UPDATE 2-Ford sees expansion in small car sales, profits
(Recasts, adds quotes from Ford executive, background, byline)
By David Bailey
TRAVERSE CITY, Mich., Aug 13 (Reuters) - Ford Motor Co (F.N) said on Wednesday it expects small car sales to increase sharply and a double-digit increase in their profits as it cuts complexity in customer offerings and in production.
Ford expects North American sales of autos such as the Focus compact using a new global car platform to grow to 2 million units within five years from 1.1 million units as demand for cars grows in the region.
The automaker also expects double-digit-percentage profit growth from that platform in North America, compared with the current Focus model built in North America, as it reduces the complexity of options offered and the parts contained in the vehicles.
Ford currently has separate platforms for the Focus sold in Europe and the one sold in North America that share less than 20 percent of their parts, which the company expects to grow to 90 percent within five years.
"Ford already delivers the best small cars in Europe," said Mark Fields, Ford's president of the Americas, in a speech at a conference in Traverse City, Michigan. "Now it's North America's turn, and we intend to deliver these small cars profitably."
Ford also expects customers for smaller cars to pay up for interior amenities such as leather, navigation systems, top-flight stereos and other items that they grew accustomed to having in the larger vehicles they are leaving.
Fields said it is possible small car buyers in North America will be willing to pay more for those vehicles than they have in the past. Compacts and other small cars typically have been seen as no-frills economy transportation.
"We have to see how the market develops as we see customer requirements on fuel economy become more and more important," Fields told reporters on the sidelines of the Center for Automotive Research seminar.
Fields said Ford is reducing the number of combinations offered in the Focus to about 150 for the 2010 model year, about a 95 percent reduction from the 2008 model year.
Ford, which posted an $8.7 billion net loss in the second quarter, has said that it believes a drop in consumer demand for large trucks and SUVs is permanent and has set plans to shift production accordingly.
Ford also expects customers to seek more amenities in its interiors and electronics and has formed a new team to increase efforts at on-board electronics across its vehicle lineup and to keep pace with the rapid changes in consumer electronics.
"That space works at a very different clock speed than the automotive industry, it works very fast," Fields said of the consumer electronics industry's penchant for product turnovers within months, compared with the multiyear cycles for cars.
Ford needs a group that "eats, sleeps and drinks" technology that can identify products and get them into Ford vehicles, Fields said.
The automaker partnered with Microsoft Corp (MSFT.O) on the Sync electronic platform that allows the driver to access digital music and cellular phones using voice commands. The platform can be adapted through software upgrades.
U.S. auto sales fell industrywide to a 16-year low in July, but Ford's Focus has been selling strongly as consumers shift demand toward cars. Average transaction prices on the Focus have increased $750 per car year to date, compared with an average $100 increase for the segment overall, Fields said.
Ford in July said it would bring six European models to North America and convert some plants from truck production to car production in response to the change in consumer demand.
By the end of 2010, two-thirds of Ford's spending will be on cars and crossover vehicles, much of it aimed at small cars such as the category in which the Focus competes, Ford said. (Editing by Brian Moss, Gerald E. McCormick, Phil Berlowitz)
