As the U.S. market finally makes the inexorable shift to more rationally-sized cars, Ford's President for the Americas, Mark Fields, will explain how his company plans to make money with smaller cars. Ford will apparently focus on doing what might seem intuitively obvious to some, but has not heretofore been part of doing business in the U.S. market. They will build small cars that people will actually find desirable to own and willing to spend more money on. For the past several decades, automakers, particularly those based in Detroit but import companies as well, have simply tried to reduce the cost of small cars below the price people were willing to pay. Since people weren't willing to pay much for lousy cars, you can see where that equation went. The problem for the automakers is that it doesn't cost that much less to build a car like a Focus than it does to build a Lincoln or a full-size truck. The engineering costs, wages for workers, tooling, etc. are all the same whether you build big or small. The lower cost of using less material is not enough to make up the price difference.

The entrance of MINI into the U.S. market earlier this decade proved that Americans were wiling to pay more for small cars, certainly enough to be profitable. The key is cars have to be desirable, good looking and have the features customers have come to expect. While Ford's latest Focus may miss out on the good looking part, it does have plenty of features - like SYNC - and people have demonstrated a willingness to buy it. The average transaction price that people are actually paying for the Focus has risen by $1,000 and Ford intends to make money on cars like this and the upcoming Fiesta by providing a good driving experience rather than just a box. What a concept!

[Source: Detroit News]

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