Ford Reaches a Crossroads

| About: Ford Motor (F)

By Justin Dove

People who follow Ford (NYSE: F) were dealt a big surprise last week by some negative press.

Ford fell 18 spots to 23rd in this year’s J.D. Power and Associates 2011 Initial Quality Study (pdf). Ford was ranked fifth last year and was the mainstream brand with fewest defects. Ford had exceeded industry averages in quality each year since 2006.

There’s no coincidence that it was also President and CEO Alan Mullaly’s first year with the company…

Mullaly’s Reputation with Boeing and Ford

Mullaly built his own strong reputation as the CEO at Boeing (NYSE:BA). Then he added to this reputation (pdf) with the way he handled Ford through the recession. Ford was the only company of the “Big Three” that didn’t take federal aid and still made a profit in 2009.

Ford’s stock fell sharply in the financial crisis to as low as $1.58 per share. Since then, it’s peaked at $18.65 per share this past January, much higher than its pre-recession value that hovered around $6 per share.

So how did Ford fall so far in quality?

It appears there is an array of problems with the MyFord Touch and MyLincoln Touch systems Ford has recently rolled out. While Ford Sync helped sales and revenue, these new touchscreen systems have become a burden for the automaker over the past year.

Consumer Reports blasted the systems last December and reiterated the sentiment this month, calling the systems “cumbersome and distracting.”

Despite Touchscreen Tech Hiccups, Ford Continues Consumer Innovation

Despite the hiccups with new technology, some appear to be high on Ford over the long term:

  • According to this International Business Times article, “Responding to increasing consumer demand for mobile app use in vehicles, Ford is hiring top tech execs and engineers.” While rolling new technology too quickly hurt Ford with MyFord Touch, the company is showing strong innovation and seems to be carving out a niche for tech-savvy customers.
  • Earlier this month Ford announced it was going to vamp up its efforts overseas, especially in Asia. They claim to expect overseas sales to increase by 50 percent over the next five years. The global market has been an issue for Ford as competitors like General Motors (NYSE:GM) have overtaken them in Asia and other markets.

It appears that Ford is at a crossroads. Growth has been strong, but quality slipped this year. It could be a case of Ford spreading itself too thin. Trying to innovate in technology and increase efforts abroad may have been too aggressive over the past year.

Mulally has a rock-solid track record though, and this situation will likely serve as a wake-up call to the giant auto manufacturer. Ford could continue to have a very strong decade if it can improve the implementation of new technology and reach the lofty expectations for Asia and abroad.

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