today -- and demanding higher dealer standards to better compete with foreign brands.
Ford has said it won't terminate Lincoln dealers, but it is banking that many will voluntarily step aside after deciding they can't afford to make the investment that Ford will require.
"This is a pivotal time," said Bob Tasca Jr., president of Tasca Automotive Group in Cranston, R.I., and chairman of the Lincoln Mercury Dealer Council. "Opportunity comes once in a brand's lifetime."
Much of the campaign to reinvent Lincoln centers on dealers, who will meet in Dearborn next week to learn what Ford expects of them.
"Company leaders and select dealer representatives are working together to help create a new and improved luxury ownership experience for future customers," said Lincoln spokesman Christian Bokich.
Details are being kept under wraps. But since June, senior Ford managers have met four times with a Lincoln advisory committee. There is an ongoing debate about what would constitute the optimum number of Lincoln dealers, as Ford uses the year-end demise of its Mercury line as a springboard to rehabilitate the brand.
Analysis of the luxury market suggests Lincoln should be pared to about 350 outlets in major markets, to directly compete with the upscale foreign brands. But its domestic rival, General Motors Co.'s Cadillac, has 1,260 U.S. dealers.
"Over 1,000 places to buy Lincoln are too many and it isn't working," said Tasca, but 300 may not be enough to sustain the brand. "There will be a place in the middle that would work."
Tasca says Ford "won't put a gun to anyone's head. It will be up to the individual dealer to make a business decision."
There are 264 dealers who sell Lincoln and Mercury in their showrooms. Some will fold without the volume boost from Mercury, others likely will consolidate with Ford franchises.
But hundreds, especially in smaller markets, could decide the return is not worth the investment that will be asked of them.
Much of Ford's focus is on determining the optimal number of Lincoln dealers in the top 30 metropolitan markets. Half of the brand's sales are from rural dealers in cities without competition from luxury foreign brands.
Ford must align Lincoln dealers with where luxury buyers are concentrated, said analyst Rebecca Lindland of IHS Automotive in Lexington, Mass.
"They have to do significant regional studies before closing doors to avoid a backlash because people are used to a dealer around the corner," she said.
Dealers to get overview
In Dearborn Monday, dealers will get an overview of the luxury landscape, comparing Lincoln with benchmark brands such as Lexus, BMW, Mercedes-Benz and Audi. The next day, they'll hear details about the plan to make Lincoln competitive, covering everything from dealership facilities, signs and furniture to staff training.
"Lincoln must portray an upscale image to go head-to-head with the European luxury brands," said Randy Berlin, a director with dealer consultant Urban Science of Detroit.
A Lincoln franchise needs to be clearly delineated from the Ford brand, preferably with its own entrance and ambiance, Berlin said. "The worst scenario is someone who diminishes the brand for others," he said.
"You won't see a gorilla on the roof of a Lincoln dealer during a sale."
Ford has not set investment figures because there are many variables, Mark Fields, Ford president of the Americas, said recently.
Sheldon Sandler, CEO of dealer financial consultants Bel Air Partners LLC in Skillman, N.J., estimated the cost of refurbishing a dealership at $500 million to $2 million. A new standalone showroom could run as high as $5 million, depending on real estate prices, he said.
"It will be up to the individual dealer to decide if they can make it without Mercury and how much they need to invest in Lincoln for the future," Tasca said.
"Some will say they can't make it."
Lou Stanford, owner of Varsity Lincoln in Novi, knows it will be tough after losing Mercury.
"It will be a struggle until we get more products," he said. "I have no intention of closing or consolidating."
The overhaul will be long and expensive, Lindland said, noting that Cadillac's rehabilitation took a decade and cost billions.
And it will take time, Berlin said: "Consumers need experience with the product and ownership before they can say 'Lincoln' and 'BMW' in the same breath."
Source: The Detroit News
Posted by Palmer at 3:37 PM