Ford's new focus: the global village

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The president of Ford of Canada is on the line and because David Mondragon has just learned my teenager is about to start driving, I am at risk of losing a lot of money on this interview.

"We've got an all-new Fiesta coming into the market for $12,999. You're not going to be able to beat that value in the market. Think about that," says Mondragon, an ex-football player who talks like I'm sure he used to hit players when he was a defensive back in college.

In Pictures, Ford's newest models for 2011 and 2012.

So I, of course, start blocking (hey, Mondragon is not the only guy who played football around here). No, no, I say, the Fiesta isn't quite right. Very nice little car and I love the dual-clutch automatic transmission ($1,200 extra). But I'm thinking a small pickup would be better.

Then, like any gridiron veteran running a car company, Mondragon calls a new play:

"Start with a Ranger. We can get you in a Ranger under $15,000. There you go. We have Employee Pricing starting next month (July), so you can have an employee pricing program - you pay what we pay," he says.

I can see that if I don't find another gear, if I don't change field and head in new direction, I'll only escape this interview by writing a $15,000 cheque. Yet, even as my brain races through the journalist's playbook, I also cannot help but notice one of the reasons why Ford of Canada is the No. 1 car company in Canada by sales. If the boss pushes this hard to move the metal - all along chuckling and cajoling me to buy a Ford - that attitude must filter down to the trenches where cars are sold one at a time.

In this week's What Car? feature, a reader wants to buy the three-door Mazda2 hatchback which is currently sold in Europe. Can she buy one in Canada?

My new gambit: jump in with the leadership question. Big bosses always like talking about leadership. I ask: What's it like to be No. 1 in Canada by sales, to have a bit of target on your back?

"Being No. 1 in Canada is not our No. 1 goal," says Mondragon, thankfully letting go of my teenager's driving needs. "It is a great pride point for us and our dealers and I think it's a great pride point for our customers, as well. But it's not our No. 1 goal. We are very focused on sustainable, profitable growth for us as a manufacturer and our retailers. And that's our No. 1 goal."

In other words, he says Ford of Canada is not going to buy market share with oversized sales sweeteners, unprofitable cash-back deals, cut-rate financing offers and overly well-equipped models. Ford will do what's necessary to stay competitive, but the days of bribing customers while losing money doing it are over. A brush with near-extinction will do that for a car company.

Remember, Ford Motor Co. amassed nearly $30-billion in losses between 2005 and 2008. To survive and reinvent the company, an essentially broke Ford in late 2006 borrowed $23-billion (U.S.) to fund a turnaround based on a single-minded focus on globally developed models for the Ford brand.

"If you look at some of the stupid things in the market ... We're not going to put incentives in the market to claim leadership," he says. "After all the hard work we've done as a company to build our brand and strengthen our financial position and our bottom line? No, we're not going to do that.

"So we might not be No. 1 when everything is said and done. But I will tell you that we will have a very sustainable and profitable business going forward." And yes, the Canadian unit of Ford is profitable, he says without divulging specific numbers.

Ford Motor itself, of course, is profitable, posting earnings of $2.7-billion (U.S.) last year. In April, Ford posted $2.1-billion in quarterly net income and, at the company's annual meeting in May, Ford chief executive Alan Mulally - under whose leadership Ford ended three years of losses in 2009 even as rivals slid into bankruptcy - said the auto maker will be solidly profitable in 2010.

"We're clearly on the path to profitable growth," Mulally told shareholders at their annual meeting in Wilmington, Del.

Mondragon, Mulally and all the other Ford executives believe they have chopped down the company into a lean, streamlined operation. Ford has downsized more than 40 per cent of its work force since Mulally came on board, along with negotiating new labour contracts that, while not as generous for the employer as those at General Motors and Chrysler, keep costs under control far better than in the recent past.

Meanwhile, Ford has spent years putting in place a product development process that creates vehicles for the world, using global platforms tailored to local markets. What's that mean?

It means that the Ford Fiesta subcompact he wants to sell me is essentially the same car sold in Europe. Shared parts, shared design, shared engineering. But this one is built in low-cost Mexico, which is part of NAFTA, so it can be sold in Canada and the United States duty-free.

"You cannot be profitable if you run your business like a regional company," says Mondragon, growing serious. "So everything at Ford comes back to our globalized footprint and our leveraging of this great global footprint of world-class vehicles.

"That's a key advantage Ford has today versus our competitors. We made those hard decisions - the decisions the industry is having to make now - early, and we invested very aggressively during the downturn. We were one of the few companies that did that."

One result of that spending is a coming barrage of new models, starting this month with the Fiesta, followed by an all-new, car-based Explorer crossover utility and continuing with the 2012 Focus compact slated for an early 2011 on-sale date.

Another is quality. Independent studies now clearly show that Ford is not just the quality leader among Detroit's three auto makers, but in the world. For instance, in the most recent J.D. Power and Associates Initial Quality Study released last week, Ford was the top-ranked non-luxury brand - ahead of Toyota, Honda and all the other mainstream brands.

Not only is the Ford brand ranked fifth overall for 2010 (up from eighth place in 2009), 12 Ford models ranked among the top three in their respective segments and four core models earned extremely high marks for quality. And beyond the Power survey, 90 per cent of Ford's models are rated average or better than average for quality by the influential researchers at Consumer Reports.

"I think of the gains we've made over the last few years, and when I think of our position in the market - to me it's about earned leadership. It's about value, affordability, quality, safety and the technology investment that we've made in the product that's earning us leadership," says Mondragon, noting that Automotive Lease Guide says Ford has the highest resale value improvement in the auto industry.

The turnaround at Ford to date is impressive, but a long list of challenges remains. First among them is to get a broader swath of the marketplace to believe the changes in Ford's products - especially world-class quality - are real and permanent. That takes time.

Second, Ford is shifting its product focus from pickup trucks and SUVs to passenger cars. For some Ford dealers, Mondragon concedes, 80 to 90 per cent of their sales volume has been in light trucks. But passenger cars and car-based crossovers represent the bulk of new models from Ford in the next few years. Ford has not been competitive as a full-line car maker for a long time, but that needs to change.

"We are ... I have this phrase that I use, 'operational readiness.' It talks to our shifting impressions for consumers - from Ford is a great truck company to Ford is a great car company," Mondragon says, adding, "We want them (consumers) to start thinking about Ford as a great car company. When they are looking for a car, we want to be on the radar screen."

Meanwhile, Ford still owes $34.3-billion) in debt - far more than the $17-billion that General Motors had when it left U.S. Chapter 11 bankruptcy last year.

Paying down that debt is a major priority, but it won't happen overnight. Ford surely will issue more stock, but with 3.8 billion shares out already, Ford must be careful about tapping new investors.

The company also will phase out its Mercury division this year, which could hurt overall sales (although it stopped selling the Mercury brand in Canada years ago). And the Lincoln luxury brand, even though sales are up 73 per cent in Canada, is underperforming overall.

Moreover, globally Ford has plenty of work to do expanding into emerging markets. Its Asia Pacific division has 2 per cent of total industry sales in China - now the world's largest automotive market - and is behind its rivals there.

And, of course, the competition in Detroit has certain advantages, too. For instance, GM, fresh out of bankruptcy and starting to gain steam, has little debt and a more advantageous labour cost structure overall in North America.

Mondragon and other Ford executives are aware of these challenges, as well as what some say is Ford's greatest risk: complacency. To avoid it, Mondragon says Ford must stick to its knitting - to focus entirely on delivering world-class products.

"We've got four legs to our stool: quality, safety, fuel economy and technology. And those are the areas where we focus our business in terms of products," he says.

In Pictures, Ford's newest models for 2011 and 2012.

In this week's What Car?, a reader wants to buy the three-door Mazda2 hatchback which is currently sold in Europe. Can she buy one in Canada?