COLOGNE, Germany (Reuters) - Ford (F.N) wants to steal customers from premium carmakers with higher-end versions of its mass-market models as it tries to end years of losses in Europe.
With most of its rivals chasing the same affluent buyers, the tactic is fraught with risk and there may be few winners.
But at the U.S. company's European headquarters, executives are confident they can convince drivers to pay more for existing models upgraded with leather interiors, chrome moldings and top-notch customer service packaged under a new label, Vignale.
Success would help Ford achieve durable profitability in Europe, which is emerging from its severest auto market downturn in two decades. The Detroit-based carmaker has not made money in the region since 2010.
Ford's European sales could soar by 25 percent to 1.65 million cars by 2020, according to research firm IHS Automotive, as it churns out at least 25 new or upgraded models by 2017.
That may count for little if it cannot raise prices. Ford's European market share bounced back in the first four months of 2014, but that was partly because it slashed prices more than rivals, according to a major market researcher.
"Prices are still as competitive as they were in the worst of times," said Ford's European sales chief Roelant de Waard.
The second-biggest U.S. automaker has spent years searching for a premium formula that works in Europe's fiercely competitive car market, a process that saw it take on and later jettison European luxury carmakers Volvo and Jaguar.
This time it is focusing on its own brand as it targets more affluent Ford buyers and drivers considering their first purchase of a high-end car. It also has customers of German premium brands BMW (BMWG.DE), Audi and Mercedes in its sights.
"People assume it would be very hard to sell to them but that's not the case," de Waard told Reuters, pointing out that one in six owners of Ford's S-MAX model previously drove a German luxury car.
Ford will also start selling its iconic Mustang sports car in Europe in 2015 and does not rule out introducing the upscale Lincoln brand at a later stage.
Its Europe CEO Stephen Odell said the carmaker was on track to meet its 2015 profit goal, but the brand needs to develop further.
"It's a big risk if you assume that you can't do anything," he told Reuters at the company's regional headquarters in Cologne. "If you assume that all you're going to do is be squeezed, than it's a problem."
PEUGEOT, RENAULT, FIAT
Ford is not alone in its upscale ambitions.
French rival Peugeot (PEUP.PA) is more advanced in launching its DS marque, which CEO Carlos Tavares plans to separate from the Citroen brand. Renault (RENA.PA) will debut the new "Initiale Paris" high-end line with the next-generation Espace MPV after offering a concept version at last September's Frankfurt auto show.
Meanwhile, those high-volume carmakers are being squeezed in a downmarket expansion by luxury rivals, with a push into compact cars by Daimler's (DAIGn.DE) Mercedes and Audi (VOWG_p.DE).
As if that were not competition enough, Fiat Chrysler FIA.MI is readying a major push for Jeep, Maserati and Alfa Romeo, premium brands with a higher profile and stronger heritage than Vignale, named after an Italian automobile coachbuilder established in the 1940s.
"Those brands that are between a mass-market and a premium brand don't have legs," Fiat Chrysler Chief Executive Sergio Marchionne told investors on May 6. "You need the Alfa DNA."
Analysts agreed the outlook for Vignale was challenging.
"I doubt that mass-market manufacturers are able to generate considerable volume in the premium segment," said Boston Consulting Group senior partner Nikolaus Lang. "Penetrating the European premium market is troublesome."
Ford, however, believes the Vignale label can enhance the appeal of cars like the Mondeo midsize saloon and the S-MAX MPV as it overhauls its European model line-up. A revamped Mondeo is expected by the end of 2014.
The strategy is intertwined with a goal to increase Ford's share of sales to retail and company-fleet buyers, who typically order cars at higher prices, while curbing reliance on less profitable sales to rental-car companies - even if that implies a loss of market share.
To differentiate Vignales from cars produced on the same production lines as cheaper versions, Ford will set up special customer lounges at 500 of its 2,400 European dealerships. They will hold exclusive rights to sell Vignale-badged cars.
Marketing strategy has shifted too, with Ford ending its sponsorship of UEFA Champions League football after 21 years. The league brought the brand to 300 million TV and online viewers in over 200 countries, but its focus has shifted to business-minded, tech-focused buyers that it will seek out using digital media and sponsorship of technology fairs.
"Ford doesn't need more awareness," said Odell. "We have to communicate the value of Ford."
(Reporting by Andreas Cremer; additional reporting by Laurence Frost; editing by Tom Pfeiffer)