Ford (NYSE:F) announced a move to increase production of the Fiesta at its big factory in Cologne, Germany this week. Ford is boosting production of the popular subcompact by 200 vehicles a week, up to 1,850 a day.
Fiesta sales have been sluggish here in the U.S., as American consumers have recently favored small SUVs and crossovers over compact and subcompact cars. But as Fool contributor John Rosevear points out in this short video, that's only part of the picture for the Fiesta -- and that's an example of the famous "One Ford" approach in action.
A transcript of the video is below.
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John Rosevear: Hey Fools, it's John Rosevear, senior auto analyst for fool dot com. Ford said this week that it has boosted production of the Fiesta subcompact at its factory in Cologne, Germany. Ford said that it had boosted the Cologne factory's output of Fiestas by 200 a day, up to 1850 a day, and they've worked six extra weekend shifts since February.
And why is that? It's because demand is growing; the Fiesta is one of Europe's best-selling cars.
And there's an interesting point for us in there. The Fiesta is a strong product, it competes well in the subcompact class all over the world. But here in the U.S., Fiesta sales are down this year. They were down 2% last month, and they're down almost 3% for the year to date. And if you just look at that number, you might think the Fiesta is in a little bit of trouble. Ford might need to do something to help it out.
But I suspect Ford isn't sweating it. That's partly because Ford knows that the U.S. market is shifting away from small cars and toward small crossovers and SUVs instead, and Ford obviously has that covered. And it's partly because, like almost all Ford models nowadays, the Fiesta is a global model.
This is a key part of the One Ford plan, the plan that Alan Mulally and his team have used to turn around Ford. Global models that can compete at the top of their classes give Ford big economies of scale. That keeps costs down, and allows Ford to make a good profit on each car sold, a big contrast from the old days when Detroit's small cars didn't really make much money.
And the scale here is pretty huge. Except for a few details, the Fiestas built in Germany are the same as the ones built in Mexico and China and Thailand and India. So Ford has pretty massive scale on the Fiesta. There are five factories around the world that make Fiestas; they're sold pretty much everywhere.
So even if U.S. sales aren't that strong because Americans aren't buying as many subcompact cars as they were a year ago, strong sales elsewhere are more than enough to keep the overall model program solidly profitable, and the fact that the Fiesta is successful when viewed globally means that Ford can justify making a big investment in the next Fiesta, which means, that car should be a very strong product that's very competitive with its rivals when it comes out in a few years.
That's the One Ford plan in action. That's how Ford works nowadays, and it's a big part of why Ford's quality and profits are both way up versus where they were last decade. Thanks for watching.
John Rosevear owns shares of Ford. The Motley Fool recommends Ford. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.