Ford's New CEO Wants to Revive the Stodgy Lincoln Brand: Is He Crazy?
One of the biggest challenges facing new Ford CEO Mark Fields is fixing the stodgy Lincoln brand -- which seems "so last century" compared with other luxury auto brands. Whereas the recently retired Alan Mulally wasn't sure that Lincoln was worth saving, Fields is highly committed to turning Lincoln around.
At first glance, it might look like Lincoln is a lost cause -- most people wrote it off as boring more than a decade ago. But Mark Fields isn't crazy. Crosstown rival General Motors has shown that it's relatively straightforward to revitalize an ailing brand. The key is having the right products and the right marketing to support them.
Lincoln: past its heyday
Lincoln has lost much of its luster in the past two decades, as foreign brands have conquered the U.S. luxury auto market. Lincoln's sales peaked way back in 1990, when it sold more than 230,000 vehicles. By last year, sales had plummeted 65% to 81,964 vehicles.
Lincoln's demise is easy enough to understand. Whereas competitors designed luxury vehicles from the ground up, Ford tried to save money by populating Lincoln's lineup with rebadged Ford vehicles that had only cosmetic changes. In the short run, this may have boosted profitability, but in the long run it was sure to undermine sales.
Lincoln has fallen to the No. 8 spot in the U.S. luxury market after being No. 1 as recently as the late 1990s. According to Bloomberg, Mulally floated the idea of dumping the brand last year.
That wouldn't be too surprising, considering that Mulally sold off Ford's other luxury brands -- Aston Margin, Jaguar, Land Rover, and Volvo -- in quick succession between 2007 and 2010. However, Mark Fields persuaded Mulally to give Lincoln time to make a comeback.
How to revive a brand: a General Motors case study
Lincoln might seem like a lost cause right now, but General Motors has shown recently that it's relatively straightforward to rebuild a fallen brand. In 1984, GM sold nearly 1 million Buicks in the U.S. By 2009, it could barely sell 100,000 annually.
The Buick brand almost got the ax during GM's reorganization. (Indeed, in the last 10 years, GM has dumped a slew of brands in the U.S.: Oldsmobile, Pontiac, Saturn, Hummer, and Saab.) The only reason Buick survived was that it's surprisingly popular in China. However, as long as it was going to continue building Buicks in the U.S., GM needed to reinvent the brand.
General Motors had to confront two major (related) problems. Buick didn't have a good product portfolio to attract new customers, and it had a stodgy image. By 2006 the average age of a Buick buyer was 66. That gave it the oldest customer base in the industry -- although Lincoln wasn't much better!
To reverse this unsavory trend, GM has updated Buick's product portfolio by attacking new growth segments. In the past few years Buick has introduced a compact car, the Verano, and a subcompact crossover, the Encore, with a mid-size SUV expected soon. It has also released new versions of the holdover models in its product lineup.
Buick has emphasized youth in its marketing. This marketing message, along with an updated product lineup, helped reduce the average age of Buick buyers to 57 last year. Buick sold 205,509 vehicles in the U.S. last year -- more than double the 2009 tally. Year-to-date sales are up 12.5%, compared with 2.5% for GM as a whole. The Buick comeback is not complete, but the trends are very promising.
How Lincoln can get there
Mark Fields' task at Ford is thus relatively straightforward, though not easy. Lincoln also has the problem of an aging customer base, and this has a lot to do with the products in its lineup -- or rather, the products it doesn't have. The most important step is to fill those gaps.
The key segments where Lincoln has been missing out are compact cars and compact crossovers. The Lincoln MKC compact crossover went on sale this spring, and Ford is now starting to ramp up production. Early sales indicators have been good, with MKCs sitting on dealer lots for just 10 days on average.
Last month, Lincoln sold 684 MKCs, but it has much greater potential once there is adequate inventory. The MKC slots into Lincoln's lineup in the same spot as the Ford Escape, which is the No. 2 seller among Ford's cars and utilities, just behind the Fusion mid-size sedan.
Lincoln has been selling more than 3,000 MKZ mid-size sedans per month, so it seems very likely that MKC sales could reach the 3,000-a-month level, too.
Lincoln is also updating its Navigator full-size SUV this year, and it's likely to release an updated version of its MKX mid-size crossover late next year. Lastly, Lincoln is probably readying a compact car for production in 2016, according to Automotive News. That would enter it into the segment where GM has had some success recently with the Buick Verano and Cadillac ATS.
Foolish final thoughts
Lincoln sales are up 16.3% year to date. The brand's gains are likely to accelerate in the second half, as deliveries of the new MKC compact crossover ramp up. To maintain this momentum, Lincoln will need to add a compact sedan to target another segment with younger buyers. It also needs to invest in creative marketing to shake off its stodgy image.
Ford has plenty of work to do, but GM's ability to revitalize an equally stodgy brand -- Buick -- shows that it can be done. Lincoln needs to design high-quality products for fast-growing segments and support them with innovative marketing. Lincoln may never truly challenge the German luxury brands for the sales crown, but at least it can get back in the race.
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The article Ford's New CEO Wants to Revive the Stodgy Lincoln Brand: Is He Crazy? originally appeared on Fool.com.Adam Levine-Weinberg is short December 2014 $15 puts on Ford. The Motley Fool recommends Ford, General Motors, and Tesla Motors and owns shares of Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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