The Flashy Vehicles Driving Ford Motor Company's Luxury Brand Turnaround Strategy

For years, one big knock against Ford Motor Company (NYSE: F  ) has been its all but dead luxury brand, Lincoln. It's true, sales of Lincoln have spiraled downward for more than a decade before crashing in 2009, and its been at the bottom of a hole since then. Ford and its investors both know that having a successful global luxury brand will be essential to growing business and recording market beating investment returns.


Graph by author. Source: Ford Motor Company sales releases. 

Ford is beginning to open up its wallet to fuel Lincoln's revival; here are the vehicles at the forefront of the turnaround strategy and why a successful Lincoln brand matters to Ford investors.

What's at stake?
Having a successful luxury brand is vital for automakers for three simple reasons. First, luxury vehicles are dubbed that for a reason -- they provide a plethora of extravagant features, technologies, and other add-ons that drive a vehicle's price higher. Luxury vehicles bring in much higher average transaction prices, or ATPs, which lift company revenues higher on a lower volume of sales. Second, just as top-line revenues increase from higher ATPs, bottom-line profits and margins rise as well.

Third, in addition to higher prices and profits, luxury segment sales are less affected in times of a recession. Also, luxury sales typically don't compete with automaker's mainstream brands that sell at a higher volume and lower price point. Basically, selling luxury vehicles is a win-win situation -- as long as you're selling them successfully, that is.

Lincoln's 2014 MKZ. Source: Ford Motor Company

Opening the wallet
Just like with most things in business, success starts with an excellent product. If Lincoln's new vehicles are able to expand sales and generate revenue at a faster clip, then management, as well as dealerships, will be more willing to spend additional cash on improving and launching more products -- a virtuous cycle. Creating that virtuous cycle will take years, it could even take decades, but Ford hopes that new vehicle launches before 2016 will get the ball rolling.

Ford promised that four new Lincoln vehicles would be launched by 2016; two of those have been unveiled: the MKZ sedan and the MKC crossover.

Lincoln's MKZ sales stumbled during last year's launch but recovered once production bottlenecks were overcome and ample supply was able to reach dealerships. This year, sales of the MKZ were up 57% through April, though with easy year over year comparisons. However, even with easier comparisons, the MKZ's gains are almost entirely responsible for the Lincoln brand's overall 21% sales surge in 2014, compared to last year. With the MKZ off to a solid start, Ford is preparing to hand the baton off to Lincoln's MKC.

Lincoln's 2015 MKC. Source: Ford Motor Company

Lincoln's MKC, which is due to hit dealerships shortly, is a vehicle that is expected to take the brand's sales to new heights in the U.S. market. One reason for such hype is because the MKC will be Lincoln's entry into the luxury market's hottest selling segment: compact crossovers.

IHS Automotive is predicting sales of the MKC to reach between 26,000 and 28,000 annually, according to Automotive News. Put another way, 28,000 sales is nearly the same amount that the entire Lincoln luxury brand sold through April this year (28,046 units). Make no mistake, if the MKC's launch goes smoothly, the new Lincoln crossover will instantly become a vital part of the brand's sales strategy.

In addition to the new MKZ and MKC, Lincoln will launch another new vehicle next year and another in 2016. One other vehicle, planned for a 2015 launch, is actually a bonus and won't count toward the tally of four new Lincoln vehicles becoming available, but has been reengineered. You might have heard of it: the Lincoln Navigator.

Lincoln's 2015 Navigator. Source: Ford Motor Company

Two decades ago, Lincoln's Navigator drove the entire brand's sales high enough for it to become the No. 1 U.S. luxury brand. Those days are long gone. Sales of the Navigator peaked in the late 1990s; last year, they were at one-fifth the highs achieved in those halcyon days. Don't expect sales of the Navigator to surge anywhere near its former peak, but a modest bump in sales to compete with the Cadillac Escalade would be a small victory. Furthermore, as one of the most recognizable names in luxury SUV history, the Navigator should bring intangible value, and potential foot traffic, to Lincoln showrooms.

Bottom line
Lincoln is in the very early chapters of its turnaround story and these vehicles are likely just setting the stage for what will become a strategy that will span decades. Let's also not forget that Lincoln's story has been mostly limited to the U.S. market, a fact that looks set to change, sooner rather than later. Ford is about to create a new opportunity for Lincoln to succeed by finally launching the brand in China. Lincoln will begin selling vehicles in seven Chinese cities this fall, and in 20 stores by the end of 2014.

With four new vehicles on the way, an overhauled Navigator soon for sale, and its entrance into the lucrative Chinese market, Ford hopes to begin erasing one big knock investors have against it: an all but dead luxury offering.

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Read/Post Comments (5) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On May 31, 2014, at 11:26 PM, normgarry wrote:

    How do you justify "badge engineering" when your "upper-end" product isn't much better than your "lower end" product and pales in comparison to what the competition is putting out?

    While Lincolns are cheaper than Audi, Mercedes, BMW and Cadillac - evenly priced with Lexus - and slightly more upscale than the highest-end Chryslers, their product only has appeal to retirees who are old enough to remember when "owning a Lincoln" was a status symbol.

    The modern status symbol is: BEEMER BENZ OR BENTLEY. Audi, Lexus, Maserati and all the other $70,000-plus cars take a backseat to those names with the exception of TESLA and "SRT" badged vehicles.

    The newest Navigator is a JOKE. The older models are awesome, luxury trucks, but the newer ones pale in comparison to the Escalade when you're talking full-sizers... and aren't desirable by rich people who want a more car-like ride in a ML or X-series BMW. No V8?

    STUPID STUPID STUPID.

    It's a shame when HYUNDAI/ KIA is putting out better luxury cars than Lincoln and still making an optional V8 - with an AWD V8 coming - at a lower price than a loaded MKS. The K900 and 2015 Genesis have Lincoln beat.

    The MKS isn't as good a car as the XTS either.

    A MKZ is $51,000 if you want a V6 in it - and it will continue to get lower scores than the Cadillac ATS and CTS.

    MY RECOMMENDATION?

    If Lincoln isn't willing to offer higher end interiors or better, more powerful drivetrains, and CHANGE THEIR STUPID NAMING STRATEGY from LETTERS TO ACTUAL NAMES...then they might as well go under.

    I think a V6 with AWD in a Lincoln should be STANDARD with an optional upgrade to the most powerful engines offered in the Mustang. Makes no gotdamn sense offering FWD platforms when your history is based on RWD platforms. Like Audi: you need to go AWD/4WD or get out.

    Bring back the big names:

    NAVIGATOR, TOWN CAR, CONTINENTAL...

    This MKZ, MKX, MKC, MKS nonsense has run its course.

    I'd love to give the masses of luxury buyers a name-matching test to see if they even know which car is which.

  • Report this Comment On June 01, 2014, at 5:24 AM, GAMETAMER wrote:

    Daniel Miller, PLEASE stop writing articles. The public tends to read and believe. Even the flatout lies.

    "2 decades ago ,the Navigator was ..." ----really?

    The model came out in '98 and 2013 just ended , so that makes only 15 yrs.

  • Report this Comment On June 01, 2014, at 6:00 AM, GAMETAMER wrote:

    Do not recommend a GM product at this time and especially a CADILLAC. From 1996 to now, that line is trash. Everyone knows that the Caddy's are dying young and the newer ones require many dealer visits with excessive cost. The only exception (long term) could be the suv model.

    I have never (ever) been wrong on a prediction(even hurricane landfalls) and I said back in '98 that the shape of the "new" Town Car was hideous and would cost Ford tons of sales. Also the lack of the line being made from scratch too. Btw, I always thought the '98 up TC looked like a turtle shell with 4 wheels.

    I agree (and have said before) that they f'd up ending the large car line(TC)

    They should have made a 2015 model that honored the 60's Continental (suicide doors too) while looking edgy, classy and brauny. With MPG of 20/28 to start and 280-310HP while making it a hair skinnier and shorter.

    Then in 2017 a convertible (hardtop) TC sedan.

    Oops , i am dreaming again....

  • Report this Comment On June 01, 2014, at 8:12 AM, fpl1954 wrote:

    I rent a lot of cars and once in a while they give me a Lincoln, BMW, etc. as a perk. Wow, those Lincolns are really excellent cars, they run rings around the foreign cars. BMW, Lexus, Infinity, Mercedes, compare fairly well with the high end Fords, albeit at twice the purchase price and 4 X the maintenance (cost and time you lose the car). However, when compared to the Lincolns, none of the other so-called luxury cars come close. I found myself AIMING for potholes with the Lincoln to watch it lift its wheels and sail across with hardly a bump. Great cars.

  • Report this Comment On June 01, 2014, at 12:51 PM, foolnmyself wrote:

    Normgarry has got it right, not much more can be said.

    The MKZ &MKS have missed their targeted customers. Most of the old ones are too big to even fit into these cars. They did get good HP out of the V-6 turbo but not enough for the new market customers. Who is this car built for? a question not asked of management.

    Ford is not committed to the Lincoln Brand and they will not spend the money needed to redo Lincoln. Yes! they should have a midsize Lincoln, Yes! they should have a Lux-o boat and YES! they should have a real "HOT ROD" Lincoln (think Mark VII) and maybe that should have been the first vehicle skinned in Aluminum. Low Volume at first to get the learning curve up to speed.

    Bum By Lincoln

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