Ford slips to fifth

Ford Australia's sales for the first quarter of this year fell back less than 2500 units over the same period last year. But that was enough in such a tight market for the local manufacturer's VFACTS ranking to drop back from third to fifth.

During the first three months of 2011, Ford sold 22,713 cars, but just 20,246 for January through to March this year. That's a 10.9 per cent drop in a market where the other two manufacturers — Holden and Toyota — experienced sales slumps below two per cent for the same period. And third and fourth placed (importers), Mazda (26,513) and Hyundai (21,731) not only outsold Ford, but increased their sales over the previous year's.

So what's happening with Ford? It's a combination of circumstances that are forming a perfect storm, according to the company's Public Affairs Director, Sinead Phipps.

"The large-car segment in Australia has fallen significantly in the past 12 months — even more than most people, including ourselves, had predicted that it would," Phipps told motoring.com.au yesterday. "So a lot of our Falcon-related sales, which obviously affect our overall sales number, are purely driven by segmentation, but also driven by the fact that we're not just going for numbers..."

By that last remark, Phipps means that the company is not inflating sales figures with short-term marketing tactics.

"One thing we've been really concentrating on for the last 12 months has been making sure that we are selling cars to real customers. So we've walked away, deliberately, from a strategy of artificially inflating our numbers, through significant demonstrator programs, etcetera, because in the long term, we think that's the wrong thing for the brand and our customers."

So the Falcon, the traditional mainstay of Ford sales in Australia, is being built and marketed to optimise profit and resale, rather than be a sales leader. And it's not just Falcon; all Ford's products are being ordered from factories (whether here or abroad) with particular logistical care.

"We've taken that strategy across the board, pretty much every vehicle line. Falcon is the one that gets the most attention, for obvious reasons, but it's been a company direction that we've taken..."

Although Phipps didn't say as much, a profitable Ford Australia — and a profitable Falcon model line — might carry more weight with the heavies in Dearborn, Ford's US HQ, than sales strength bought at the cost of revenue.

"A lot of the [VFACTS] rankings make really good headlines — and I definitely appreciate why people are interested in it — but [this has] been a deliberate channel strategy for us," Phipps observed. "We're aware there's always a downside to doing something like that, which gives the perception that sales are down — but we're making the right sales."

The decision was made last year, when Ford was left overstocked and with large numbers of brand new cars out on the grass, waiting for buyers to materialise.

"Around the start of last year we had a lot of stock in our company yards, because... we were actually not building in line with market demand," Phipps explained. "We took a down-balance and we cleared out that stock — and we said we weren't going to do that anymore. We're not going to build more cars than the market needs."

It's a strategy not dissimilar from one that Ford has applied in the past, when the company was building Territory to individual order around the end of the GFC. However, Phipps says there are differences.

"It's not necessarily individual cars, but it doesn't do anyone any good if we build cars that nobody wants to buy," she said. The primary difference is that Territory was being built after the order had been received at the dealership, but this time around the company is following the market intelligence available from the dealers in advance. An example provided by Phipps was the Ford dealer in Bundaberg ordering three cars in silver, red and blue, rather than passively accepting three in white, which would sit on the lot for months.

"We let the dealers order the cars, based on what they know their customers want — and then we build them. Now that's obviously a very simplified overview of what we're doing; it's not quite that simple unfortunately, but that's the basic tenet of what we're doing. We're not running huge demonstrator programs, which some other brands in the market are.

"We acknowledge that means our numbers in comparison to theirs don't look as good. But we're not after just a ranking, we're after satisfied customers..."

The Falcon's sales are mirrored by percentage with other models in the large-car segment. Holden's Commodore has lost nearly as many sales in the year to date (down 2296), as Ford's whole model range, but the Holden was starting from a much higher sales base. Toyota's Aurion — due for replacement shortly — has sold fewer than half the Falcons retailed in the first quarter and has seen its sales slump by nearly 27 per cent over the same period last year. One explanation for Falcon's falling sales could be described simply as desertion by fleet buyers.

"Our private share has actually gone up," said Phipps. "Fleets have obviously always been a key customer of that segment — not just Falcon, but Commodore and others in that segment as well — but fleets are definitely moving away. More fleets are 'user chooser', more fleets have environmental considerations; a number of government fleets around the country will only buy four-cylinder vehicles."

Ford doesn't expect the fleets to make an immediate return to the fold with the introduction of the EcoBoost Falcon and nor is Phipps certain that buyers are holding off purchasing Falcon until the EcoBoost four-cylinder models arrive.

"There's a segment of the population that might still be concerned about the idea of a four-cylinder in a vehicle of Falcon size," she said. "But we think once we get people into it to drive it that concern will go away. They'll then appreciate the full benefits, but we think it will be more of a slow burn, whereas, for example, diesel for Territory was sort of a hit right out of the blocks, because there had been pent-up demand for it. We think we'll have to prove the case for EcoBoost in Falcon..."

That's for fleet buyers, of course, as well as private buyers. With the EcoBoost (the first time Ford has marketed a four-cylinder Falcon), the company faces an uphill battle to convince fleets to buy, one would think. But Phipps is confident that the preliminaries are already in place.

"[EcoBoost] does present an opportunity as long as we can get the price right for them, because fleets also look at it from [the point of view], what's the residual value and what's the price... their cost of ownership?

"A lot of the fleets actually set their residuals quite early. One of our key things with EcoBoost has been to get them to drive it as early as we can. Once they experience it, they then can see what the benefits are. It's too early for that yet, but we don't think it will take them too long to set residuals. And what we would obviously hope is that that will be a positive news story for us."

Falcon isn't Ford's sole 'underachiever' in the market. Sales for the first quarter were also down for the Fiesta, Mondeo and Ranger. In the case of Fiesta and Ranger, supply has been disrupted by the flooding in Thailand last year.

"Fiesta and Ranger — both of them — have been affected by parts shortages out of Thailand," Phipps explained. "Ranger more so than Fiesta, but they have both been affected by it.

"We're hoping that we're starting to come through the worst of it now; we should start to see more stock availability, particularly Ranger as well. We've been most concerned by [that]. We should start to see more availability next month."

The situation for Mondeo is surprising. Phipps says that the reduced sales of the mid-sized model are a matter of advertising — or the lack of it — and matching the timing of the commercials to vehicle stock arriving in the country.

"What we tend to find with Mondeo — strangely enough — when we advertise it we sell more. [Mondeo sales] tend to go up and down a little bit, but we're hoping to recover those in the rest of the year."

That would be with some advertising budget allocated to the Mondeo, of course, but it has to be timed with the supply from Europe too.

"Obviously there's no point advertising if the boats don't arrive from Europe. And if they arrive on the 30th of the month, it's not much good."

In the compact SUV segment, Ford's new Kuga is nowhere near achieving the sales of the Escape, which is now in runout and sold roughly 700 fewer cars in the first quarter than for the same time last year. Says Phipps, the Kuga, with just one powertrain variant, will not likely match the Escape's sales until the all new model is introduced, a year from now.

"For the next 12 to 18 months Kuga is a niche offering; we're only looking at [selling] about 200 a month. We only [received] our first boatload of arrivals mid-way through March... Kuga is really only just coming into market now.

"Until we move to the new model, it will be around the 200 a month mark; it won't be a significant player in that segment — and it's not intended to be."

For Ford enthusiasts there are some positives to take out of all this. Focus and Territory are both selling well; EcoBoost Falcon is not far away and the company is engaged on an update for the large car due around 2014. A major selling point for that vehicle will be fuel efficiency. And the new Kuga, when that arrives, will provide Ford with a much broader model range to rival competitors in the same segment.

But in the meantime Ford will continue to be perceived as the battler of the three local-manufacturing brands.

Sales figures courtesy of VFACTS

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