Is America ready for the '96 Taurus?

Its styling is so daring, so swoopy and so unusual that Ford Motor Co. took the wraps off the '96 Taurus nine months ago to give it tons of exposure be ore "officially" launching the new model Sept. 28. Now the big test begins as Taurus and its stablemate, the Mercury Sable, try to keep and capture the hearts and pocketbooks of Americans. It's a roll of the dice, and the outlook is fuzzy.

Sable obviously is a key factor in Ford's strategy, but it's the high-volume Taurus that becomes the predator in its quest to remain the best selling car in America. In the process, however, Taurus also becomes the prey -- the car everyone else in its size and price category is targeting with a vengeance.

So what are the pros and cons in analyzing how Taurus/sable will do in the marketplace? First the pluses:

* Styling. The '96 Taurus turns heads. Its elliptical shape will undoubtedly attract the attention of potential customers who are not normally Ford buyers.

* Equipment. Power windows and door locks that lock when the car is put in gear, along with a neat control panel, are evidence that the new Taurus is a thoughtfully conceived vehicle.

* Quality. No telling how it will rank in the J.D. Power surveys, but the '96 Taurus is a much better car than the one it replaces.

* Marketing. Ford's spin doctors are the best in the business. They've given the company five of the 10 best-selling cars and trucks in the U.S. If anybody can play up the positives and bury the negatives of the '96 Taurus, they can.

Among the potential negatives:

* Styling. The new look is such a radical departure that there is no way for Ford to hold onto all current Taurus owners.

* Price. Ford expects that 40% of '96 Taurus sales will be $19,390 for the entry-level GL. But when moving up, buyers are looking at more than $20,000, and that price perception is a problem.

* The Marketplace: Taurus/ Sable launches into a softening market. With Ford trying to sell up to 600,000 units a year, the downward trend of the market presents a major impediment.

* Competition. Domestic automakers have a natural price advantage against the 96 Taurus, which they will undoubtedly exploit. Japanese manufacturers will enhance service to an already loyal customer base and continue to hype their quality.

Fueled by a $110 million ad campaign, the '96 Taurus is dominating conversations within the auto industry. Auto writers, analysts and competitors are asking one another "Whaddaya think?" And Team Taurus talks to anybody who's interested. But no one can answer this question: Will the '96 Taurus surpass, or even match, its predecessor?

The stakes are high. Besides the $2.8 billion Ford spent developing the '96 Taurus, the old Taurus/Sable duo contributed $7.5 billion to the corporate coffers every year and accounted for 110,000 jobs. With more than 4 million on the road, the pair held 6% of the market. And the Taurus has been the best selling car in the U.S. for the past three years. So why mess with it?

Ford executives say the market made them do it. They concede that after 10 years the original Taurus was showing its age. Its cycle plan called for an all-new (there was a modest redo in 1992) replacement for '96. So Ford started market research three years ago. After chatting 'em up with more than 10,000 consumers in focus clinics nationwide, "the answer came back overwhelmingly that (the new) Taurus was expected to (be) revolutionary," says Ross H. Roberts, Ford Div. vice president and general manager.

Based on that research, top executives at Ford wanted to "stretch" the design of the second generation of their most popular car since the Model A, and they've done it. The elliptical-shape design of the 1996 Taurus leaves every family sedan on the road in the dust. But it is controversial a love/loathe look.

It's a risk, and the Ford folks know it. But "we've done enough market research that I feel absolutely confident that the car is going to be successful from a design standpoint," says Richard J. Langraff, head of the Taurus development team. "It would just be astonishing if the car, from a design standpoint, was not successful."

Auto writers who have driven the car say it surpasses the '95 model. It's quieter, equipped better, and numerous options are now standard. There's "less shake, less noise, less harshness," says George Bell, chief engineer on the project. That's true, but so is the reality that the '96 Taurus is sailing against the wind of just about every current trend in the automotive industry.

The conventional wisdom is when you're ahead, protect your lead. Ford sold 510,319 Taurus/sables during the '95 model year. Most manufacturers salivate for those kind of numbers off, basically, one car. But rather than adopt a less radical style to protect that sizable chunk of the market, Ford chose a revolutionary design for two reasons: It wants to hit that 600,000 target, and it wants to go after import buyers, although that's hardly a new goal.

Conquest sales are made through design, technological innovation or price. With Taurus' shape driving development team engineers to their creative brink, Ford pursued the first two prerequisites, sacrificing the third in the process. The new base model costs about $ 1,000 more than the old one.

Succumbing to pressure from its dealers, Ford held the price increase to 5.6%, rather than impose the 7% price hike that it wanted. Any substantial price boost, however, seems to ignore the affordability issue. But Mr. Landgraff says that "we haven't taken the car up substantially in price, or repositioned it downward in price. Relative to other cars, it's about the same place it's been for the last couple of years."

By aggressively going after the Toyota Camry and Honda Accord, Taurus is targeting a different kind of customer. Nothing wrong with that. As a Chrysler Corp. executive says, "We all want to attract more import buyers." But Ford's tactic is puzzling.

The new Taurus has more features and engineering content (see WAW -- July '95 p.25). So rather than the 16 manhours it takes to assemble the '95 model, the '96 replacement requires about 17 manhours of work. During a time when every carmaker is looking to cut manufacturing hours, Ford bucks another automotive trend by increasing the time it takes to assemble a Taurus.

James D. Donaldson, Ford Large Front Wheel Drive Vehicle Center vice president, promises that assembly time will be lowered as the car is farther into its life cycle.

This program is full of oxymorons. For instance, 17% of Taurus/sable sales are station wagons. Ford wants to raise that to 25%. While the team was locked in the basement, apparently nobody bothered to check out the market's insatiable appetite for sport/utility vehicles (SUVs). Or that they have the No. 1 seller, the Explorer. In other words, even if they could boost the percentage of station wagons sold, how do they do it without cannibalizing sales from their own SUV, or from their hot selling minivan -- the Windstar?

The `96 Taurus is a longer, wider, heavier car than its predecessor. Thus, Ford has put Taurus' best buyers at risk. Market research has shown that women drivers don't like big cars; fully 60% of current Taurus owners are female. Perhaps that's why, despite its massive advertising campaign, that Ford expects the percentage of female buyers to drop to 50%

Its biggest competitor naturally questions Ford's strategy with the new Taurus. Steve McAvoy, passenger car marketing manager at General Motors Corp.'s Chevrolet Div., passes along these cogent observations to WAW:

* "We're going to learn (whether) you can effectively restyle your car and move the transactional price up about $3,000 one year to the next. They've got a $2,000 incentive on their present vehicle, and they've raised their new vehicle approximately $1,000. It's going to be interesting to see how the market reacts to that."

* "Ford has to prove that this car is going to be accepted in the market. I've got sales figures that it's accepting my car (Chevrolet Lumina). They have no evidence at the moment that this car is going to be acceptable."

* "There's a whole bunch riding on it. There was a slight miscue with the launch of their (Ford) Contour. Now they come with the Taurus. Better not miscue there. Yeah, there's a lot of risk."

Indeed there is, but the Ford folks have a plan.

From January to June, Ford ran both Taurus production plants in Atlanta and Chicago on overtime, and they used a handsome rebate to sell the old model -- and built a commanding sales lead through the first eight months of the year. Then Ford allowed dealers to start selling the new model about a month before the official launch date. Says one executive: "If we sell 380,000 to 400,000 old and new Tauruses this year, we can (stay No. 1)."

And if that happens, it's a no-brainer to guess which Taurus will be featured as the best selling car for 1995: the '96 version.

"Ford, without question, has our respect as a marketer," says Mr. McAvoy. Adds a Chrysler executive, "They'll do whatever it takes to remain the No. 1 car, including buying market share."

There has been much speculation about Taurus pricing: Ford wants to move it upscale; it's to cover costs; or it's to leave some wiggle room in case incentives are needed.

Some Ford executives already are backing off the sticker price. "Many things could happen to that when the trading process begins," says Mr. Roberts, "used cars in trade-ins, whether the dealer makes full gross, there) are a lot of variables."

A Ford insider confides that if Taurus/ Sable production hits about 550,000 annually, the gross variable profit will be 5.000 to $6,000 per car. That leaves a lot of room to dicker and still remain in the black on each sale.

Simultaneously, Ford wants to cut corporate and rental fleet sales, which account for more than half of Taurus volume, while increasing Taurus/sable overall sales by 90,000 units. Leasing is the only avenue that provides a quick path to that target.

Should Ford opt for that strategy (see Leasing, p.68), it is master of the short-term, 24-month lease. There's no other way for the company to move enough metal to keep the new Taurus No. 1.

Ford has announced it will offer a special 24-month lease to Honda Accord and Toyota Camry customers whose leases are ending. The lure is they'll be able to bring their Tauruses back if they're not satisfied within the first six months of the deal. The closer, however, will be the price.

Taurus wants to hold on to its current owners, too. That'll be easier, says Richard Beattie, Ford's executive director of rental, lease and remarketing operations. "As an option to end of lease, (current lease customers) will be offered an all-new Taurus. Nothing can be better than to have an all-new product."

Mercury's Sable has always been an afterthought. But to make Ford's strategy work, its 100,000 annual sales must be maintained, if not increased, to lessen the load on Taurus.

Alan Baum, a partner in AutoFutures, an Ann Arbor-based automotive research and analysis company, says Taurus will enter a cooling-to-stagnant market. "We look for slight growth in '96 from this year's 14.8 million, a downturn in 1997 to something below 14 million add then a slow recovery in '98 and '99."

Thus, short-term leasing takes on immense importance in Ford's overall strategy to maintain the cash-generating, high-volume sales of Taurus/sable.

In a slow market, not only will Ford have a built-in, returning clientele and know who they are and where they'll return their cars, they'll know on what day customers are coming back. Right now, anyway, every Taurus and Sable that Ford can lease is a near-term advantage.

Mr. Beattie doesn't think late-model, leased Tauruses entering the used-car market will hurt '96 Taurus sales. New car buyers will be steered toward leasing.

Competitors, for the most part, have been kind in their comments about the new Taurus.

But a Nissan official is blunt. "(Ford) is positioning that car as something akin to an import," he says. "They may be in for a bit of a shock. No matter what (they) say, the Taurus cannot compete with the Maxima."

Dodge no doubt will hype the fact that, although Taurus is about the same size as its Intrepid, the Intrepid has more interior space and power, handles better and costs a bit less.

GM can wreak havoc on Ford's strategy. It has at least a half-dozen entries in the mid/full-size market, and just about all of them have a natural price advantage over Taurus/sable. Look for GM to exploit that and mount a massive, brand-specific ad campaign of its own when new models hit the market in 1997. Chevy will push the Lumina as a substance-over-style alternative to Taurus for $2,000 to $3,000 less.

Honda Accord owners? Well, they're Accord owners. If they wanted a bigger car for less money, they would have switched to the old Taurus. Honda lovers are like Saab and Volvo owners; Ford may pick off a few but they're not going anywhere.

Next year's Toyota Camry purportedly will cost 20% less to build, allowing Toyota to lop $1,000 off the sticker. Thus, the new Camry will be more price-competitive with Taurus, and will most likely remain the premier four-door sedan in terms of quality.

Americans grew comfortable with the old Taurus. Even if they didn't own one, they knew it was a good, solid car. Now Ford has bet big that Americans are ready for a revolutionary replacement, and that they'll pay more to get one. That strategy could shoot down the best selling car in America if it fails.