Q&A – Larry Prein

Ford evolves with focus on global efficiencies

Reading Time: 5 minutes

 

Ford Motor Company, the grandparent of affordable Americanautomobiles, has just reaped first-quarter profits of $2.6 billion [AED 9.55billion], putting them on pace for a record year. The group’s resurgence andrecent success in the United States and international markets has beenattributed by the global media to a focus on fuel efficiency and smaller cars.Executive spoke to Ford Middle East Managing Director Larry Prein to see whatdrives regional car markets. 

E  In the firstquarter of 2011, many manufacturers reported strong growth in car sales in theUnited Arab Emirates. Which factors and market segments have driven thisgrowth?

At least for Ford, our growth has been driven essentially bynew products entering into different segments. Ford has been known for verygood SUVs [sport utility vehicles] and very good large cars. We also have seensome excellent growth with smaller cars. [Our growth] has been driven by theintroduction of new products that catch people’s attention and also byrepositioning some of our existing products.

E  What can youtell us about the impact of new products on the development of your customerbase? Do you track new customers versus repeat customers?

We try to. It depends on how good our dealerships’information is. What we are seeing is that the new products attract a higherpercentage of new customers into the showrooms. They like the styling, thetechnology [and] the value that the vehicles offer. It ties in with what we areseeing in the US and Europe as far as purchase motivation.

E  Any specialdemand profiles in the local market?

Although we do testing for the Middle East and some specialengineering for the region, a lot of customer tastes are pretty similarthroughout the world. One thing we are trying to do is to commonize [sic]nameplates around the world. A [Ford] Focus that looks different in the USversus Europe versus South America versus Asia is going away. [It is about]having one vehicle designed for the world that we can market to the world anddevelop one advertising campaign and get better efficiencies.

E  When was theconvergence point at which Ford moved into this unified global approach?

It was when Alan Mulally came in [as president and chiefexecutive officer] about four years ago. He had a global view, coming fromBoeing. There was a lot of talk at the time about people merging and doingjoint ventures and having everything together. I remember him saying that thebiggest thing Ford had to do was to merge with itself and get efficiencies ofproduct development and purchasing by having global platforms; instead ofengineering a vehicle four times, engineer it once.

E  In the luxurysegment, the group has the Lincoln brand, which appears not to have the kind ofstrength in this region that it used to have in the US. How is the brand doingtoday for you?

The US is working on how to bring Lincoln to really premiumstature. Right now, it is probably at some place between the premium and themass market in the Gulf Cooperation Council. We have some new products out thatare doing very well but it is still a small volume for us. We haven’t got thatbreakthrough product in Lincoln yet.

E  Does theabsence of what is perceived as a full premium brand in your product portfolioimpact your position negatively in the GCC?

No. The UAE is a bit of an anomaly. It has a very highluxury segmentation; probably close to 20 percent of the industry is in premiumcars. But in Saudi Arabia [the premium segment] is 3 or 4 percent. Kuwait issomewhere in the middle, probably 8 or 10 percent. To do [the luxury market]right, you have to have a heritage. Mercedes, BMW, Range Rover and some of theothers have their place in the market but we still have the 90 percent [toaddress]. The mass market is where you have people still looking for the bestvalue for their money and the best vehicle that fits their personality andtheir needs.

E  How do youraudiences here in the GCC respond to automotive trends that are very muchemphasized globally, such as hybrid and green?

It varies by market. In Saudi Arabia, petrol is 50 cents pergallon, whereas it is more expensive in the UAE. Incomes are higher here, so Ithink people are more aware of green and doing the right thing. We arelaunching our eco-boost engines that get 20 percent better fuel economy thantraditional engines and have much cleaner emissions, and we are taking a lot of[other] steps in that direction… We are doing some testing [on hybrids] butwe are not really sure if customers are ready to pay the premium at the massmarket level.

E  How aboutinfrastructure for hybrids?

The infrastructure isn’t the biggest deal, at least on thevehicles that have gas and battery power. Once you get to cars that run solelyon battery power, the infrastructure becomes more of an issue.

E  How much isthe overall investment required per vehicle to make a car fit for the high heatand humidity environments of the Middle East?

The real trick there is building it into the base program.We have a couple of engineering people based here and a lot of people come fromdifferent product programs around the world to test. When findings are made onwhat the norms should be for this area, they get built into the productprograms globally. So, there is a lot of learning and if the new norms are setas part of the base program, this is what you have to achieve. It is much morecost efficient, and we are getting much better at that. If the vehicles arealready developed and you have to try and go back and fix it afterwards it getsmuch more expensive.

E  When it comesto product and efficiency for this market, how close to your ideal are you?

You can always improve. We have a very good process and havebeen doing it for several years. Before, it was more hit or miss — fixingthings after they get here — let’s say 20 years ago. We have been gettingbetter and it has really picked up in the last five years with the push forglobal platforms and more commonality between markets.

E  What is yourUAE marketshare?

In the UAE last year we finished at around a little over 5percent, based on the numbers that we look at. We take MEAC [Middle EastAutomotive Council] data and then have some assumptions for re-exports. It’shard to tell because there are no definitive government records one way or theother. It is the best guess that we can come up with.

E  Do you seepolitical risk and security risk hitting you any time soon?

My region includes Afghanistan and Iraq as well as the restof the Middle East, so we always have some of those risks present. We don’thave Egypt but North Africa has an impact on everybody, just from a customerconfidence viewpoint. We just have to play it out and manage the risk the bestwe can.

E  Can you sayhow much you have invested in the past five years in your Middle East presence?

Our dealers have invested, I would say, hundreds of millionsof dollars, all told, but I don’t have an exact number. It is a very significantamount. They see the business opportunity as our new vehicles have come out andcustomer acceptance has been strong. That gives them more confidence to investin new facilities, in people and processes.

E  Do you expectUAE automotive sales to reach a double-digit increase in 2011 versus thepre-crisis year of 2008?

No. If we could get all the vehicles we wanted, we might beable to do it, but we can’t. We are in competition with all the other marketsto get production. We see our sales growing here significantly versus last yearbut we probably will not reach 2008-type numbers [until 2012] if we can get theinventory next year.

 

Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years. Send mail

*

Top