Friday, May 27, 2005

Great Interview with Ford COO Jim Padilla

Autonews and Autoweek have a rather good and informing interview about the state of the Ford Motor Company with Jim Padilla, COO. As my obsession with the interplay between increasing oil prices in America and automakers grows, I've highlighted that part of this interview that covered the subject below, with Padilla's words in italics, and the interviewer's in bold:

...we didn't see a huge impact of fuel prices on some of our bigger products. We had a phenomenal December for the F series. As January and February came in, it became clear that we were seeing some implication from fuel prices. It affects the margins.

So we've got our challenges, and we're taking them on...

Will rising car sales make up for the Explorer and Expedition segments weakening?

This is kind of the way we see the industry changing. Traditional trucks, which is pickups and SUVs, are down quite a bit as a percentage share of the industry. Crossovers and small SUVs are up. Small cars and sports cars are up. We're affected. Our large SUVs are down. But we're pretty much offsetting that with crossovers, which is the Freestyle predominantly, and the Escape. We anticipated a movement that would put less emphasis on sport utility vehicles. We didn't expect it changing that fast because we didn't expect the fuel implications.

And that will save them. So far the only product in Ford's stable that is in huge demand is the Mustang. But as Padilla points out in another part of the interview, the Mustang is part of the trend away from SUVs and into mid-size and small cars. The Mustang, as viewed as a mid-size car that gets better gas mileage than a comparably priced SUV is catching that portion of the market that is now interested in performance, rather than size.

There's a striking contrast on what Ford is saying on fuel prices and GM is saying on fuel prices. You are acknowledging this is a big hit this year. GM is saying that any suggestions that vehicle sales are being affected by fuel prices is poor analysis and poor journalism. What do you make of that? Is it a real issue or isn't it?

I call it the way we see it. I'm an engineer. We deal with facts and figures. I think the facts speak for themselves.

Is this a hint that Padilla and other Ford higherups are aware of the shortage of oil for the long term? Possibly. Padilla continues with his critique of the Nissan and GM strategy for higher oil prices, which is to speed up the replacements of SUVs with new ones:

Is aging product also part of the SUV decline?

It's anybody's supposition, but it didn't affect it much a year ago. The Explorer and its competitors are fairly modern products. You don't have to apologize for them. I think it's a segment shift that we're seeing. And, on top of that, the fuel prices are having an implication.

The article is really fantastic, and a good barometer that Ford is at the very least preparing for a radical change in the automobile market in America. For a company like Ford, who are incredibly dependent on the sale of gas guzzlers like the Explorer and the F-150 to stay afloat to say that SUVs are no longer the priority is amazing. Crossovers and mid-size sedans have much smaller profit margins. To embrace these new market segments can only mean that Ford realizes that oil prices are making an enormous impact on the industry. It's good to see that they may be ahead of the curve.

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