How serious is Ford (NYSE:F) about reviving the old Lincoln luxury brand?
Here at the Motley Fool, we've debated that for a while. Unlike General Motors' (NYSE:GM) all-out effort with Cadillac, Ford's push to reestablish Lincoln as a luxury contender has seemed to advance by fits and starts, with hints that the automaker's top brass might not be fully committed to the effort.
We now know that former Ford CEO Alan Mulally wasn't sold on the idea of keeping Lincoln around -- but his second in command, Mark Fields, convinced him that it was worth trying to transform Lincoln into a profitable global luxury brand.
Now, of course, Mulally is retired -- and Fields has taken the top job at Ford. And as Motley Fool senior auto specialist John Rosevear explains in this video, Fields has moved quickly to emphasize the importance of the Lincoln effort, by promoting the company's chief engineer to a brand-new high-profile post as president of the Lincoln brand.
A transcript of the video is below.
John Rosevear: Hey Fools, it's John Rosevear, senior auto specialist for Fool.com. Ford released its second-quarter earnings this past week, we've covered those elsewhere, but before those earnings came out the company announced a bunch of changes in senior management. The big headline from Ford was that Paul Mascarenas, who is Ford's chief of research and advanced engineering, has said he will retire, and Ford will replace him with Dr. Ken Washington, who they are hiring away from the advanced R&D lab at Lockheed Martin's Space Systems Company, so clearly somebody with big league credentials.
But there was a more interesting move announced at the same time.
Kumar Galhotra currently holds the title of vice president of engineering, he's responsible for the engineering teams behind all Ford and Lincoln vehicles globally, he's Ford's chief engineer. But as of Sept. 1 he'll have a new job as president of the Lincoln brand, reporting directly to CEO Mark Fields.
This is interesting. For the last few years, Lincoln has been run by Jim Farley. Farley is a talented executive who used to run the Lexus brand for Toyota before former CEO Alan Mulally hired him away back in 2007. Mulally once described him to me as Ford's "secret weapon", but his main job is that he's Ford's global chief of marketing, sales, and service, and apparently Mark Fields has decided that Lincoln needs a dedicated full time leader.
Fields of course just took over as CEO at the beginning of July, Alan Mullaly retired as of the end of June, and I've been wondering just how Fields would approach Lincoln.
Fields has a background in luxury, back when Ford owned Jaguar and Aston Martin and Land Rover and Volvo they were all run as one division, what they called the Premier Automotive Group, and Fields ran that division for several years. I've met Fields and talked to him a couple of times, and he is definitely a guy who has a very good clue about global luxury and luxury marketing and so forth.I haven't heard him say anything specific but I bet he has a very clear vision for where he wants the Lincoln brand to go.
We've heard reports that Mulally actually wanted to shut Lincoln down, but Fields convinced him to keep it going and invest in it. The reason for having a luxury brand is pretty clear, luxury vehicles have higher profit margins than mainstream models, a well-run luxury brand can be a major source of profits for an automaker. The example I always give is that the Volkswagen Group (NASDAQOTH:VLKAY) gets about two-thirds of its profits from the Audi and Porsche brands, even though they represent a much smaller share of total sales.
Lincoln won't be that kind of contributor to Ford's bottom line for many years, if ever, but Ford has a window of opportunity to establish it as a contender in China, and to boost it here in the U.S. as well. Of course Lincoln will need new products in order to really get a boost, but I suspect those products are coming and it'll be interesting to see how this unfolds. But with the appointment this week of Galhotra to run Lincoln, Fields has made his first public move with the brand, and it seems likely that there are many more to come. Thanks for watching.
John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. 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.