The Motley Fool Previous Page

What Is Vignale, and Is It Ford Motor Company's Answer in Its Troubled European Region?

Daniel Miller
July 22, 2014

Ford's Mondeo Vignale trim. Source: Ford Motor Company

Every Ford Motor Company (NYSE: F) investor knows how much cash has been burned in Europe over the last couple of years. Ford burns through cash in Europe at such a fast rate it might as well use the greenbacks in bonfire cookouts to attract new customers to dealerships. For the most part, Ford's management could have just left that region's earnings slide out of quarterly presentations to help lower investors' blood pressure. 

Burning piles of cash in Europe is a theme that investors can't wait to leave in the dust, once and for all. Despite my joking about leaving the Europe slide off Ford's Q2 presentation, the company's regional losses will be one of the most anticipated topics for investors to determine how close Ford is to breaking even; a move that could have saved $1.6 billion of lost profits last year alone, and $3.5 billion since the beginning of 2012.

Ford's turnaround in Europe could be accelerated by introducing higher-margin products, such as its luxury Lincoln lineup, but the folks at the Blue Oval have another idea in mind. Will it work?

Lincoln isn't the answer?
Ford's Lincoln luxury brand has been essentially starved of innovation and new products up until the last couple of years. Before the Great Recession hit, and nearly brought Ford to its knees, the company had been investing capital into its premier luxury brands that included Jaguar, Aston Martin, and Land Rover -- that capital didn't make its way to Lincoln.

When Ford sold off those premier luxury brands to secure capital, that was desperately needed to fund the strategic turnaround of its namesake and core Ford brand, it had only one remaining luxury brand on the books: Lincoln.

Unfortunately, for investors, the turnaround at Lincoln will be a very long process, perhaps decades. For that reason, Ford isn't planning to launch Lincoln into Europe where it would have difficulty competing with Europe's own luxury brands -- industry leading brands such as Audi, BMW, and Mercedes-Benz, which have had global success for decades.

But along with reducing production capacity and slashing costs, generating higher margins and transaction prices from luxury vehicle sales will be critical to speeding up Ford's break-even date -- and, gasp, even profitability. So, if Lincoln isn't the answer to Ford driving higher margin sales, what is?

Ford Focus Vignale trim. Source: Ford Motor Company

Enter Vignale
Ford hopes that answer is a new upscale trim called Vignale. The first thought crossing savvy investors' minds would probably be to compare Vignale to the Titanium trim found here in the U.S., but it's actually a step beyond even that premium trim.

Ford is planning for its Vignale models, which will debut in Europe in 2015, to have their own design cues and will be priced about 10% higher than its premium Titanium trim. One example, according to Automotive News, of a premium feature to be included with the Vignale trim is the use of unequal bush sizes on the suspension control arm which is typically only used with premium luxury cars because of its higher expense and increased production complexity. Ford hopes that premium options such as that will convince consumers to step up to purchase the trim, rather than opt for a competitors luxury vehicle.

"I think our opportunity is not necessarily to go head to head with premium bran