Ford Edge Sales Facing Uncertain Future As Segment Grows

A Ford company memo obtained by the Detroit News on Friday notes that the company is not meeting its sales goals, and that employees are losing faith in the company's "Way Forward" turnaround plan.

The report quotes the memo as conceding that Ford missed its January sales goal by 10,600 vehicles--1% of market share--and will probably do likewise this month and next. The memo reportedly also notes that only 47% of Ford employees have confidence in the company's long-term success, and less than 45% feels the turnaround is working.

"It's no surprise that morale would be affected by the downsizing of the company over the course of the last 24 months," said Jim Sanfilippo, vice president at AMCI, Detroit. "And who would be surprised that they would need to concentrate on morale to stabilize; these folks have been through tough months of uncertainty."

The memo highlights some bright spots for Ford, which lost more than $12 billion last year. The Edge crossover, intended to herald a new, innovative direction for Ford and embody its "Way Forward" restructuring mantra, sold 5,586 units last month and 2,201 in December, a month after the vehicle launched.

But analysts are saying it is not yet selling as strongly as the company had hoped. "Actually, if Ford really wants sales to sell 100,000 Edges per year, they need to sell closer to 8,000 units a month, so they are pretty far off target," said Rebecca Lindland, automotive analyst with Lexington, Mass.-based Global Insight.

Jeff Schuster, auto analyst with marketing consultancy J.D. Power & Associates, said that Ford's Edge numbers are healthy, but the consultancy doesn't see Edge selling more than 7,000 units a month. "Still, that's a good number, and I think our view at this point is they will have higher sales months in the spring" as well.

Last week, the company began offering $500 dealer incentives on base-model versions of the vehicle. Lindland said those spiffs make sense "because most people who are 'early adopters' for new products like the Edge tend to have more money and want more of the bells and whistles. So it should not have been a surprise that demand for well-equipped versions would be high."

Sanfilippo pointed out that there is a 60- to-90-day window to build awareness and that in the fourth month after launch, sales should meet expectations.

The rapid growth of the crossover market both helps and hinders Ford's efforts to shoulder--belatedly--into the segment. According to the consultancy, crossovers will grab 15.7% of the market this year. By 2009, they will be 19% of the market. In 2006, they were at 13.4% market share.

However, like a highway that is crowded no matter how many lanes the government adds, automakers are expanding their crossover offerings as quickly as the market expands. Said Schuster: "Last year, there were 47 crossovers in the marketplace. In 2009, we have that going to 74 so you will have this explosion of product, and that will put a limit on a particular vehicle."

J.D. Power predicts Ford will sell the most Edges this year and next: about 86,000. After that, sales will drop into the 70,000s.