FORD NEEDS A BETTER IDEA

2/6/09

Ford is now showing the 2010 Taurus on the auto show circuit. The new Taurus replaces the old Taurus, one of the most competent and underrated cars on the road. The new car is unusually significant for a number of reasons. First, it is the bread and butter of the Ford car lineup, the car that proved, when it first arrived over twenty years ago, and before the blue oval boys let it go to seed, Ford could make a car that could go head to head against the Accord and the Camry. Second, the new Taurus is the product of a state of the art computer design process that enabled the car to be designed in under 24 months, the wave of the future as car companies attempt to be more nimble in response to consumer demand, gas prices, and the diktats of their new masters in Washington. Third, the car shows what the new Alan Mulally led Ford can do. Fourth, if the car doesn’t work, Ford might very well be toast. Fifth, from all indication, this will be a GREAT car.

I, however, find the new Taurus most significant for another attribute, and the news isn’t good for either Ford or the economy.

The current Taurus is a very good car that I have repeatedly recommended it (along with its near identical cousin, the soon to be ditched Mercury Sable) to friends interested in a larger family sedan. None has been disappointed, and this reaction is not limited to friends of Mark Quinn. The current car starts at retail in the mid $20s and tops out at about $34m, very generously equipped. In today’s economy, base models are readily available in the low $20s and loaded models can be had in the mid to high $20s. The new car will also be available, according to Ford, in the mid-$20s, but the really eye-popping, loaded to the gills car, the car that can legitimately compete with the fully loaded Toyota Avalon and Nissan Maxima, and even with the Lexus ES 350, will reach the low $40s.

The low $40s for a Ford that isn’t a truck (or for a Ford that is a truck, for that matter)?

The most obvious question is “Is this a time to be bringing out a $40,000 family sedan?” But, as usual, I am digging a little deeper.

The problem that I am highlighting is not unique to Ford but can be generalized easily to the whole car business and, with even modest effort, to the entire retail or travel sectors, and it is simply this: Cars are priced for an economy characterized by easy credit. The overwhelming majority of people, and almost everyone in the market for a Ford, could not possibly afford a $40m vehicle were it not for sweetheart leases or access to the equity in their homes, both of which long since left the building. The days of “Why should I give a damn? It’s not my money” credit are gone for a long, long time. People thus cannot pay $40m for a car. No car company (or other retail or travel concern) management, even that led by Alan Mulally, the best of the bunch in the car business, seems to realize that, or, even if they do realize it, will confront it.

The “transition” through which our economy is going will be more painful and prolonged than most people think. Corporate managements’, and ordinary people’s, inability or unwillingness to confront new realities will only make it longer and more excruciating.