Ford (NYSE: F ) is under a lot of pressure to successfully revive its luxury Lincoln brand. It has been able to fix so many other company issues that caused massive losses and can now finally spend time fixing the Lincoln brand. Unfortunately for Ford, the brand needs fixing: The Lincoln MKZ – which had a lot of pre-sale hype – has completely stumbled out of the gate. Hands down, Ford and Lincoln failed its dealers so far.
Meanwhile, General Motors (NYSE: GM ) is enjoying great success with its Cadillac line, with a 49% rise in sales for March. If you're counting, that makes it six consecutive months of gains for GM's luxury line. Let's take a look at how Ford is trying to fix its MKZ flop, and explain how very important this is to Ford investors.
Super Bowl mulligan
The Lincoln MKZ had received more interest than any other Lincoln vehicle since the '90s. Dealers where promised the flashy new sedan would arrive by the end of December 2012. Turns out that didn't happen, and dealerships missed sales for Christmas, New Year's Day, Presidents Day, St. Patrick's Day, and Easter. Suffice it to say that the $7.4 million spent on the Super Bowl ad was a waste – as was the spot during the Grammy's. Part of the reason for this massive MKZ delay was due to the very successful Fusion.
Can't halt the Fusion
Lincoln executives know they only have one shot at reinventing the Lincoln line. For that reason they are inspecting every single Lincoln MKZ to make sure quality is top notch. Unfortunately this was being done at the same Mexico plant that was producing the extremely popular Fusion, and it overwhelmed plant resources. The Fusion has been hailed by critics and consumers, winning numerous awards and setting record sales. Simply put, Ford couldn't afford to halt the production of the Fusions because they're selling out!
Too little, too late
That caused lengthy delays for the MKZ, which has taken until now to get through the backlog of quality inspections. When it became obvious that the Mexico plant couldn't handle the inspections in time, Ford had the MKZs sent to another plant in Michigan but it was too little, too late. Now Ford is offering cash to dealers based on lost sales in addition to incentives on other Lincoln models. Unfortunately communication was poor between the factory and dealers causing some consumers to cancel pre-orders. It's not only lost sales, but a frustrating start to a customer relationship that will be important in reviving the brand.
You might be thinking "So what?". After all, it's only one model right? Ford has had great success with its fresh models of the Fusion and Escape even after multiple recalls. However the Lincoln MKZ is different. This was supposed to attract a new generation to a brand that was all but dead. Not only that, but without Lincoln sales, Ford doesn't have a luxury line at all! That is a huge downfall for a company that is doing so many things right these days. What happens when the younger crowd that the Fusion, Focus, and Fiesta attracts gets older and wealthy enough to be stepped up to a luxury model? Unfortunately at this point, they have to leave the Ford dealership. That affects the bottom line, and that affects me as a shareholder. Ford needs to fix this, and fast. Ford will be essentially relaunching the MKZ with a second round of advertising in April – let's hope for a home run this time.
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