Ford marshals reinforcements for SUV production

Louisville, Kentucky — At a time when General Motors and Fiat Chrysler are assembling their forces for the upcoming pickup wars with Ford Motor Co., the target of their attacks is strategizing a new front for battle.

Ford is looking to outflank the competition with its all-new Lincoln Navigator and Ford Expedition. It just needs to draft more of them into service.

The Blue Oval’s Kentucky Truck Plant is the staging area for that part of the fight. The profit-rich SUVs built here have pushed up average transaction prices since going on sale in November, and that’s helping fund development of the self-driving and electrified vehicles that will be critical to Ford’s future.

But with vehicle sales plateauing industrywide, and Ford’s top officials forecasting a rough year for profits, the company is amplifying production goals for the Navigator and Expedition to meet demand for its vital new living rooms on wheels.

“Basically, everything this plant produces, we can sell,” Joe Hinrichs, Ford president of global operations, said during a media trip here last week. “Every tenth of a second matters.”

The 8,400 employees here build behemoths: Expeditions, Navigators and Super-Duty pickups. The plant runs 24 hours a day, six days a week, with one 24-hour period of scheduled downtime on the weekend. The revenue generated from this plant alone would technically qualify it as a Fortune 500 company, the employees like to brag.

Last year, the plant produced on average just over 1,000 vehicles per day. Hinrichs and Kentucky Truck Plant Manager Andrew Tapp want more.

The company is spending $25 million here — in addition to $900 million in previously announced investments — on robots, data analytics systems and other technology to produce 25 percent more big SUVs than the company had originally planned. The investments come as Ford scales back investment by $7 billion on cars to reinvest that in the SUV and truck lineups

Hinrichs won’t say how many Expeditions and Navigators the company had planned to produce in 2018 when they launched the new vehicles. But the company was conservative in its expectations.

“(This is) a segment where we had lots of potential, but we just didn’t want to be too optimistic until we started seeing the response to the vehicle,” he said.

Mark LaNeve, Ford vice president of U.S. marketing, sales and service, said when the company released its January sales results that if Ford had them available, it would have sold “a lot more” than the 1,288 Expeditions and 3,439 Navigators that it did sell. The big SUVs are sold on average within seven days of hitting dealer lots; that’s the fastest turn-rate in the company.

Part of the plan to accelerate production is to operate more efficiently. Hinrichs said that in part illustrates part of what CEO Jim Hackett means when he talks about “fitness,” a term he favors when talking about his goals for the automaker.

“Fitness is a lot about cost, but there’s a lot of other ways we can manifest our progress and the fitness of our business in the manufacturing side,” Hinrichs told reporters in Kentucky. “If we can make more units of things that are in demand, or if we can have less downtime, or if we could have better quality ... fitness is all-inclusive. Fitness is about competing. Fitness is about getting yourself in a spot where you feel confident, and you can compete with everybody else.”

Louisville workers will be able to 3-D print tools in-house. An enhanced analytics system can pinpoint lagging parts of the line so workers can more quickly address issues. More robots will streamline repetitive parts of the line.

Dave Sullivan, manager of product analysis at industry consulting firm AutoPacific, said, “Ford needs to pull all the levers they can to improve 2018. Even if this only lasts a year or two, it should have a direct impact on their bottom line. Expedition and Navigator are both priced on the high end of the segment. Were customers willing to pay a premium for these? The answer, for now, appears to be yes.”

Hedging bets

Sales of new vehicles have leveled off across the industry. GM and Fiat Chrysler are introducing all-new pickups this year to directly challenge Ford’s industry-leading F-150.There’s a general dissatisfaction with Ford’s profit margins in 2017.

Against that backdrop, Ford can’t afford to miss sales for the new SUVs. Especially when GM’s pre-tax profit in 2017 was driven by the automaker’s investments in strengthening its lineup of SUVs and crossovers to meet rising consumer demand.

GM introduced a whole slate of SUVs and crossovers last year. Its Chevrolet brand had the fastest-growing crossover lineup in the market in 2017. The popularity of those crossovers is expected to tide the automaker through its manufacturing changeover to the profit-driving 2019 Silverado pickup, which hits dealer lots later this year — and the 2019 GMC Sierra/Denali, which will be seen for the first time next month in Detroit.

With the SUV market saturated by the competition, analysts said it’s not surprising Ford kept expectations comparatively low for its new SUVs.

“Every automaker is learning about SUV demand in real time,” said Karl Brauer, analyst industry analyst and executive publisher of Autotrader and Kelley Blue Book. “Even after years of watching it grow, I think many car companies still, rightfully, wonder when and where it will end. It’s not surprising Ford hedged its bets. The reality is that the new Navigator is very good. And Lincoln, after a long drought, has a reason to be confident in the face of their cross-town rival.

“I think the Expedition and Navigator, like the current F-150, represent the best of Ford right now.”

Timing advantage

Since its launch last fall, 85 percent of all Navigators sold were either the $93,705 Black Label trim or $81,205 Reserve Trim. Though Ford won’t say it directly, they’re going after GM’s Cadillac Escalade. In January GM sold 1,403 Escalades and 838 of the larger Escalade ESV, compared to the 1,288 Navigators sold.

Ford sold 3,439 Expeditions in January. The company said the most expensive Platinum trim accounted for 29 percent of overall sales since the Expedition’s introduction.

GM sold 5,288 full-size Chevrolet Suburbans and 2,701 GMC Yukons in January. Fiat Chrysler sold 5,145 Dodge Durangos that month.

But Ford has an advantage on timing, according to Sullivan: The Navigator and Expedition hit in the middle of the competition’s product cycles, which could give Ford an edge until GM can reboot its Escalade.

And Hinrichs, whose last 14 out of 15 personal vehicles have been Navigators, wants to lean in to what he said is one of Ford’s best-ever products in order to keep the company moving.

“We have a better product,” he said. “We’re not the dominant volume player in this segment, but we think we’ve got a really great product, so we want to get out there and be a challenger brand that allows us to grow the business and have a big impact on the bottom line.”

ithibodeau@detroitnews.com

Twitter: @Ian_Thibodeau

Staff Writer Nora Naughton contributed.