Escalating costs will continue to drive consolidation in the automotive industry, says Jac Nasser, president of Ford Automotive Operations. And Ford will press on for consolidation in its dealer ranks, he said.
Nasser was interviewed May 12 in Dearborn, Mich., by Editor Peter Brown, Executive Editor Edward Lapham and Staff Reporter Mary Connelly. What follows is an edited transcript.
As an industry, we now have DaimlerChrysler AG, bigger and fewer dealers and bigger and fewer suppliers. Is bigger always going to win?
I don't think bigger is necessarily better. However, to be better it helps to be bigger in the type of industry that were in. You can be bigger and not better.
Do you share the analysts' view that DaimlerChrysler might prompt other people to look for partners for that half that might make them better?
I don't think there is anyone in this industry that is going to overreact to this and rush out to do acquisitions, mergers and relationships that don't fundamentally make sense.
Do you expect to see continued consolidation among automakers of a reasonably dramatic nature over time?
Yes. The cost of doing business is going to continue to escalate. I am talking about the resources and investment needed to be able to remain competitive, to be able to invest in research and engineering, the environment, safety, the technology that will go into the products, and the broad range of products that will be required.
That is going to continue to be a push for fewer and fewer unique and separate boardrooms. I think that will result in companies that will need volumes approaching 10 million vehicles a year. I think we will get to a point where even someone selling a million vehicles a year will be a niche player.
How will moving Lincoln Mercury to California produce cars that really matter?
The move was driven by a number of reasons.
We felt it was an opportunity to get to know the market better by actually being there. California is an area of creativity and innovation. Just the synergy of being involved in that energy and creativity was a plus for us.
We feel that over time we will be able to attract a different type of person for Lincoln and Mercury. That will, over time, create a different DNA for the division. Finally, Ford Division is a very powerful force. It was very difficult to establish different personalities and styles of operating.
You would have an organization capable of designing and mostly engineering cars that would use common parts?
You wouldn't have the capability to change a platform or change the hard points of a vehicles. But you would want the capability to be able to have different designs and head in different directions.
What are your dealers telling you about market consolidation and Ford Retail Networks?
It is mixed. Whenever you go through a big change, you always go through a period of remorse about the fact that change is happening. That is just human nature. People are getting more and more comfortable.
We'll just keep going. We think it is fundamentally good for the dealers, for us and for the customers.
The market is like a Turkish bazaar with people lowering prices this way and that way.
I don't see it getting any better in the short term. We can't afford to sit back and be spectators.
How do you build brands when you are plunking down $1,500 on a car?
In the short term, you've got to concentrate on making sure you are active in the marketplace. In the longer term, you've got to start to build more discernible differences in the products. We've done it very successfully with most of our truck range, and less successfully on a consistent basis with our car range.
Are you changing your industry forecast for the year?
If anything, we may nudge it up a little bit. But no major change.
Do you want to take more of Kia?
We're in discussions. We are not interested in significantly more debt. We are conservative in our balance sheet, and that is the way we like it to be. We're not in a mood for changing cash into liabilities at this point. But we're there and in discussion.
Has creation of Visteon as a market-oriented supplier saved you money? Is it in term of hundreds of millions?
Yes. It's focus. It's attitude. It's having a sense of fending for themselves and a spirit of running a business.
Is your car strategy stable in North America? Will you keep Contour and Mystique in North America for the foreseeable future?
I'm in this phase of listening. We can't talk about future products.
You'll find some major changes in the way we present our car lineup over the next several years. We will be going through a complete evaluation of what is right for us in the car market. We are going to change our resource allocation very quickly.
When you look at all of the competitors in the business today we've got too much of our assets tied up in products that are too generic. That applies to Ford, General Motors, Chrysler, Toyota and Honda. It applies to everybody.
Do you share the hypothesis that a great deal of future growth will be not in car or truck but a car/truck hybrid?
No, I don't. I share a view that there is going to be some growth in that segment, but we haven't seen the end of truck growth.
Cars at the moment are probably at their lowest ebb. The reason trucks have developed so strongly in the United States is because there has been tremendous creativity and ingenuity in the truck area.
Will cars come back?
I think they have to come back.
They won't come back magically. They have to deserve their come back. Just imagine where the truck market would be if you still had the truck products of 10 years ago. No three-doors, no four-doors, no easy-to-use four-wheel-drive vehicles, no extended cabs, no flaresides.
The basic thinking and the basic creativity that went into the truck market of the last several years, that is the type of personality we need to install in the car segments.
Are you reviewing your truck strategy to make trucks more fuel-efficient or more compatible with passenger cars?
If you look at our strategy over the last several years, I don't think it's a coincidence that the Windstar is the only minivan with 5-star safety ratings.
I don't think it's a coincidence that we have announced an environmental strategy.
I don't think it's a coincidence that we took the lead on side airbags.
As soon as we think we've got technology that is ready for the market and is affordable, we will offer it to the marketplace. That includes include clean air, safety and fuel economy.
When you look at our strategy in those three areas, we have clearly placed more emphasis in the past on safety. We've got more 5-star ratings than any other manufacturer. We have placed more emphasis on safety and clean air.
We've had less of an emphasis on the efficiency side because the marketplace is basically being driven to larger products.
We are rebalancing our resources between those three areas so that we are putting more emphasis and more focus on the efficiency side. You will start to see that roll out over the next several years.
Is truck-bumper height to car-bumper height and car-door height something that is going to change? Is that a real issue?
I think if the marketplace suggests it's an issue. That will have the biggest impact. There is always room for improvement. There isn't an overwhelming case for panic at this point.
Should there be one CAFE standard for cars and trucks?
It depends on what that standard is. I'd be more in favor of letting the marketplace decide what the levels should be and not try to superimpose it with high-level standards.
What will the Euro mean to European operations?
Overall, it's positive. We've effectively had a common market but with very different tax rates and very different currency rates. Over time, it is going to be positive for economic growth, for transparency of prices and it will provide efficiencies in the way we run our business.