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“Simplify, simplify.” It may seem odd that a transcendentalist poet and writer could have any influence on a global auto manufacturer, but Ford Motor Company CEO Alan Mulally seems to have taken Thoreau’s words to heart.
Mulally announced Monday that Ford will attempt to reduce its lineup to as few as 20 models worldwide. Ford has already started down this path by phasing out the ailing Mercury brand this year, but the 20 to 25 models Mulally is shooting for is a drastic drop from the 97 the company had on offer just four years ago.
“I think it is plausible that Ford can get away with having just 25 or so models,” said Martin Lariviere, a professor of management and strategy. “They have a very limited number of brands,” he added. “Ford is the only global brand they have to manage…GM, in contrast, needs a midsized car for Cadillac, Buick, and Chevy—not to mention Vauxhaul, Opel, and whatever brand they use in Australia.”
Reducing the number of brands Ford sells has been part of Mulally’s turnaround plan, and it also may be key to achieving a low model count. Since Mulally became CEO in 2006, Ford has sold off its entire premium brand portfolio—Jaguar, Land Rover, Aston Martin, and Volvo—and reduced its stake in Mazda.
Also aiding Ford in its quest for fewer models is the globalization of car designs across the industry. For example, GM relied on its Holden division in Australia when developing its latest rear-drive car platform. And before GM shuttered Saturn, the brand was briefly reborn as an American marque for Opel cars developed (and some even built) in Europe. Ford’s new Fiesta and Focus models will be largely similar across different regions—65 percent of Fiesta parts and 80 percent of Focus parts will be the same worldwide.
“What Ford cares about is how much of the content is standard,” Lariviere said. Ford appears to be betting that common models and parts will save the company money, but Lariviere thinks some savings could be offset by higher development costs, since each platform has to be more flexible. How Ford sources its parts could be another confounding factor. “Part of the challenge will be how many suppliers Ford will be dealing with,” he said. Shipping costs could drive Ford to purchase parts from suppliers close to the final assembly plants, but doing so may undermine the economies of scale.
“Will this save them lots of money? I don’t really know,” Lariviere said.