Ford Hits the Reset Button With Lincoln

Have you ever had that moment when you slammed into a glass door because you pushed, instead of pulled? That's essentially what Ford's (NYSE: F  ) Lincoln luxury brand did in front of the whole auto industry with its highly anticipated MKZ. It completely stumbled out of the gate and immediately gave investors reason to doubt Lincoln's long awaited revival. Fortunately, one stumble doesn't make or break a comeback, and I have two reasons to believe Lincoln will regain its stride.

Let me set the stage
Ford needs Lincoln to be a successful luxury brand – period. After CEO Alan Mulally came on board when the company was posting tens of billions of dollars in losses, he made the decision to cut failing brands. Ford sold off Jaguar and Land Rover and killed Mercury, to name three of the five brands no longer with the company. Lincoln is now the sole survivor.

After fixing a long list of problems over the past few years Ford recognized the need for a presence in the luxury segment. Putting the money and effort into reviving the Lincoln brand made more sense to Ford than buying a different brand. The automotive industry is insanely loyal, but if loyal Ford consumers are ready to buy luxury vehicles then they might find themselves leaving Ford dealerships. That's something Ford can't sit back and take lightly. Those are incremental sales driving away from dealerships – with higher profit margins to boot. It costs much more to gain a consumer than it costs to keep them; it isn't a battle Ford can keep losing.

So far, not good
Unfortunately the first quarter of 2013 didn't shape up well for Lincoln and its newest MKZ model. Due to supplier and quality inspection issues the vehicle didn't make it onto lots until months beyond its anticipated arrival date. This caused a huge headache for dealers, and ultimately some lost customers.

Lincoln's advertisement during the Super Bowl was practically worthless since any attention and buzz garnered from it was lost when people couldn't even buy the product. Despite the shaky quarter, Ford executives finally see a bright spot in the gloomy story of Lincoln's revival.

Reset, let's try again
If your day job made it impossible for you to catch Ford's recent conference call, you're in luck – I took notes for you. One of the more interesting points was regarding Lincoln's MKZ – the vehicle which was supposed to lead the charge on Lincoln's revival.

Jim Farley, leader of Lincoln sales, said: "I think you'll see in our sales results that the product is being extremely well received. We should have a really great story to tell at the end of the month."

I've been following Ford closely and knew it was going to try a "re-launch" the MKZ this month with fresh advertising campaigns. I didn't expect a good story before results of Ford's second quarter are discussed sometime in July. Now I'm anxious to see the sales results for April, and am hoping Farley wasn't exaggerating in his statement.

One, two punch
I'm currently researching a deeper dive on Lincoln's MKC concept which debuted earlier this year. What I've seen so far is extremely positive and it could make a big splash in the surging luxury crossover segment. If the MKZ does indeed finally make the sales growth it was intended for, and if the MKC does well, we could be witnessing one of the biggest brand comebacks in a decade. Considering that this is engineered by Ford – who avoided bailouts and turned its original brand around in three short years – are we surprised?

I'm not, but that's why I invested in the company long ago. Here's to a yet another good story next month for Ford and Lincoln – it's been a long time coming.

Lincoln is just one opportunity for 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 Motley 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.

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  • Report this Comment On April 30, 2013, at 4:29 PM, Deepwater805 wrote:

    The new Lincolns look like Cylon raiders, and we know what happened to those guys....

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