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Ford's challenge: product, product, product

2006-09-18 10:35
"They have a lot of work ahead of them in the product area. It's the biggest challenge of the turnaround," said Standard Poor's equity analyst Efraim Levy. "Even negotiating with the unions can be done, but ultimately, if they can't start stabilising market share and growing volume they'll have to go back and cut more."

Without cars that sell, more painful medicine is in store even if the accelerated turnaround plan unveiled on Friday delivers exactly as promised, analysts said.

After initially pledging to stem market share losses this year, Ford acknowledged its sales will continue to shrink amid the strain of higher interest rates and a slowing economy.

Ford is betting it can hold its market share steady above 14% in coming years, compared with above 16 percent currently, according to forecasts released by Ford.

By contrast, Ford's US share was more than 25% in 1995, when the No. 2 US carmaker was riding high on the strength of its trucks and the now-iscontinued Taurus sedan.

Now, Ford has to defend its market-leading position in full-size pickup trucks, while pushing into areas that analysts and dealers say it has been neglecting far too long - fuel-efficient passenger cars and "crossover" vehicles, or lighter SUVs built on car platforms, that are quickly winning new fans.

However, a car takes almost three years to move from the design studio to the showroom, meaning Ford's push will not be fully felt until 2009, analysts said.

While Ford's trucks are selling well, "the big issue for Ford right now ... is that they need to get into the car business in a big way," Group 1 Automotive Inc. <GPI.N> Chief Executive Earl Hesterberg said at the Reuters Autos Summit last week in Detroit. "Unfortunately you don't wake up one morning and establish this."

Ford promises more, faster

Ford is promising to roll out new models faster.

"We've re-examined our entire cycle plan and we've accelerated our work on future products," Ford Executive Vice President Mark Fields said on Friday. "Development is now under way on five new vehicles."

Ford did not elaborate on those cars, but offered up other product plans last week. These include a new version of its Mustang muscle car every year and a retro-styled crossover based on its Fairlane prototype unveiled last year.

Ford will enter the crossover market in November with its Edge and the Lincoln MKX models.

Analysts believe the segment will be the fastest-growing over the next few years, with as many as 70 competing models available by 2009.

These include Toyota's newly revamped RAV4, which sparked the crossover craze, and three upcoming GM crossovers - the GMC Acadia, Buick Enclave and Saturn Outlook.

A redesigned version of Ford's flagship F-150 pickup truck will debut in 2008, the company said.

Analysts remain cautious about the F-150 given the competition from General Motor's new Chevrolet Silverado pickup that will hit showrooms later this year, and Toyota's all-new Tundra pickup expected in early 2007.

"They are going to have to give the F-150 everything they've got and they are not going to get a whole lot from it in terms of sales," said Erich Merkle, an analyst with IRN Inc. "Ford is going to have to fight really hard just to maintain its volume of the F-series."

Although Ford executives have said since January they plan to sell a subcompact car in the US market, the company made clear last week that will not happen until 2009.

That will be three years after the Japanese car companies launched their latest small car offensive with the Toyota Yaris, the Honda Fit and the Nissan Versa, all of which have proven to be sellout hits in 2006.

Merkle said he expected Ford would have three small cars in showrooms toward the end of the decade. Fields said last week those new vehicles would be based on platforms developed outside the US market.

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