Big bet on a small car

Ford of Europe pins recovery hopes on new Fiesta supermini

Ford of Europe's biggest hope for turning around its fortunes lies with one of its smallest cars.

In debuting the redesigned Fiesta supermini here Tuesday, Sept. 11, Ford unveiled a vehicle it hopes will double its segment share to 15 percent, from about 7 percent.

Ford sold 274,255 Fiestas last year, but the automaker has bigger plans for the new generation.

"We're going to be doing 405,000 Fiestas at Cologne (Germany), maybe as many as 450,000, and another 100,000 at Valencia (Spain). We'll be doing 1,800 units a day," said David Thursfield, Ford of Europe CEO.

Thursfield made the comments just as news was breaking of the terrorist attacks in the United States, which is expected to have at least short-term impact on global markets and consumer confidence.

Regardless of the overall market picture, the Fiesta enters a supermini segment already superheated by new entries. Every automaker of note has an entry, and the Fiesta's launch at Frankfurt was echoed by launches for the Citroen C3 and VW Polo.

With 3.56 million units sold in 2000, the supermini segment is the second largest in Western Europe. Only the lower-medium segment - led by the Ford Focus and VW Golf - is larger.

But all cars in the segment except the Peugeot 206 and Fiat Punto - two of the best sellers - showed price declines over the 12 months ending in June, according to eurocarprice.com, using JATO Dynamics data. And margins are thin in the segment already.

"The compromise is that you're always balancing off affordability in superminis," said Martin Leach, Ford of Europe vice president of product development.

"They have to be accessible to a large volume of customers, so the challenge is keeping a tight rein on costs while delivering best possible function."

Making Fiesta a profit center is a major part of Ford of Europe's turnaround plan. Ford of Europe posted a $1 billion operating loss last year. This year it expects to break even, while targeting $1 billion in profits by 2003 to 2004.

One way to make money off the Fiesta is to share the platform with as many vehicles as possible. The Fusion UAV, shown here last week, the Ka replacement, the StreetKa convertible and possibly a small sports car will come off the same platform, which could push volume close to the 1 million mark.

You can reach Mark Rechtin at mrechtin@crain.com

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