It’s 2007, and Ford Motor Co.’s newly minted Chief Executive Officer Alan Mulally is facing a loss of a record $12.7 billion for the previous year. While Mulally’s policies didn’t cause the loss, he certainly had to address it.
One of his big concerns was Ford’s multiplicity of brands, which included Ford, Mercury, Lincoln, Mazda, Aston Martin, Jaguar, Land Rover and Volvo. The last four plus Lincoln were a part of Ford’s Premier Automotive Group, formed under company CEO Jacques Nasser in 1999 to expand Ford’s global reach and fill Ford’s coffers.
But the anticipated $1 billion annual profit never materialized. Instead, Premier lost money in four of the past five years, as sales were one-third less than expected when the group was established. And the group siphoned money from the main Ford brand, which was seeing a sales slide of its own.
Mulally had already mortgaged the entire company in an effort to secure a $23 billion loan. But it was time to stem the company’s financial bleeding by dismantling Premier Automotive Group and focus on Ford’s talent as a mass-market manufacturer.
Irrational exuberance
It was a different world for Ford in 1999.
The new year brought a new chairman of the board, Bill Ford Jr., 41. But the board of directors decided to split the job of chairman and chief executive officer, the latter going to Jacques Nasser, one of Ford’s most talented executives, he was known as being an aggressive cost-cutter, earning him the nickname “Jac the Knife.”
But the financial discipline disappeared. This was the age of irrational exuberance, and Ford was flying high, making record profits.
Nasser started to tap Ford’s treasury, buying Kwik-Fit, a chain of British car repair shops for $1.6 billion, as well as a number of salvage yards with the idea of selling used auto parts online. He also acquired Land Rover and Volvo, combining them with Lincoln, Aston Martin and Jaguar, which Ford already owned, to form Premier Automotive Group, which was established this week in 1999.
To cosset its new divisions, Nasser built an expansive new headquarters in California. Yet while Volvo was profitable, the other foreign automakers proved to be money pits. Yet even as the four unrelated brands with little in common began adjusting to their new owner, CEO Nasser’s abrasive personality, blitzkrieg rate of change, excessive cost-cutting and declining quality led to his firing in 2001.
Bill Ford Jr. would replace him.
A vision dims
But the house that Jac built remained intact.
To make it profitable, Premier’s brands visual uniqueness remained intact, but there was a lot of parts sharing with Ford’s mainstream products. The Volvo C30 was built on the Ford C1 platform used for the Ford C-Max, while the Lincoln LS and Jaguar S-Type shared a platform with the Ford Thunderbird and much of their under-skin hardware. And Jaguar’s entry to compete with BMW’s 3 Series was little more than a reskinned Ford Mondeo, known in the U.S. as the Ford Contour. The Aston Martin One-77 contained parts from the Ford Fusion, while the Aston Martin Vantage was filled with Ford parts. In fact, Aston Martin’s V-12 was little more than the marriage of two Ford Duratec V-6s. And Volvo’s new XC90 platform was reworked for use for a variety of Ford, Mercury and Lincoln products.
But it was all for naught. The company didn’t have the financial resources to support its myriad of brands.
While the Premier Automotive Group was once considered pivotal to Ford’s survival in the new century, it was no longer seen as essential. The famed brands Nasser had assembled with pride a few years before, ones meant to ensure Ford’s worldwide dominance in 21st century, were sold off like yesterday’s news. By 2010, Premier Automotive Group would be gone, the money used to ensure Ford’s survival, which only escaped bankruptcy by Mulally’s mortgaging the company.
Nasser’s foray did more than drain the corporate treasury, it damaged Lincoln for years to come. In 2000, Lincoln finally outsold Cadillac. But its inclusion in Premier deprived it of corporate funding to maintain momentum as the brand was misguidedly run by a German based in London.
In fact, Ford is still trying to revive its luxury brand, nearly two decades later.
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- Source: https://www.thedetroitbureau.com/2023/03/the-rearview-mirror-fords-high-end-failure/
