The future of Ford

Ford's top man in the Middle East, Jim Benintende, has been rewarded for his efforts over the past seven years as one of the company's senior managers in the region. In the last two years, Ford resolved a costly legal battle with its former dealer in the UAE, which is the second most important automobile market in the Middle East, and started to make its presence felt through two new partners.

In the last 12 months, Ford has backed up new model launches with some of the most aggressive pricing campaigns seen in recent times. And it is paying off. Ford sales in the UAE during 2002 are said to be 'comfortably placed' in what have been difficult market conditions. A repeat performance in 2003 is definitely a possibility, according to Ford sources.

During Ford's legal battle in the UAE, no one would have expected such a turn of events. Before the issue went to the courts, Ford's market share in the UAE had eroded, partly due to poor model launches, but mostly because of the lax attitude at Galadari Automobiles, the company's UAE dealership. Between 1999, when it went to court, and late 2001, when the issue was resolved, Ford stopped all shipments of its models into the country.

In a seminal case involving the UAE's archaic Commercial Agencies Law, a final verdict was never delivered by the local courts. The dispute was eventually resolved through an out of court settlement.

'What Ford showed through the duration of legal route was that it was willing to go the distance to correct what was a hopeless situation,' said
a senior official at a rival carmaker.

'Ford has indeed come in from the cold. Not many other companies would have the guts to do what they did in a similar situation. More importantly, since the dispute came to public attention, the relationship between the manufacturer and dealership in the region will never be the same. After what Ford did to Galadari, no regional dealership can say for sure that a similar thing will not happen to them. It is the best thing to have happened to the industry in years.'

Ford did not focus all its energies on the UAE market. In Saudi Arabia, its biggest market, the company decided to have separate dealerships for
the Ford and Mercury brands. The transformation was effected without the acrimony that accompanied the dealership changes in the UAE. Again, the move paid off, and the Saudi market has performed well over the last two years. By the end of 2002, Ford unit sales in the Middle East were estimated at 25,000, a solid growth rate of 10 percent over the previous year.

However, there are reports that volumes in the first quarter of 2003 were five percent lower than in the same period in 2002. Markets such as Saudi Arabia and Kuwait bore the brunt of the losses. Retail activity in Kuwait had nearly ground to a halt during the hostilities in Iraq. And consumer spending is not expected to pick up anytime soon.

A senior Ford official in Riyadh, however, remains optimistic. 'The political scenario in the region has changed,' he says, 'and there is now every reason to believe that an upturn will be had on the economic side as well, even if there is a slight softening in oil prices. All things being equal, we are predicting a strong second half recovery for the Gulf auto market, which will extend into the first few months of 2004.'

In Ford's meetings with its regional dealers, company officials reiterated that there will be no easing up on the effort to gain market share, whatever the short-term consequences for the operating margins of the dealers and the manufacturer. According to industry sources, Ford intends to attain a 3,000-5,000 unit gain annually in each of the next three years, which should push its overall tally to 45,000 vehicles. And within the decade, Ford expects to be able to take on General Motors for the title of biggest regional seller of American cars.

A lot of the credit for Ford's improved fortunes in the region should go to Benintende, a consummate professional. He has worked in Ford's Dubai office for seven years - which is double the average length of service for senior company officials in the region.

Consider the Mideast launch of the Mondeo - Ford's bestselling model internationally. Earlier, Ford would have priced the mid-sized car in the UAE at the 52,000-54,000 dirham ($14,150-$14,700) mark, which would have placed it at a distinct disadvantage vis-à-vis Japanese makes in the same category. This time, a decision was made to bring the price down under the 50,000 dirham barrier. Early indications are that model is exceeding Ford's pre-launch expectations.

'No longer will Ford be content with introducing a model and hoping to get some fair numbers from it. Now, the intention is to aim for market leadership in a category or very close to it,' said the Ford official from Saudi Arabia.

Apart from the Mondeo, Ford's great hopes are for the pricier Explorer and Expedition SUVs, and the legendary Mustang model. The two SUVs had a good run in the last two years. Lincoln limousines, having recently undergone a major revamp, are also racking up decent sales.

But the recent upsurge in anti-American sentiment in the region - further inflamed by the war in Iraq - has hurt sales for Ford and other US brands. According to industry sources, the Big Three American manufacturers have all taken hits on sales, especially in the small but volatile markets of Lebanon and Jordan. Even sales in the crucial Saudi Arabian market have been affected by anti-American sentiment among consumers.

The Ford official in the kingdom says that the problem is manageable, and points to the company's volume gains in 2002 as proof. 'Buying a car is quite different from buying a cola or a burger,' he insists. 'Wider issues will not have the same level of impact when it comes to buying a car. If that were the case, no US car manufacturer would have been able to move any shipments in the region since the first Gulf War. Recent events will leave a temporary blip, nothing more.'

Ford is not alone among the major manufacturers in believing that an upturn is just ahead - General Motors is planning 20 new launches over the next few months. Chrysler, which is running a distant third, hopes to put behind it a dismal 2002 in the Gulf with new launches of its
own.

The other brands owned by Ford - Jaguar, Land Rover and Volvo - all performed well in 2002, beefing up the group's bottom line. In an ambitious move, Land Rover is setting up a multimillion-dollar greenfield assembly line venture with a Jordanian partner. Units from these plants, which will obviously be cheaper than vehicles imported from outside the region, will be exported to some of the North African markets.

Volvo, which underperformed in the Middle East on its own, has blossomed in the last two years since coming under Ford's ownership. While Volvo is not about to take on Mercedes and BMW anytime soon, an expanded lineup helped the Swedish brand attain the 1,500 unit sales mark in 2002. Another strong year is predicted.

'The next two years will be crucial for Ford. It will be in this period that consumers will see the full benefits of our expanded offering,' says one regional company official. 'Ford is now set for the future like never before, and the Middle East is integral to it.'