How Ford Became Synonymous With Failure

On this day in economic and financial history...

One of the worst things any company can experience is a product or brand launch so wretchedly unpopular that it later becomes synonymous with failure. Each product category has its own master flop, but on Nov. 19, 1959, the auto industry's biggest disaster finally drew to a close. That was the day Ford (NYSE: F  ) finally ended the Edsel.

The Edsel's many problems are well-known to car guys and marketing pros alike. In the run-up to its launch, the Edsel was marketed like an iPhone on wheels, a revolutionary new machine that turned out to be anything but. The Edsel lineup offered 18 models targeted at virtually every segment of the population without actually appealing to any of them. The car's front grill, an infamous "toilet bowl" or "horse collar" design, was the source of much mockery -- and some psychologically inclined commentators have noted its similarities to the female nether regions. No wonder few people wanted to drive it.

Ford sold about 84,000 Edsels over its three-year run -- far below the breakeven number and a sorry statistic for any major automaker. The company is estimated to have lost $350 million on the project, or nearly $3 billion when adjusted for inflation.

The evils of Big Oil
OPEC's oil embargo pushed American politicians into a rare bout of swift action toward the end of 1973. On Sept. 19, 1973, the Senate overwhelmingly voted to grant President Nixon sweeping emergency powers to deal with the crisis, including rationing authority, if necessary.

In remarks during the voting debate, two senators made arguments that would become the cornerstone of modern Democratic stances in the fight for energy independence. Senator Thomas J. McIntyre, D-N.H., claimed:

Today's fuel crisis ... can be laid directly to the betrayal of the public trust by the major American oil companies. I am charging these giants of the industry with gross incompetence, stubborn blindness, with selfishness, and with a lack of foresight that seems totally incredible. ... While the crisis is hurting ... the major oil companies are reaping windfall profits of historic dimensions.

There were three major American oil companies on the Dow Jones Industrial Average (INDEX: ^DJI  ) in 1973: Exxon, now ExxonMobil (NYSE: XOM  ) ; California-based Standard Oil, which later changed its name to Chevron (NYSE: CVX  ) ; and Texaco, which merged with Chevron in 2001. Exxon, the largest of the three, would later report 1973 net income of $2.44 billion, an impressive 59% gain over 1972's result, and more than double the 27% increase in its annual revenue from 1972 to 1973. Texaco's fourth-quarter profits in 1973 were 72% higher than in the same period in 1972. McIntyre's anger was a bit misplaced; by the end of 1974, when the oil shock had ended, these oil majors all reported lower quarterly profits.

Senator Charles Mathias, Jr., R-Md., said that he was "a little distressed that we've heard so little from Detroit on this debate" and that it "would have been a help if we heard from the auto manufacturers that an efficient small car would be developed -- that instead of building bigger autos, they will soon be building more efficient autos and give Americans the greatest mileage per gallon."

This concern was well-founded. The American auto fleet hit fuel-efficiency rock bottom in 1973 with an average of only 11.9 miles per gallon. Consumer-oriented passenger vehicles only averaged 13.3 MPG. Automakers did begin to improve their vehicle fuel efficiencies, but very slowly. By 1991, the American auto fleet had improved to 16.9 MPG, with passenger vehicles up to 20.1 MPG. However, one American automaker made some impressive gains at the upper end of the scale by that point: General Motors (NYSE: GM  ) claimed six of the top 10 spots for fuel-efficient cars in 1991, with all getting more than 40 MPG in city driving.

Ford has made impressive gains in the two decades since 1991, and the average fuel economy for its cars is now better than GM's. However, the American icon still lags many Asian automakers, despite a concerted push to sell more electric and hybrid vehicles. Can Ford overcome foreign competition to be the world's most efficient (and innovative) automaker again? This question, and many others, are answered by the Fool's exclusive Ford research service. Our analysts are dedicated to staying on top of Ford's important moves, so shareholders like you will never be caught off guard by another Edsel fiasco. Click here to sign up for a full year's subscription today.

Read/Post Comments (7) | Recommend This Article (1)

Comments from our Foolish Readers

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  • Report this Comment On November 19, 2012, at 11:44 AM, eansor wrote:

    Oh my...

  • Report this Comment On November 19, 2012, at 11:46 AM, Smalls62 wrote:

    LOL That was a rather odd writeup. Good luck selling your report.

  • Report this Comment On November 19, 2012, at 11:59 AM, wigginsrl wrote:

    Very interesting hop-scotch down memory lane. Jumped over the Corvair-Nadar soap opera and other infamous moments for all the auto companies. Now fast forward to the 21st century and the undenable event that is legally and actually synonymous with failure - bankrupcy! LOL.

  • Report this Comment On November 19, 2012, at 12:19 PM, trebor4819 wrote:

    Using 53 year old news as a "current" story is ridiculous....I hope your boss is reading these replies

  • Report this Comment On November 19, 2012, at 12:48 PM, MotownLucas wrote:

    Worthless article with no relevance to investing today and an asinine headline. This is an investing site not an historical society.

  • Report this Comment On November 19, 2012, at 1:43 PM, shortyoh wrote:

    Ok - I'll bite.

    Which GM cars, exactly, got 40 mpg or more in the city in 1991? You've got the Geo Metro, but that's just one vehicle. You claim 6.

    As for current fuel economy, Ford is VERY, VERY competitive for real world and rated mpg. Portraying them as "lagging" questions your analytical capabilities

  • Report this Comment On November 19, 2012, at 2:03 PM, XMFBiggles wrote:

    @ shortyoh -

    GM had four different Geo models in the top ten, as well as the Pontiac Firefly and the Chevy Sprint:

    Ford's sold vehicles had an average MPG of 22.0 in July, according to this site, good for sixth place among major automakers:

    If eight people run a sprint race and the difference between first and sixth place is a second or so, the sixth-place finisher still lagged the winner, even though they put forth a competitive effort.

    - Alex

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