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From the Detroit Free Press:

Ford lags on fast-growing subcompacts

Firm working to rejoin segment

June 6, 2006
BY SARAH A. WEBSTER

FREE PRESS BUSINESS WRITER

The market for affordable, fuel-efficient vehicles like the 2007 Honda Fit subcompact is booming due to high gas prices. (Honda)

Ford Motor Co.'s new product-development strategy, which was revamped by top executives as part of the company's Way Forward turnaround plan, will leave Ford without a stake in the fast-growing subcompact car segment for at least another year -- or more than a decade in all.

The Dearborn-based automaker is desperately trying to stabilize its deteriorating market share and return to profitability in North America, partly by morphing its gas-guzzling, big-truck image into one that is more environmentally friendly.

With the help of Kermit the Frog, the company has promoted its hybrid gas-electric vehicles and bold, fuel-efficient cars such as the Ford Fusion.

But there has been a hole in that strategy: Ford left the ultra-efficient subcompact car segment in 1997, the last model year for the Ford Aspire, and hasn't said when it's coming to market with a replacement since then.

Subcompact cars are those smaller than compact cars, such as the Ford Focus and Honda Civic.

And the market for those affordable, fuel-efficient vehicles -- such as the Honda Fit, Toyota Yaris, Kia Spectra and Chevrolet Aveo -- has been booming in this year's gas-conscious market, with sales up 20.9% through May of this year, as classified by Autodata Corp.

The subcompact category is still very small, accounting for just 1.2% of the 16.9 million new vehicle sales last year, but no other category is growing so fast. Even the popular crossover segment, by contrast, grew half as fast.

Ford spokeswoman Sara Tatchio said the company plans to be "a big player" in the subcompact car segment.

But she wouldn't say when that would be, except to say it won't be next year. She denied a report Monday in Automotive News that Ford's plans to build a subcompact car have been delayed, noting that Ford has never publicly disclosed its timetable for the vehicle.

"What we think is important is to get into the segment with the right vehicle, and do that as quickly as we can," she said.

Tatchio acknowledged that Ford's new president of the Americas, Mark Fields, has altered plans about what vehicles will be built and when as part of the effort to return Ford North America to profitability by 2008.

The company's SVT performance line, for example, will have at least one car and truck going forward, rather than the fuller lineup once planned. A Mercury crossover based on the Ford Freestyle, which Merrill Lynch had expected in 2007, is no longer likely.

But Tatchio insisted that Ford is on target with its own objectives to design and build a subcompact car.

"We are on target to have very aggressive improvements in delivering more products to our showrooms faster," said Tatchio, who boasted that the average age of the company's lineup would improve by 1.6 years. "By late 2007 and 2008, we will be very competitive in the industry with the overall percent of new product in our showroom."

Automakers' product plans are highly secretive, given their competitive nature, but a Merrill Lynch report forecast Ford coming to market with a small youth-oriented hatchback in the 2008 model year. Grand Rapids-based IRN Inc., another research firm, initially forecast Ford's subcompact car coming in 2007.

Erich Merkle, an auto analyst with IRN, said he now forecasts a Ford subcompact car in the 2010 model year as Ford tries to design and engineer a more boldly styled car, one that is more distinct than "a me-too Korean-kind of competitor."

"It's refreshing to hear that Ford is rethinking the strategy," he said. "I think it is important for them to get the product right, no question. The problem with Ford, though, quite honestly, is they have been trying to get the product right for some time, and they've been losing market share because they haven't been able to get the product right."

Tatchio also called reports that Ford was delaying its freshening of the Ford Mustang by a year, pursuing a rear-wheel-drive sedan and flip-flopping on building a Lincoln coupe off the Mustang platform "speculation."

She also would not discuss reports that Lincoln might kill its plans to build a second front-wheel-drive, full-size sedan. Lincoln showed a full-size MKS concept car at the Detroit auto show this year and could produce another sedan based on the Ford Five Hundred.

For the first five months of the year, Ford's share of the U.S. new vehicle market has fallen to 18.5%, down from 19.1% a year ago. Sales are down 3.5%, with 1.3 million new cars and trucks sold through May.
 
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