Ford Motor Co. (NYSE: F) has weathered the economic downturn far better than its Detroit counterparts GM and Chrysler, which both slid into bankruptcy in 2009. That’s partially because Ford had plenty of cash on hand – but also because the leadership at the automaker realized it had to reinvent its line of cars and trucks to succeed.
The story of Ford’s reinvention is most striking in its current relaunch of one of its most iconic brands: The Explorer SUV. This stylish, fuel-efficient crossover represents just how far the automaker has come, and the vision Ford has for the future.
But the real question is, will consumers continue to buy into the new Ford – or will the latest incarnation of the Explorer fall flat as a step backwards towards the heyday of sport utility vehicles? Here are the details:
According to Ford, the V-6 Explorer will get 20% better fuel economy than the outgoing model — and the turbocharged premium version will use 30% less gas. This is a clear mission to unseat Toyota (NYSE: TM) and its Highlander and Honda (NYSE: HMC
) and its Pilot with a fuel-efficient but spacious vehicle. Among the tricks used to reduce fuel consumption are a sleek new aerodynamic design, a six speed automatic transmission and a crossover frame instead of a re-purposed truck frame that shed 100 pounds from the new Explorer.
The good news is that these changes add efficiency. Unfortunately, that “efficiency” isn’t all that impressive – with estimates pointing to “above 20 MPG” for combined highway-city driving.
Worse still, the redesigned crossover is less of the high-riding, boxy SUV that folks will remember from the late 1990s and early 2000s. Rather, the new Explorer embraces its “crossover” label with a trim, curvy design that may not immediately appear related to earlier versions of the brand that were so successful for Ford.
So the real measure of success for the Explorer, then, won’t be the formal fuel efficiency as certified by the EPA – it will be whether consumers return to the driver’s seat of this model.
It’s worth noting that Ford has worked very hard in the last few years to move beyond the trucks and SUVs that fueled its success a decade ago. At the 2010 North American International Auto Show earlier this year, Ford Motor Co. snagged both the Car of the Year award with its Fusion hybrid and Truck of the Year award with its Transit Connect van. Sales continue to climb, and anticipation of a fuel-efficient European styled Focus is high.
It’s also worth mentioning that Ford, as a company, has performed remarkably well thanks to this reinvention. Ford stock is up +27% this year while the broader market is essentially flat. Likewise, the automaker’s stock is up a stunning +88% in the last year compared to gains of just +14% or so for the Dow Jones. Ford has remained consistently profitable, topping Wall Street expectations dramatically for each of the last four quarters and growing profits each of the last four quarters as well.
But if we’ve learned anything about Detroit, it’s that past successes don’t mean a secure future. GM and Chrysler learned that the hard way – and if the Explorer flops, Ford could face that reality too.
As of this writing, Jeff Reeves did not own a position in any of the stocks named here.
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