What Will Ford's New CEO Do With Lincoln?
Ford has a new CEO: Mark Fields took over for the retiring Alan Mulally last week.
Mulally will be a very hard act to follow. But Fields was a strong choice for the job, and Ford investors should look forward to seeing how Fields guides the company forward from here.
One question of great interest: How will Fields approach the ongoing effort to transform the old Lincoln brand?
Motley Fool senior auto specialist John Rosevear thinks that Fields might bring a very different perspective to the job of overhauling Lincoln. As he explains in this video, Fields has run global luxury-vehicle brands in the past -- and that gives him a well-informed perspective on what really needs to be done to reestablish Lincoln as a luxury contender.
A transcript of the video is below.
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John Rosevear: Hey Fools, it's John Rosevear, senior auto specialist for Fool.com. So Ford has a new CEO, Alan Mulally has retired from Ford and his successor, longtime Ford veteran Mark Fields, took over on July 1st. We'll all miss Alan Mulally, I've interviewed him a few times and I can tell you he's a lot of fun to talk to, great energy, very upbeat, it's clear why Ford folks love him. But I've also spent some time talking to Mark Fields, and I think he'll be a strong CEO for Ford too.
One of the things I think will be interesting to watch is how Fields guides the development of the Lincoln brand. Years ago, Ford had a division called the Premier Automotive Group, or PAG, this had all of Ford's premium brands, at the time Ford owned Jaguar and Aston Martin and Volvo and Land Rover as well as the Lincoln and Mercury brands. All of those except Lincoln are gone now, Ford closed Mercury and sold off the overseas brands, but what's significant is that this existed as a division of Ford, all of those brands, and Mark Fields actually ran it for three years between 2002 and 2005.
So Fields has a much more in-depth understanding of what it takes to run a global luxury-car brand than the average person who maybe grew up in Detroit and is now an auto executive, and I think that's giving him a different perspective on what Lincoln could be in terms of its potential, and a perspective on how far it has to go to be really competitive with say Jaguar or even something like Toyota's Lexus brand.
But it does have a long way to go even to be a solid profit center for Ford. Bloomberg reported last month that Lincoln was such a big money loser for Ford that Mulally wanted to just shut it down at one point last year. But Fields talked him out of it.
I think what Fields really understands is that a well-run luxury car brand can make a disproportionally big contribution to overall profits. Every time we talk about Volkswagen Group we talk about this, how the Audi and Porsche brands represented just 18% of the VW Group's total sales last year but 65% of its pre-tax profits.
Lincoln is a long long way from making that kind of contribution to Ford's bottom line, but a luxury business has that kind of potential, and Ford probably needs it to stay competitive globally, needs that boost to profits. So how will they get there?
Obviously Lincoln needs more products that aren't just black Fords with nicer leather. The MKZ sedan is a good start, it's based on the same architecture as Ford's Fusion sedan but it's distinctively different and offers a different experience. It's the same deal with the all-new MKC SUV, it's a cousin of the Ford Escape but it's quite nice and should sell well, not just here but in China where compact premium SUVs are quite hot. A
nd we do know that China is a big part of the case for Lincoln, the brand has been rolled out in China with a big emphasis on customer service, but it's also clear that Lincoln needs more new products both here and in China, a bigger crossover SUV and an overhaul for the bigger MKS sedan, both of those are known to be under development, but this is going to take time, and it will be worth watching how Fields guides this project, because I bet he has a pretty clear vision for what needs to be done. Thanks for watching.
The article What Will Ford's New CEO Do With Lincoln? originally appeared on Fool.com.John Rosevear owns shares of Ford. The Motley Fool recommends Ford. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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