Counting On A Pickup
Struggling Ford bets the ranch on a glitzy new F-150, the world's bestselling vehicle
It's quitting time at the Luck Stone quarry in Leesburg, Va., and the boys are out for a little fun. Tony Toler, the pit manager, aims a brand-new 2004 Ford F-150 pickup truck toward a 45-degree hillside. On the walkie-talkie, he calls the foreman, Paul Jenkins, riding right behind in his '98 Dodge Ram. "You with me, boy?" he needles his colleague. "We want to see if that Dodge is as Ford-tough as this Ford."
Both trucks clamber up the hill with ease. On the way back down, however, the going gets rougher. Loose gear flies into the front seat of the F-150 from the rear. I brace myself against the dashboard to avoid becoming part of it. The Ford, in low gear, holds the hill without slipping. But the Dodge skids halfway down the berm before hitting the bottom. Back on the pavement, Toler--a Dodge devotee himself, whose own pickup is a '95 Ram--is impressed. "It pulled up there fine," he says of the Ford. "It felt good."
It had better. As Ford Motor Co. works through a "back to basics" program and a huge revitalization plan, its fortunes are hitched squarely to the new F-150, headed to dealers this month. After disastrous excursions into auto-repair shops, the car-rental business, and other side ventures, Ford has been losing market share and struggling to remain profitable. The company told employees last month that it might have to cut 1,800 white-collar jobs to balance the books.
Slipping behind. Ford's earnings were better than expected in the second quarter, with $417 million in net income. But almost all of that came from cost cutting and from the company's financial services arm; automotive operations barely broke even. And rebates averaging more than $3,000 per vehicle are driving car prices--and profit margins--down. Worse for Ford, its passenger car division for the first time has slipped behind Toyota in U.S. sales.
The company that was once the world's most profitable automaker now hopes its journeyman pickup will pull it out of its rut. With annual sales of more than 800,000--about the same as the Honda Accord and the Toyota Camry combined--the F-series is the bestselling vehicle in the world. It accounts for 15 percent of Ford's North American revenue and hauled in $6,000 worth of profit per vehicle in 2002, according to Merrill Lynch--enough to turn a corporate loss into a modest profit. And Ford says the new F-150 will be better, tougher, and more profitable yet.
But the '04 F-150 has a lot of hills to crest before it fulfills those expectations. Expensive manufacturing techniques and dozens of option configurations have made the new truck as much as $1,500 more costly to build than the old one. Yet Ford will price it just $245 to $635 above its predecessor, meaning the company will eat the additional cost--and maybe more, since Dodge and Chevrolet are likely to greet the new competitor with deeper discounts that Ford may have to match.
High stakes. Importers, meanwhile, are moving in on the last chunk of Big Three turf. Toyota plans to add a Made in the U.S.A. badge to its Tundra pickup by building it in Texas, and Nissan will soon begin building its own F-150 competitor, the Titan, in Mississippi. That makes the '04 F-150 Ford's most important new vehicle in years. "Nothing could devastate this company more," predicts Jerry Reynolds, owner of Prestige Ford near Dallas, "than if this truck isn't a success."
To gauge the reception the critical new truck is likely to get, U.S. News asked some of the workers at Luck Stone--where most employees drive either a Ford, Chevy, or Dodge pickup--to help evaluate a new F-150 borrowed from Ford. Luck workers drove the truck--a $35,000 FX4 sport model, loaded up with four-wheel drive, a 300-horsepower V-8, 18-inch off-road tires, and leather interior--over rock piles and into mud pits, twisted the frame on rutted trails, poked around under the hood, and tested its power with a bed full of cargo.
At first glance, the truck was a crowd pleaser. The '04's boxier design was a hit, as were some of the features. "I love that center console," says Benny Woodward, a plant technician, as he puffed on a Marlboro and examined an interior that Ford boasts will be the most stylish of any large pickup. All new F-150s will come with a two-tone instrument panel. Bucket seats, chrome-trimmed air vents, and other niceties will be standard on higher trim lines. "Consumers want all the capability [of a pickup], along with this level of refinement," says Doug Scott, marketing manager for Ford's truck group. One reason: Many pickup buyers these days are switching over from more comfortable SUVs.
Cornering the well-heeled buyer--whether shod in work boots or loafers--is a key part of Ford's revitalization plan. With some analysts predicting that Ford's overall U.S. market share will shrink into the teens from the current 21 percent, higher-margin luxury cars--such as Ford's Lincoln, Volvo, and Jaguar nameplates--are becoming ever more important. "We don't plan to lose market share," insists Ford President Nick Scheele. "But you'll probably see a shift in market share to premium brands."
That includes trucks too. The surprising success of "special edition" models like the leather-lined King Ranch version of the F-150 has led Ford to predict that just 10 percent to 15 percent of '04 F-150 buyers will choose the entry-level XL model, starting at about $22,000, while the upscale F-150 Lariat, topping out at more than $40,000, will capture 20 percent to 25 percent of the truck's sales.
But expecting pickup aficionados to pay extra for luxe features could be a risky bet. "I want a pickup truck, not a Cadillac," gibed Larry Stokes, a Luck Stone mechanic who owns a '99 Ford Ranger pickup. "I wouldn't want to take this truck into the woods." Too plush an image, in fact, could become a strategic mistake. "It makes no sense for what's essentially a work vehicle," says Joe Phillippi of AutoTrends Consulting in Short Hills, N.J. "The mistaken belief is that whatever they put on the street people will buy."
At the quarry, in fact, workers fingered a number of shortcomings that might lead them to a Dodge or Chevy. One frequent complaint was that the F-150 lacked the ground clearance to master a rugged work site. And when Will Cockerill, a warehouse worker, was strapping a 1,246-pound motor into the cargo bed, he noticed that the tie-down straps weren't reinforced: "If something really moved, it could snatch them right out of the wall." Even little things count. The removable cup-holder insert, for smaller cups, bothered Paul Jenkins. "That's something I've got to take out and put somewhere."
Flex time. If people don't buy the mix of trucks Ford expects, there's a fallback. New "flexible manufacturing" techniques at F-150 plants, such as those in Norfolk, Va., and Kansas City, Mo., will allow Ford to switch quickly from building one version of the truck to another. Upgrading to such modern methods and getting more mileage out of common components is an urgent priority for Ford. The Futura sedan, due in 2005, could be the basic platform for up to 10 Ford models, including Lincoln, Mercury, and even Jaguar, with several "crossover"-style SUVs.
But Ford is far behind efficient manufacturers like Toyota, which can already build up to three completely different vehicles on the same assembly line. And Ford executives acknowledge that to stay competitive the company needs to cut its capacity by roughly 1 million units, or 25 percent, which could entail a bitter fight with the United Auto Workers union. General Motors managed similar cuts in its workforce but did so over a decade, mainly through attrition. "Ford can't wait that long," says David Cole of the Center for Automotive Research in Ann Arbor, Mich. "Ford must shrink and change, or die."
Ford's strategic predicament is of little concern to truck buyers, however--or to our testers back at the quarry, who were mainly interested in seeing if they could stump the truck. The F-150 passed all of the impromptu tests they devised, until Tony Toler angled the truck onto a pile of gravel. With the front right and the left rear tires nearly airborne, the other two tires would provide no traction. Finally, the F-150 had bogged down. Ford can't afford to fall into a similar trap.
2004 Ford F-150 pickup
STARTING PRICES: $22,010 to $36,365
BASE ENGINE: 231-horsepower V-8
KEY FEATURES: five different models, three cabin and bed choices, improved ride and stiffness, larger interior
COOL OPTIONS: Modular overhead storage system, bucket seats, chrome trim, rear-seat DVD player
USNEWS.COM Check out our auto reviews at usnews.com/auto.
With Paul Bedard
This story appears in the August 18, 2003 print edition of U.S. News & World Report.