Was Ford too quick to sell JLR?

[Deanh]

I agree Volvo and Mazda have made an excellent partnership and lots of shared lessons were beneficial to all parties IMHO. I am glad at the end of the day they have gone their separate ways. I saw the S40 and Mazda 3 excellent cars in their own right but the Focus playing second fiddle is not acceptable. The C170 once squared away had little to no issues. Styling is not for everyone but overall a good car. My beef in 2006 was "Why is Ford not getting any love?" Good enough at that time doesn't cut it. Ford is in a much better position now based on the current product and laser-focus. Is there things Mazda/Volvo does better? Perhaps, the thing is I'll take a current Focus over a Mazda 3 or S40 anyday and twice on Sundays.

Hugh, twice on Sundays?....you using a fake Fleet Number?

[Hugh]

Hugh, twice on Sundays?....you using a fake Fleet Number?

 

No secrets on da interwebs eh? Who has my back? Not you!

 

The forms were for 2 Focus 'S' HB's. The extra 'T' was put there in Crayon. I blame my daughter for that one.

[elkarlo]

The point most people miss is the amount of investment that would have been required had they kept JLR and that is money that would not have been available to get the Ford brand back on its feet. As close as Ford was to bankruptcy it's entirely plausible that they would not have made it without selling JLR and Volvo. In this case it's a win/win for everyone.

Agreed. Ford needed the money, or really didn't have the money to keep JLR going. Getting rid of it was good for Ford at the time. Also Ford needed the focus that not having Volve and JLR gave em. Yeah I miss not having those brands in our portfolio, but it has helpe dout Ford.

 

What I do regret is the deepening divide with Mazda. I feel that closer collaberation and shared facilties would help both companies

[elkarlo]

Selling JLR was the right call. It raised enough cash to sustain the core business. Without the money, there might not have been a new Fusion and updates to the C1 platform that now form the backbone of Ford's renaissance.

 

I think the case for selling Volvo and especially Mazda were less clear. Volvo was not a very expensive drag on Ford like JLR was and the FWD platform commonality was a bonus. The problem with Volvo was largely related to the expensive production base in Sweden and Belgium. Volvo was lacking a US production base and I think given enough time, there was a reasonable chance that Ford could have moved some production to the US - S40 to Wayne or Louisville, S60 to Hermosillo or Flat Rock, and S80/XC90 to Chicago. With the eventual shut down of Mercury, I would argue that a tighter integration of Volvo with Ford might have been a good thing on a worldwide basis. But it was also hard to say no to the pile of cash that Geely was willing to pay.

 

Mazda was accounted by Ford as an equity investment, and that made it easy to sell from a logistic and accounting stand point. But Mazda was a key part of Ford's dual-brand China strategy and it existed in many Asian markets as a brand managed by the local Ford operation. Mazda was Ford's 2nd brand in Asian emerging markets and it had a lot of utility and growth potential in tandem with the Ford brand (similar to the Hyundai-Kia or Buick-Chevy synergy).

Exactly, on the Mazda part. In China, seperating production now with Mazda, is costly and pointless. Mazda is a good second window into a lot of areas with poor Ford coverage.

 

They also make some seriously nice vehicles. Really is a shame. I hope Ford reinvests in Mazda, at least to the point where they can appoint dirctors to the board.

[Hugh]

Exactly, on the Mazda part. In China, seperating production now with Mazda, is costly and pointless. Mazda is a good second window into a lot of areas with poor Ford coverage.

 

They also make some seriously nice vehicles. Really is a shame. I hope Ford reinvests in Mazda, at least to the point where they can appoint dirctors to the board.

How much does Mazda suffer sales loss in China due to the hot/cold China/Japan relationship? I don't think as much as say Toyota and Honda but I don't have the numbers to prove/disprove. I think Fords new strategy into China is good because it focuses on the Ford and Lincoln brand. Reinvesting in Mazda I feel will take focus away.

[bzcat]

How much does Mazda suffer sales loss in China due to the hot/cold China/Japan relationship? I don't think as much as say Toyota and Honda but I don't have the numbers to prove/disprove. I think Fords new strategy into China is good because it focuses on the Ford and Lincoln brand. Reinvesting in Mazda I feel will take focus away.

 

The Ford-Mazda divorce seriously set back Ford's efforts in China. Ford would be much further ahead now in China if Mazda had stayed in its orbit.

 

Because Ford had only one major joint venture partner (unlike all the other major companies that have 2), it was critical for Ford to have full cooperation of Chang'an. The pointless separation of production facility in Nanjing (Mazda2 and Fiesta) and Chongqing II (Focus, Mazda3, S40) due to the Ford-Mazda split was hugely disruptive and limited output. The restructuring of Chang'an Ford-Mazda into Chang'an Ford and Chang'an Mazda also means Ford had to give Mazda its own production capacity at those plants just when Ford needed those capacity. And on top of that, Ford lost marketing and sales control of its 2nd and 3rd brand in China (Mazda and Volvo) just when everyone else were turning to multi-brand strategy to saturate the market and gain market share. The timing was pretty terrible.

 

And that's just China.

 

Mazda brand was under Ford management in the following markets: Taiwan, Korea, Philippines, Thailand, Vietnam, Indonesia, Malaysia, and probably a few more. Together, this represented about 300k Mazda units that were produced and assembled in Ford factories in Taiwan, Thailand, Vietnam, and Philippines. With the Ford-Mazda divorce, Ford had to turn over the Mazda sales and distribution network that it built up in these countries. And instead of Mazda being a complimentary brand in a region where consumers prefer Japanese brands, Mazda became a Ford brand competitor. And Ford had to give Mazda 50% ownership in one of the Thailand assembly plant as parting gift.

 

Losing Mazda was a gut punch to Ford in Asia. The two brands were tightly integrated in this region on production and sales, not unlike Ford and Lincoln in the US.

Edited July 30, 2013 by bzcat

[old_fairmont_wagon]

Hugh, I had even forgotten about the Volvo purchase. The idea wasn't about competing with ford's domestic production. Its arguable that a Volvo/J/LR buyer already isn't a Ford buyer and thus, do not represent much of an opportunity cost. What does represent a real cost is assembling premium, but low margin vehicles overseas at the wrong end of an unfavorable exchange rate, and then factor in the cost of shipping, and floor planning at two seperate dealerships. If ford could have done combined Volvo/J/LR dealerships in the US, built those low margin cars in the US, and then sold them in the volume that they could have reasonably achieved, they would have built up a much larger family of owners and created regular traffic in those joint showrooms for the upper levle products of each brand.

 

I believe that selling those brands when they did was essential to Ford surviving in the form that it exists today. The mistakes were made many, many years earlier and doomed the purchases to failure as business ventures.

 

And who doesn't believe that a slightly stretched, AWD C-1 platform X-type wouldn't have been better than the poorly disguised Mondeo that it was in reality? It could have been built in the same plant state side as the S40 and a C1 derived small SUV for Land rover.

[Hugh]

No Arguments here. My Point is Ford and Lincoln should not have to invest in other ventures while not taking car of your brand. Yes, Mazda is more popular in some markets. Ford has it's work cut out by focusing on their own product. Not Mazda, Volvo, J/LR. I understand a J/LR customer is not nessecarily a Ford customer. Lincoln should not have to suffer and be played to stereotype to facilitate some vapourware market or preconcieved notion.

Business ebbs and flows. Always will. Thanks BZ for the info and it sucks for Ford for now. I feel this alternate history being kicked around would have not been benefical for Ford and it's looks a little too rose-coloured for me.