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Tough choices

By / 5 years ago / Interview / No Comments

As one of those high-flying global executives US car firms are so good at creating, Mark Ovenden is ideally situated to give a view on how the fleet industry in the UK is affected by issues right round the world.

Managing director of Ford of Britain since last summer, Ovenden had previously spent three years in Russia and although British, has that unmistakable transatlantic twang redolent of years of experience among the Detroit powerbrokers.

So how does he see the health of the UK industry, and Ford in particular? 

‘Well, the economy is what the economy is and the exchange rate is what the exchange rate is and so a bit like footballers we're really focused on taking every game as it comes, and that means month-by-month, quarter-by-quarter and launching great product, and so far this year it’s going well – we’ve really got out of the blocks quickly,’ he says.

Ovenden believes that the foundation of success is down to product being very strong, but he reckons Ford still has some work to do on its core fleet car.

‘We’ve not seen the full potential of Focus in Britain yet because last year we were short on diesel engines, but the fact that Europe’s gone a little bit soft and the improving availability of diesel engines means that in Britain we are really able to strengthen Focus’s performance.

‘Whenever new product comes out in Britain it seems to take people a little while to get used to it, and in particular that’s been the case with Focus – the styling is a departure from the old one and it has taken people a while to get used to it, but now they have. And with diesel engines and the petrol Ecoboost coming through now we have plenty of upside potential. So all is good, but only the paranoid survive.’

A top-three selling car – it’s a position most competitors in the volume C-sector hatch market would like to be in. But looking at the market from a wider perspective, Ovenden sees trouble ahead for those with their house not in order.

He says: ‘It gets ever more competitive and it always will do. I've been in the market 26 years and it has got more competitive every year and as a result I think the also-ran brands are going to be under a lot of pressure.

‘The Koreans are coming through, and I think the Chinese will come through and what people used to call the premium manufacturers are coming down too, and so it is getting tougher, but that’s the nature of capitalism and we have to make sure we keep turning out very strong products.

‘The benefit of our One Ford strategy now is that we can leverage the strength of Ford globally in each and every market in which we compete. With the pressures on the European market, one of the benefits of Ford being very profitable in the US is that we can continue to invest in the product, where some manufacturers who are overly exposed to Europe are going to find it difficult to continue to invest in new product.’

The solution? Hard choices and cutting capacity. Ovenden believes there needs to be a major realignment of the European car manufacturing industry before health will be restored, and that the cuts in production when the recession first hit in 2008 were fairly cursory and short-term.

‘Sometimes we mix it up in a lot of complex stuff but fundamentally it’s economics 101. If you’ve got an industry with 35% overcapacity, until somebody blinks and takes out capacity there’s going to be tremendous downward pressure on margins, because it is just simple supply and demand.

‘In Europe in 2008, not a lot actually happened. If you look at what went on in the States and the measures that Ford and GM took to restore their profitability it was serious cutting and shutting of factories, not just tinkering at the edges. And further back: Ford took a lot of tough decision at the start of the 2000s, ending carmaking at Dagenham for example, which was tough but leaves us in a better situation now.

‘Because if you look at all the capacity being put in all around the world this downward pressure on pricing is going to continue. It’s great news for customers though as they get lots of great choice at great prices.

‘In Europe though, it’s fair to say that no-one else has yet taken those chunky decisions of that nature. One of the challenges is that it must be very hard for domestic manufacturers to cut plants because the governments will have a view and it’s a lot of jobs. But in the end that which can’t go on forever won’t and there will have to be a rationalisation.’

For Ford, with decent margins and strong new product, part of the challenge going forward will be ensuring the fleet product mix is right to improve residual values for the used market.

‘With our Ecoboost petrol engine that delivers all these best-in-class figures from a 1.0-litre unit, I think you will see a move back from diesel in the fleet market, but I don’t think it will be precipitous or sudden because people don’t suddenly change that much. But what you’re aiming to do in fleet is to replicate the natural retail demand because, in the end, all cars are retail cars.

‘If you get a particular model or powertrain into the fleet market that is inconsistent with the natural retail demand when that stuff come into the used market you have to drop residual values. The more flexible and aligned your fleet portfolio, the better.’

With new product such as B-MAX, Kuga and new Transit coming soon, Ford of Britain looks in a decent position, relative to the weakness of the European volume sector, but Ovenden knows there can be no let-up in effort.

‘You almost have to hit home runs on every single product you are bringing out and if anyone stumbles in this market, it’s very hard for them to get up again. It really is that tough.’

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