Demand for Small CUVs Likely to Stay, Hinrichs Says

Joe Hinrichs, Ford President-The Americas, feels good about the direction the automaker is heading.

Ford just launched the aluminum-intensive F-150, which promises increased fuel economy and capacity, as well as a new Mustang. Sales have been brisk in North America, although the past several months have been soft due to the switchover to the new F-150.

Hinrichs is confident the automaker will have a strong 2015, but there are key issues he will be paying close attention to, including falling gasoline prices that are impacting mix and the revival of the Lincoln luxury division.

WardsAuto: Of all the concept or production alternative powertrains you have test driven in recent years, which is your personal favorite, and why?

Hinrichs: I have driven a fuel-cell vehicle and was very impressed with the capability and the potential that technology offers. I was surprised at how much it felt like normal propulsion. I also continue to be very impressed with our base hybrids like the Fusion and MKZ. For the money the hybrids we have are very impressive.

WardsAuto: Did you ever think you would have to worry about falling gasoline prices in the U.S.? How is that impacting Ford? 

Hinrichs: We know it’s a dynamic industry and economy we’re participating in, but I did not expect we’d be talking about gas prices below $2.50, and perhaps $2.00 a gallon. I wouldn’t have predicted that and I don’t think many people would. It’s important to believe that consumers and the industry still believe gas prices will rise. And when we’re doing research with prospective customers, fuel economy is still a very important consideration set for new vehicles.

How is it impacting Ford? We were already seeing increasing sales of small SUVs, and SUVs in general. Fuel prices at these levels will probably continue to facilitate that, perhaps accelerate it. If you look at the past 12-18 months, small SUVs have been the fastest-rising segment in the industry, and that’s before we saw the dramatic drops in fuel prices. So the effect I think it will have on Ford is that it won’t affect the overall industry too much in total volume, but it will have a mixed effect on increased CUV and SUV sales.

WardsAuto: What are the major issues facing your supply chain today?

Hinrichs: The biggest issue facing the supply chain today is keeping up with the higher sales in the industry, and some mix shifts. But the biggest issue is the overall volume.

We shouldn’t forget how dramatic the downturn was on the supply base back in 2008 and 2009. The OEMs went through major restructuring and the supply base went through massive restructuring, as well. In a relatively short period of time the industry has come back to 17 million units on a seasonally adjusted annual basis.  

It just takes one supplier not having the capacity and you can’t build a vehicle or a powertrain. So that’s probably the biggest issue, keeping up with the demand in the near term. In the medium- to long-term it continues to be working on the ever-increasing expectations for technology and regulatory changes to the vehicle, whether it’s connectivity or autonomous driving. And of course all of us are working toward hitting the one national fuel economy standard in the U.S.

WardsAuto: What are some challenges you’ve faced since being appointed executive vice president and president-The Americas?

Hinrichs: When I got into the position (CEO) Mark (Fields) and I sat down and talked about both the opportunities and the challenges. One of our first priorities over the past couple of years was to get back our momentum on the quality front, both in the internal and external surveys, and I feel really good about the progress we’re making there.

 The second thing was to work with everybody to get our launch readiness to where we needed it to be to support what we knew was coming in 2014, this record launch year. So far, so good. The launches have gone pretty well this year. I think getting our launch readiness back where it needed to be and getting the launches completed successfully, as well as working on ongoing quality improvements, were a big challenge and important part of this job. The quality improvements included working on the next-generation Sync system, Sync 3, which we just announced.

WardsAuto: How long will it take to make Lincoln a top luxury brand? What indicators will you look for along the way to know it’s going in the right direction?

Hinrichs: We said all along we expect this to be a multi-year journey. What’s important is that the products, the brand and the experience consumers have with the brand are all consistent and evolving over time together. We will continue to invest heavily in not only the products, but the total experience people have with the brand.

Indicators we will look for is consumer acceptance of the new products. We will also be looking to see the consumer experience feedback we get. How are customers responding to the work we’re doing? Whether it’s online or through dealerships, what kinds of experience are they getting and is it consistent with what we want the brand to stand for? And importantly, sales will be an important part over time. We’re seeing sales grow this year, they’re outpacing the industry. But it’s sales growth over time; it doesn’t mean every month or every 6-month period. That will be an important indicator.

WardsAuto: As Ford and other automakers experience a consumer shift from cars to CUVs, do you think certain car segments are at risk? In the future, could you see covering the car market with fewer models?

Hinrichs: If you look at the data we’re looking at, the strongest growth is in the small SUV segment. We are seeing decline in the large-car segment. That’s the segment that seems to be declining the fastest. There are several reasons for that. One is the (shift) to SUVs, and the other is that C/D cars have gotten bigger over time and there are a lot of competitive products on the car side.

We certainly intend to continue to offer a full range of small, medium and large cars, utilities and trucks, as a full-line manufacturer. But I think you will continue to see some of this trend we’re seeing with the large-car segment getting smaller and small SUVs continuing to be the growing segment.

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