Hey How’d You Like a 65 MPG Ford? Psych!

15th September 2008

Ford is being lambasted in various news media, including Automotive News and Business Week, for excluding the recently introduced Ford Fiesta ECOnetic from the US market. Ford will begin selling a Mexico-produced Fiesta in the US in 2010, but it will not, apparently, sell the ECOnetic here. What is the ECOnetic? It is a higher economy (65 MPG) version of the already high economy (40-45 MPG) Fiesta. It has a Diesel engine, very few creature comforts, low rolling resistance tires and special aerodynamics. According to Business Week, the cost of producing and shipping would require the price to be higher than the $25,700 at which it will sell in Europe. It would, however, be eligible for a $1300 tax credit, bringing the price to $24,400 – approximately comparable to a Toyota Prius, the current darling of the environmental crowd. Ford sources confirm to The Slandy Report that the ECOnetic is not planned for the US market – yet. If fuel prices keep rising, they will likely revisit that decision.

So is Ford making a mistake? Or are they exercising due prudence in spending what little money they have left? The Slandy Report thinks the answer is C – all of the above. The ECOnetic and its engine are made in the UK, where labor, exchange and shipping rates stack the deck against selling the car profitably in the US. There are mitigating factors, however:

• Because the Fiesta will already be produced in Mexico, why couldn’t Ford ship only the engine from the UK for assembly in the Mexican plant? It sure would cost less than shipping the entire car…
• Ford would realize a tremendous PR boost by beating the Prius’ environmental claims (presently the highest mileage vehicle for sale in the US – 48 mpg city, 45 highway) with a North America-produced product – this would help shed the image of selling only big, bloated SUVs and pickups.
• Ford tends to over-analyze everything (I’m not exaggerating) and has the attitude that “if you can’t prove it, it doesn’t exist.” Most reports say that Toyota is just starting to make money selling hybrids. They were willing to lose money for some time because they saw the long-term benefits (PR, future economies of scale, etc.). Ford needs to do the same. Even if they lose money on every ECOnetic they sell here, the car will have a halo effect over the entire company (see previous point). You can’t buy the positive image that car’s economy would give Ford.

Ford can/should limit the availability of the ECOnetic and advertise the hell out of it. Make sure every man, woman and child in the US and Canada knows that Ford sells “the highest-mileage car you can buy.” By limiting availability, they will be able to charge the $25K without any trouble – and without costly incentives. Reduced availability will also create a perceived shortage, which any first-year marketing or econ student knows is the way to create demand and profits. They should look at any loses they do incur as advertising or PR cost – it will be more effective than anything the “marketing communications” staff could come up with.