Lincoln’s MKZ. Photo Credit: Ford Motor Company.
Unfortunately for Ford Motor Company (NYSE:F), its luxury-car competition with crosstown rival General Motors Company (NYSE:GM) hasn’t been pretty recently. GM is having one of its most improved sales years since 1976, while sales of Ford’s Lincoln line have declined 7.6%. Across its full lineup, Lincoln’s 2013 sales have nearly been surpassed by the Ford Fusion’s sales in July alone. Investors hoping to see Lincoln quickly turn around as quickly as Ford fixed its core brand after the recession should prepare for a big disappointment.
Roll up your sleeves…
At least Ford Motor Company (NYSE:F) executives aren’t delusional about what the Lincoln brand is today, and what it will take to revive the brand.
“No, we’re not true luxury,” said J Mays, Ford Motor Company (NYSE:F)’s design chief at the Dearborn campus, according to the Detroit News. “We’re in an investment stage with Lincoln. We’ve probably got a 10-year investment to make.”
One of the biggest knocks against Lincoln currently is that while Ford Motor Company (NYSE:F) is significantly trimming its number of platforms, a luxury Lincoln vehicle is basically a repackaged standard Ford vehicle. “It’s definitely a wanna-be luxury brand,” said Michelle Krebs, senior analyst at automotive research firm Edmunds.com, according to the Detroit News. “It’s not there, though, by any stretch.”
To reimage its luxury lineup next year, Ford Motor Company (NYSE:F) will add “Black Label” themes: three new ultra-premium themes available for the MKZ late in 2014, and one for the MKC.
Exterior of MKC Black Label Chroma Flame exterior concept. Photo credit: Ford Motor.
It’s definitely a good first step to include exclusive materials and colors that will differentiate Lincoln trim packages from Ford vehicles. Some of the materials in the Black Labels will include Venetian leather and Ziricote wood trim, usually found on high-end yachts.
To speed up its resurgence, Lincoln must also change its target audience. It will now shift from retirement-aged consumers to a younger, more affluent crowd. In its quest to shake things up, Ford is asking Lincoln dealerships to change its showrooms to meet specific guidelines.
According to the AP, 70% of dealerships in the 130 largest metropolitan areas have agreed to the changes, which will improve showrooms, selling strategy and overall appearance. Renovations even extend to the smallest details: new showroom smells, foods, drinks and even luxurious chairs. That means no more hamburgers and hotdogs during summer sale cookouts; you’ll be getting wine paired with cheese.
Next steps
Ford needs its luxury brand to succeed now more than ever, after killing or selling all of its brands besides the Blue Oval and Lincoln. As most of you know, luxury vehicles bring in higher transaction prices and margins, while representing incremental sales. Because the two brands don’t compete for the same consumer, luxury cars can fuel quick top- and bottom-line growth.
Lincoln hopes its next handful of launches can kickstart the brand’s revival. The MKC will be its next step, debuting in the second quarter of 2014, and competing with the Acura RDX and Audi Q5, among others.
After that, the MKS will debut in the large sedan segment, hitting showrooms in 2016. Another historically big-selling model, the MKX, will arrive in the first half of 2015. The kicker could be Lincoln’s once-flagship SUV, the Navigator, which could hit the market in late 2014.
Halfway there
There are two major things Ford needs to grow in order to be a great investment over the rest of the decade: market share overseas, and luxury sales in the U.S. and China.
Ford’s great progress in the latter country has boosted its pre-tax profit in the Asia-Pacific-Africa region to its best-ever quarterly result. Ford’s sales in China are up 50% over last year, and continue to climb thanks to new product launches.
Now Ford needs to shore up the other half of that strategy for success. As the old saying goes “The fastest way to do something is to do it right the first time.” If that means Lincoln’s resurgence will take longer than expected — even up to 10 years — to catch Cadillac, then that’s what must be done. Investors who remain patient should be rewarded during the journey.
The article Can Ford’s Lincoln Brand Catch Cadillac? originally appeared on Fool.com and is written by Daniel Miller.
Fool contributor Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford.
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