Ford Fusion: Designed for the multiple needs of the Indian market

Does Ford India finally have another winner ready? That's the question being asked of the company's new urban activity vehicle (UAV), Fusion. The question is pertinent because this is Ford India's biggest launch since it unveiled the Ikon five long years ago. And the answer lies as much in Fusion's unique styling as it does in Ford India's recently acquired manufacturing muscle (Read: pricing power).

David Friedman, managing director and president, Ford India, believes Fusion's hybrid styling - a crossover between the space and solidity of an SUV and the agility of a mid-sized sedan - caters to a unique, emerging need being felt by urban consumers. He adds: "So far we have seen products in a fixed segmentation and one-body style. There were no cars that match the multiple needs of consumers. Fusion fills that gap."

It's been quite a while since the company put a reasonably high-volume product in the marketplace. It hasn't had a big success since the Ikon. (Over 86,000 units of the Ikon have been sold in the domestic market so far, and a sales of 27,000 units are likely this year.) Ford India's two subsequent launches - the D-segment Mondeo in 2001 and the sports utility vehicle (SUV), Endeavour in 2003 - are both fringe models with small volumes. Ford India really needs another big seller.

There are several reasons why Fusion could click. Foremost among them is Ford's competitive pricing ability derived from its manufacturing strength, an edge that the Ikon lacked. When it was launched, Ford was importing the engine and transmission. Only later was Ford India's agreement with Hindustan Motors (HM) for the manufacture of engines formalised.

Sourcing locally from HM, Ford India was able to pass on the benefits to customers in the form of price cuts. As indigenisation hit 90 per cent, Ford India was able to breach the Rs 5-lakh barrier and offer Ikon Flair at Rs 4.95 lakh.

David Friedman: Spreading the smile

Ford India's manufacturing strength also comes from its export operations. Over 1.06 lakh completely knocked down (CKD) Ikon kits have been exported so far. Export container no. 5000 was shipped out recently. "Exports have been quite beneficial (to Ford) on a couple of fronts. First, we got more volumes and economies of scale. Second, exports was almost like another product line for us." Ford India was exporting to South Africa, Brazil, China and countries which were in a different leg of the economic cycle as compared to India. In 2001-02, the Indian market was stagnant but exports were growing. Today, exports are stagnant and local sales are on the up. "That helps balance our business," Friedman adds.

All this enabled Ford India to kick-off the second shift of production at its Maraimalai Nagar plant near Chennai in August this year. "That enabled us to spread our manufacturing fixed costs better and pass on the benefits to the consumer," says Friedman. In August, a new line-up of the Ikon was launched and the price of the base model was reduced further to Rs 4.49 lakh.

Friedman reckons he can squeeze out 60,000 cars a year with the second shift in place. But with Ford India expecting to produce 30,000 Ikons, another 20,000 for exports, 10,000 Fusions and about 2,400 Endeavours in 2005, it will have to start thinking about a third shift pretty soon. "We will be humming. Squeezing out capacity to produce more, as you know, is good business," he says with a smile.

The third aspect of Ford India's manufacturing ability comes from its financial turnaround. After piling up accumulated losses of over Rs 500 crore since its entry in 1995, Ford India is likely to make its first net profit this year. "The cash generation is allowing us to internally fund our expansion - the move to the second shift and the launch of Endeavour and Fusion were funded from our profits," says Friedman.

Without doubt, Ford India now has the ability to price Fusion far more competitively than the initial pricing of Ikon. But to what extent the auto giant will exercise this option is a different issue altogether.