Friday, June 20, 2008

Ford's delayed reaction

“We view the move to smaller, more fuel-efficient vehicles as permanent, and we are responding to customer demand,” Ford CEO Alan Mulally said in the statement. “For the long term, we are moving fast to introduce more small cars, crossovers and fuel-efficient powertrains — including more hybrids — and we will adjust our manufacturing facilities to match our updated product lineup.”

Ford Motor Company (F) is cutting production and delaying the release of its latest F150 pick up truck, because of the declining market for trucks and SUVs. This statement by Ford CEO Alan Mulally comes a few weeks after GM echoed similar thoughts when they announced the closing of their pick up truck plant in Oshawa, Ontario. The trouble is that Ford's whole problem stems from delaying in the first place. These two companies are about as prescient as birds flying into closed windows. Quick, name 2 smaller fuel efficient vehicles that are made by Ford?

It is easy to see why these two companies have struggled the way they have in the recent past when their lack of foresight comes out so clearly in statements like Mulally's above. I'm no economist or fortune teller but I'd like to think that if you would have asked me 3 years ago which type of vehicles would trend higher in popularity I would not have pointed to the F150 and Sliverado. On the other hand, Toyota (TM) has been putting out small fuel efficient cars for ages. Even Toyota's larger vehicles are far superior in fuel efficiency than their U.S. headquartered competition. Ford and GM have been failing for years to provide the vehicles that people want to drive. Add this problem to their array of other issues such as health care costs and a U.S. slowdown, and it's easy to see why these companies are in trouble. I hope they don't pull their ad from below this post...

Gasoline is currently selling for about $1.30/L in my area.


Nurse B, 911 said...

Classic example of how members of an industry becomes complacent and reactive vs. proactive in their product development.

I feel bad for all the employees and parts manufacturers who will hurt from these changes, but the unions and corporations have an equal partnership to share in these woes.

pitz said...

I don't know about Toyotas, but I drive an early 1990s GM car when I'm in Canada. It gets roughly 32mpg. My mother drives a 2005 Honda Accord, and it gets 34-35mpg. Hardly a huge difference in efficiency, and hers is a 4-cylinder (and a slightly smaller car overall).

GM's small vehicles aren't appreciably different in fuel efficiency compared to small Hondas or Toyotas. The V6 Impalas and Malibus don't really burn any less fuel than their V6-based counterparts in the Toyota Camry and Honda Accord lineups.

Toyota/Honda don't have the pickup sales, so they obviously are producing a more fuel efficient 'fleet' overall, but if you compare individual cars, you'd be hard pressed to find instances where comparable cars from the Japanese consume materially less fuel than their GM-built counterparts. Or at least that's been my experience when shopping (and precisely the reason why I drive a car that's 16 years old -- because there's nothing newer out there that would provide me any savings in operating costs..).

pitz said...

BTW, my mother bought the Honda to replace an old GM that had about 350k km's on it. Dealer convinced her that she'd be saving a ton of money on fuel, because Hondas are so much more fuel efficient, blah blah blah.

Turned out to be completely not true, her fuel costs are pretty much identical, comparing her 4-cylinder Accord, to her 3800 V6 powered Oldsmobile. Maybe the Honda will require fewer, and less costly repairs than a contemporary GM car, but there was little to nothing to be saved in fuel expense.

MG (moneygardener) said...

Chev. Aveo = 26MPG
Toyota Yaris = 31MPG

Toyota Matrix = 27MPG
Corolla = 29MPG
Honda Civic = 29MPG
Fit = 30 MPG

Ford Focus = 28MPG
Chev. Cobalt = 25MPG

MG (moneygardener) said...

source (EPA results).

head to head Yaris and Aveo difference is striking. Also, generally more selection of fuel efficient models with Toyota and Honda.

Anonymous said...

Both GM and Ford were making alot more money per vehicle on trucks/SUVS so they just kept churning them out as fast as they could. The bigger the vehicle the better (Ford Expedition)

Much like the US bsnk CEOs in the sub prime market they thought this would last forever. It is not rocket science to see that energy will cost more in the future and that you need to make higher quality cars to compete with quality imports such as Toyota and Honda

MG (moneygardener) said...

good analogy anon

Jda said...

Ford has tons of fuel efficient cars the problem is they dont bring it to the US. The 2.0L diesel engine that they have in Europe can easily do 45mpg. GM has the same too.

telly said...

I always find it amusing when the subject of quality is brought into the mix to compare domestic automakers with the foreign imports. Most people are still living in the 80's / early 90's. It's pretty obvious that Ford & GM still have their work cut out for them when it comes to improving the perception of their vehicles.

Form JD Powers most recent survey:

J.D. Powers' top 10 nameplates for 2008, based on problems per 100 vehicles are Porsche (87 per 100), Infiniti (98), Lexus (99), Mercedes-Benz (104), Toyota (104), Mercury (109), Honda (110), Ford (112), Jaguar (112) and Audi (113). Cadillac and Chevrolet are ranked 11th and 12th, and each are listed with 113 problems per 100 vehicles

Clearly, Toyota & Honda are not head & shoulders above Ford & GM with respect to quality as many people think. In fact, they're pretty even at this point.

I'm with Pitz in that, an older car (235k km) suits me just fine for now so I've got no reason to upgrade but if I were, I'd be happy to pay significantly less for a new Ford at 0% financing wiht loads of discounts than a Toyota or Honda that gets me 1-2 mpg more. But then again, I also carpool...

Sarlock said...

The big 3 did such damage to themselves with the poor quality of their vehicles 10-20 years ago that even with a strong track record of high quality vehicles over the past decade or more, they have yet to change general public sentiment. Likely it will take many years yet before they can finally shed their past. If they survive.

Anonymous said...

"head to head Yaris and Aveo difference is striking."

The Aveo was not designed and engineered by GM. It is an updated version of the Daewoo Lanos. GM bought most of the automotive assets of the Daewoo conglomerate a few years ago after they went bankrupt.

GM didn't have a subcompact of their own so they polished up and rebadged the Lanos. They also sell a couple other rebadged Daewoos here as the Chevy Optra and Epica.

The Aveo is a finely polished turd of a car but it isn't very representative of what GM is capable of.