Ford Notes: Looking for Image Upgrade with New Models

This past week, Ford (NYSE:F) unveiled several new Ford models and plans to revamp several existing models to boost its vehicle line-up and better compete with rivals such as GM (NYSE:GM) and Toyota (NYSE:TM). These revamped and new models include all new Ford Escape, 2013 Ford Mustangs, 2013 Ford Flex, Fiesta ST, Focus ST and Focus ST-R. ^[1] Also, after GM’s recent plan to push into the luxury car market through new Cadillac models, Ford make a similar announcement this week to take on luxury car brands like BMW, Daimler’s (ETR:DAI) Mercedes-Benz and GM’s Cadillac through significant revamps of two existing Lincoln models, the MKS sedan and the MKT crossover. But disappointing results from a recent survey of U.S. drivers point toward Ford’s urgent need for an image makeover.

Our price estimate of $14 for Ford’s stock is almost 40% above the current market price.

See our complete analysis for Ford stock here

Need of an image makeover to realize full sales potential

Ford’s revamped models will include new technologies, improved fuel efficiency as well as design upgrades, which will likely boost vehicle sales. But poor recognition for fuel-efficiency in the U.S. will need to be tackled to realize full sales potential. The company reported this week that almost 68% of U.S. drivers have poor opinion of Ford’s fuel efficiency, in spite of Ford’s EcoBoost technology and fuel-efficient models such as Fiesta and Explorer. ^[2] Ford’s image may receive some help from its announcement of the first electric station wagon – Ford Transit Connect Electric Wagon – by early next year. However, sustained and vigorous marketing effort, which will push up marketing costs. ^[3]

Margins and sales supported by push toward a common global platform

The new 2013 Escape model will be based on the same platform that Ford will use to make its Focus compact car, two future minivans and at least six other models. ^[4] This indicates that Ford is making progress on its One Ford plan that aims to build a global platform to develop new models for different markets. With a global platform, Ford can accrue massive cost savings through the use of common sets of vehicles parts and spares to make vehicles. This will help reduce costs in terms of engineering time, parts and services, as well as tools and machinery. These cost savings will not only boost Ford’s margins but also enable the automaker to price its vehicles competitively in emerging markets such as China, India and Brazil to drive sales.

You can drag the trend line in the modifiable chart above to see the impact on Ford’s stock value.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Ford at LA Auto Show [↩]
2. Ford Says 68% of U.S. Drivers Have Poor View of Its Mileage [↩]
3. Ford lifts the curtain on five-seater Connect Electric station wagon [↩]
4. Ford SUV Marks New World Car Strategy [↩]