Ford's New CEO Wants to Revive the Stodgy Lincoln Brand: Is He Crazy?

One of the biggest challenges facing new Ford (NYSE: F  ) CEO Mark Fields is fixing the stodgy Lincoln brand -- which seems "so last century" compared with other luxury auto brands. Whereas the recently retired Alan Mulally wasn't sure that Lincoln was worth saving, Fields is highly committed to turning Lincoln around.

At first glance, it might look like Lincoln is a lost cause -- most people wrote it off as boring more than a decade ago. But Mark Fields isn't crazy. Crosstown rival General Motors (NYSE: GM  ) has shown that it's relatively straightforward to revitalize an ailing brand. The key is having the right products and the right marketing to support them.

Lincoln: past its heyday
Lincoln has lost much of its luster in the past two decades, as foreign brands have conquered the U.S. luxury auto market. Lincoln's sales peaked way back in 1990, when it sold more than 230,000 vehicles. By last year, sales had plummeted 65% to 81,964 vehicles.

Lincoln has fallen far from its glory days: 65%, to be exact!

Lincoln's demise is easy enough to understand. Whereas competitors designed luxury vehicles from the ground up, Ford tried to save money by populating Lincoln's lineup with rebadged Ford vehicles that had only cosmetic changes. In the short run, this may have boosted profitability, but in the long run it was sure to undermine sales.

Lincoln has fallen to the No. 8 spot in the U.S. luxury market after being No. 1 as recently as the late 1990s. According to Bloomberg, Mulally floated the idea of dumping the brand last year.

Ford dumped most of its luxury brands, including Jaguar, between 2007 and 2010.

That wouldn't be too surprising, considering that Mulally sold off Ford's other luxury brands -- Aston Margin, Jaguar, Land Rover, and Volvo -- in quick succession between 2007 and 2010. However, Mark Fields persuaded Mulally to give Lincoln time to make a comeback.

How to revive a brand: a General Motors case study
Lincoln might seem like a lost cause right now, but General Motors has shown recently that it's relatively straightforward to rebuild a fallen brand. In 1984, GM sold nearly 1 million Buicks in the U.S. By 2009, it could barely sell 100,000 annually.

The Buick brand almost got the ax during GM's reorganization. (Indeed, in the last 10 years, GM has dumped a slew of brands in the U.S.: Oldsmobile, Pontiac, Saturn, Hummer, and Saab.) The only reason Buick survived was that it's surprisingly popular in China. However, as long as it was going to continue building Buicks in the U.S., GM needed to reinvent the brand.

General Motors had to confront two major (related) problems. Buick didn't have a good product portfolio to attract new customers, and it had a stodgy image. By 2006 the average age of a Buick buyer was 66. That gave it the oldest customer base in the industry -- although Lincoln wasn't much better!

GM has pumped life back into the Buick brand with new products.

To reverse this unsavory trend, GM has updated Buick's product portfolio by attacking new growth segments. In the past few years Buick has introduced a compact car, the Verano, and a subcompact crossover, the Encore, with a mid-size SUV expected soon. It has also released new versions of the holdover models in its product lineup.

Buick has emphasized youth in its marketing. This marketing message, along with an updated product lineup, helped reduce the average age of Buick buyers to 57 last year. Buick sold 205,509 vehicles in the U.S. last year -- more than double the 2009 tally. Year-to-date sales are up 12.5%, compared with 2.5% for GM as a whole. The Buick comeback is not complete, but the trends are very promising.

How Lincoln can get there
Mark Fields' task at Ford is thus relatively straightforward, though not easy. Lincoln also has the problem of an aging customer base, and this has a lot to do with the products in its lineup -- or rather, the products it doesn't have. The most important step is to fill those gaps.

The key segments where Lincoln has been missing out are compact cars and compact crossovers. The Lincoln MKC compact crossover went on sale this spring, and Ford is now starting to ramp up production. Early sales indicators have been good, with MKCs sitting on dealer lots for just 10 days on average.

Lincoln has been selling the glass-roofed MKZ sedan at a 3,000-a-month pace. (Photo: Ford.)

Last month, Lincoln sold 684 MKCs, but it has much greater potential once there is adequate inventory. The MKC slots into Lincoln's lineup in the same spot as the Ford Escape, which is the No. 2 seller among Ford's cars and utilities, just behind the Fusion mid-size sedan.

Lincoln has been selling more than 3,000 MKZ mid-size sedans per month, so it seems very likely that MKC sales could reach the 3,000-a-month level, too.

Lincoln is also updating its Navigator full-size SUV this year, and it's likely to release an updated version of its MKX mid-size crossover late next year. Lastly, Lincoln is probably readying a compact car for production in 2016, according to Automotive News. That would enter it into the segment where GM has had some success recently with the Buick Verano and Cadillac ATS.

Foolish final thoughts
Lincoln sales are up 16.3% year to date. The brand's gains are likely to accelerate in the second half, as deliveries of the new MKC compact crossover ramp up. To maintain this momentum, Lincoln will need to add a compact sedan to target another segment with younger buyers. It also needs to invest in creative marketing to shake off its stodgy image.

Ford has plenty of work to do, but GM's ability to revitalize an equally stodgy brand -- Buick -- shows that it can be done. Lincoln needs to design high-quality products for fast-growing segments and support them with innovative marketing. Lincoln may never truly challenge the German luxury brands for the sales crown, but at least it can get back in the race.

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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 July 07, 2014, at 8:41 AM, dmhudson91 wrote:

    1. Make your cars performance-oriented like BMW/MB

    2. Fix your ugly grille/front-end on all of your cars!

    3. The MKX is a blob and the MKT is a hearse!

    4. Everything about the MKZ except the front-end is awesome

    So basically a full performance and exterior overhaul is needed

  • Report this Comment On July 07, 2014, at 8:58 AM, ohiodale wrote:

    I like the look of the new Lincolns including the front ends which are a radical style The interiors are very nice also. All the redeisgned Lincolns will be like the MKZ which are very nice. The front ends look classy to me. I do not want Lincoln to turn into a BMW or MB. BMWs are not comfortable rides and the interiors are not that nice for the price. I love MBs but to get a nice one with good features would cost $20k more than a Lincoln. My friend has a nice BMW with 30k miles. He paid $56k and cannot sell it for $23k today 6 years later. That is a loss of $43k which is the price of a completely decked out MKZ with all the available options.

  • Report this Comment On July 07, 2014, at 2:25 PM, Manasseh33 wrote:

    Lincoln is following Acura too closely. Front wheel drive and FWD bias on its AWD with no different engines in its "Luxury" brand than its main stream brand. Sure, Acura has a hit with their MDX but that's only because Honda doesn't have a comparison. Despite a total redesign of their flagship model Acura sales remain dismal in their cars. Lincoln should watch & learn and compare Cadillacs results with their RWD vehicles. Lincoln needs to replace their current lineup with RWD vehicles before they will be taken seriously. Some higher performance versions or stand alone engines would also help. Maybe a 4 door Mustang using a turbocharged V8 or the ready to be retired supercharged V8?? Talk about gaining some street creed and attracting attention! If they could do a turbo version with a mild 500-525hp with AWD it would be a great flagship vehicle for increasing sales and traffic.

  • Report this Comment On July 07, 2014, at 4:15 PM, Buddylo wrote:

    I have an older Lincoln Towncar. It is like driving a sofa down the road and I love it. I'm not a fan of the the tight handling luxury cars out there and they are not as comfortable as my Towncar. My Towncar is like riding on a cloud - you could run over just about anything and not feel a thing. After running over a bus load of kids, I asked my wife if she felt anything and she said "felt what dear?" I wish they would bring the Towncar back.

  • Report this Comment On July 15, 2014, at 11:41 AM, TMFGemHunter wrote:

    I think these comments show how there is a split between the people who want classic American luxury cars -- big and comfy -- and those who want more performance-oriented luxury cars. It's pretty much impossible to split the difference. Cadillac's solution has been to make the XTS for the first group and the ATS and CTS for the second.

    Perhaps Lincoln could also divide its lineup in a similar way in an attempt to please everyone. But the risk of doing that is that it dilutes the overall brand because there's no consistent message.


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Adam Levine-Weinberg

Adam Levine-Weinberg is a senior Industrials/Consumer Goods specialist with The Motley Fool. He is an avid stock-market watcher and a value investor at heart. He primarily covers airline, auto, retail, and tech stocks. Follow him on Twitter for the latest news and commentary on the airline industry!

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