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Is Ford Turning Lincoln Around?

Lincoln's new MKZ Hybrid. Lincoln chief Jim Farley hinted on Wednesday that the hybrid version of the new sedan is selling better than expected. Photo credit: Ford Motor Company

Over the last few years, Ford's (NYSE: F  ) ability to execute its ambitious plans has been top-notch.

Near death just a few short years ago, the iconic automaker is now strong and profitable, with a big cash reserve to hedge against future downturns.

After years of being criticized for its small-car efforts, its compact Focus is now the world's best-seller. Its SUVs have been reborn as high-tech, fuel-efficient darlings of auto critics around the world. And its latest midsized sedan is good enough to finally have Toyota (NYSE: TM  ) worried.

Almost everything Ford has done recently has worked out well, often very well.

Everything, that is, except the revival of its old luxury brand, Lincoln. But that could be on the verge of changing.

Is a Lincoln revival finally taking hold?
Ford's global sales and marketing chief – and Lincoln's boss – Jim Farley hinted to reporters on Wednesday that sales of Lincoln's new MKZ might be on the verge of taking off. After a few months of un-Ford-like production glitches that slowed the new sedan's rollout, Farley said that the cars are finally reaching dealers' lots – and flying off of them.

Farley didn't give specific numbers, but he did say that "we should have a really great story to tell" when sales are reported after the end of the month. The MKZ is "turning very well", Farley said, referring to the time that cars are spending on dealers' lots before being sold, and he is "very happy" with sales results so far.

Farley said that the percentage of MKZ hybrids sold has exceeded his expectations, as has the new sedan's success in the coastal regions of the U.S., where Ford has historically lost ground to import brands.

Of course, one would expect Farley to present any news in the best possible light. But any success for the MKZ would represent a ray of hope for Lincoln. Recent news has been dismal: The new MKZ's sales through March were down almost 50% versus year-ago sales of the old model, presumably in part because of those production glitches, and Lincoln's overall sales are down about 24% so far in 2013.

A brand that has so far eluded Ford's turnaround magic
Lincoln has had an up-and-down history ever since Ford bought it way back in 1922. But lately, the trend has been more down than up: After Ford discontinued the airport-limo-favorite Lincoln Town Car a couple of years ago, critics began to wonder if there was any reason left for the brand to exist at all. A series of marketing and operational stumbles since then haven't helped.

But Ford sees a big reason to revive Lincoln, and it has a lot to do with the company's global ambitions. A successful luxury-car brand can deliver outsized profits, because luxury cars carry much better margins than mass-market vehicles.

Those profits get even better with the global scale available to a giant automaker, as parts that are invisible to most buyers can be shared with the automaker's more mundane models. Volkswagen (NASDAQOTH: VLKAY  ) is a great example of this: Its Audi brand accounts for only a small portion of its global sales, but delivers almost half of its profits.

A lot of that profit comes from China, where the luxury-car market is growing quickly. That example hasn't been lost on VW archrival General Motors (NYSE: GM  ) , which has put a huge effort into turning its Cadillac brand into a serious global contender – in part, to drive profit gains in China.

Ford seems set on following the same path, but so far, its old luxury brand hasn't made much noise. If that is indeed set to change soon, it will be very good news for the Blue Oval.

Worried about Ford?
If you're concerned that Ford's turnaround has run its course, relax – there's good reason to think that the Blue Oval still has big growth opportunities ahead. We've outlined those opportunities in detail, in the Fool's premium Ford research service. If you're looking for some freshly updated guidance to Ford's prospects in coming years, you've come to the right place – click here to get started now.

Read/Post Comments (9) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 24, 2013, at 9:19 PM, Deepwater805 wrote:

    The new Lincolns look like a Cylon raider, and we all know what happened to those tin cans....

  • Report this Comment On April 24, 2013, at 9:31 PM, wolinshow wrote:

    They had to have jumped on this years ago, I mean there was a time when they dominated in the 80s but not much since then. You see Cadillac went from just being a big luxury car to midsize eye appealing vehicles, some were hits some were misses but they didnt just sleep like Lincoln. You see that they have widen the market for the 35 - 60 market

  • Report this Comment On April 24, 2013, at 9:41 PM, Tamarindwalk wrote:

    The Lincoln today is even less desirable than the old Soviet Zil. It wallows on the road and falls apart at every bump. No wonder Mercedes and other foreign cars have taken over the American luxury market.

  • Report this Comment On April 24, 2013, at 9:43 PM, Kummin wrote:

    They should never have quit making the Town Car.

  • Report this Comment On April 24, 2013, at 9:58 PM, stagensell wrote:

    Couldn't give me a Lincoln. Piece of Sh__

  • Report this Comment On April 24, 2013, at 10:21 PM, fknottyfor wrote:

    I've had 2 Town Cars and both of them gave great service but I bought them because I take long driving trips and they're great on the road--the new Lincolns don't have air suspension, which is why the ride on the Town Car is so good.

    I wonder what the sales comparison is between the Town Car and the MKZ? And I wonder why they couldn't continue producing the Town Car AND introduce the new model--sort of a something-for-everyone deal?

  • Report this Comment On April 24, 2013, at 10:35 PM, Leathrglvd wrote:

    Turning around or padding a Ford Taurus?

  • Report this Comment On April 24, 2013, at 10:53 PM, rcm237 wrote:

    If I want a compact I'll buy a Sonata. I want a full size car. But Ford has caved in. So, and being a Ford customer, it kills me to say this, I'll buy a Cadillac.

  • Report this Comment On April 24, 2013, at 11:46 PM, dfresh713 wrote:

    I can sit here and trash Fords market research dept, engineering but there is an issue somewhere coming from the top down. Why ever get rid of a cash cow like the Towncar? Give it a face lift and use the under body to make a smaller sporty Towncar. This car looks like pure garbage from the front end.. did Ford hire kamakazis?

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