Ford shifts past bumpy Explorer debut
Ford Motor Co.'s changeover to the all-new 2020 Explorer, a cornerstone of the Blue Oval's all-in-on-SUVs strategy, promised to be difficult from the start.
Company officials acknowledge errors in the rush to ramp up production at Chicago Assembly delayed deliveries by months as Ford's best-selling large SUV rolled off the line with major problems — faulty seats, loose wiring harnesses and digital displays with buggy software.
The slowdown contributed to a 50% fall in Explorer sales in the third quarter of the year, the company reported. The delays came as Ford expected to see a profit upswing from its transition to a more truck- and SUV-heavy lineup. Simply put: Ford executives say they tried to do too much, too fast, and they fumbled a vital product introduction with little room for error.
"This is a rarity," Joe Hinrichs, Ford's president of automotive, told The Detroit News. "We took on a lot more than we have before. It was too much for that plant to take on."
Problems with the new Explorers and its sister, the Lincoln Aviator, were fixed before they headed to showrooms, the automaker said. The SUVs were trucked to Ford's Flat Rock Assembly to make repairs. Quality control was done at Flat Rock because there was no space around the 2.8 million-square-foot Chicago plant to do so.
The kinks are ironed out now. More than six months after the automaker finished updating the plant to build the new models, Chicago Assembly is running as it should be. Hinrichs and others at Ford say the automaker won't see such a complex rollout anytime soon.
But some experts argue Ford missed a chance to demonstrate CEO Jim Hackett had made the company faster, more nimble and more efficient, markers of the "fitness" mantra he's championed since becoming CEO in May 2017.
"To be fair to them, this was a lot to change," said Jeff Schuster, industry analyst with LMC Automotive. "But this is Ford. They should know how to do this by know, and this isn't the first time that you've had some substantial changeover at a plant."
No margin for error
Ford insists the Chicago changeover was the most complex and quickest it's ever attempted. And it's successfully introduced other new vehicles this year, such as the new compact Escape SUV. Chicago was a unique stutter-step for a few reasons, Hinrichs said.
The Dearborn automaker spent $1 billion and took just 31 days in March to retool its 95-year-old assembly plant on Chicago's south side to build the 2020 Explorer and 2020 Lincoln Aviator on an all-new, rear-wheel drive platform.
Ford couldn't build vehicles down the mainline to train plant employees, a process the automaker traditionally uses. Instead, Ford chose to train employees off-site while the company retooled and rebuilt the assembly line to ensure production could resume as soon as the plant overhaul wrapped. The plant started running three shifts — near maximum capacity — almost immediately.
Complicating matters, the automaker tried to build multiple new models and trim levels on the same line early on. The typical hiccups associated with the changeover to a new vehicle were amplified further by the narrow margin for error Ford left itself. Changing a plant over to build rear-wheel drive vehicles is enough of a challenge without a 30-day retool timeline and a hastened launch plan, multiple Ford officials said.
"When you go from front-wheel to rear-wheel drive, it's kind of like building a house backwards," said Ron Ketelhut, Ford's global director of manufacturing strategy. It meant a big change for the 5,000-plus workers at the plant, a change Ford traditionally would have allotted more time to address.
"Going from front-wheel to rear-wheel is a really big deal," Ketelhut said. "This is probably more difficult than building a new plant. You have a little more time if you're building a new plant."
The last time Ford changed a plant over from a front-wheel drive configuration, the automaker allotted six months at Michigan Assembly in 2018. The automaker had to retool that plant in Wayne to build new rear-drive Ranger pickup after spending years building front-drive Focus and C-Max compacts.
"There isn't a lot of slack there to allow for a seamless changeover," LMC's Schuster said. "There's no question complexity has increased, there are pressures on costs and accelerated timelines. Any time that happens, you've got a higher margin for things to go wrong."
Hinrichs said the sales hit Ford is taking due to the sluggish and flawed launch would be similar to what the automaker would have baked into full-year projections had Ford planned to take more time to change over the facility.
"This launch was going to be a significant profit hit for the calendar year," Hinrichs said. The automaker chose such an aggressive timeline to try to mitigate profit losses it would encounter by not having an Explorer to sell for too long.
"Explorer is a vehicle that we've been maxed out in sales for the last five years," Gary Johnson, Ford's chief manufacturing and labor affairs officer, told The News, meaning the automaker was selling as many of the vehicles as it could build. "We wouldn't normally do this. But the previous product was so hot and the expectation for the new model was so hot, that's why we did it this way."
The missed opportunity means not only that Explorer sales were off nearly 50% in the third quarter of 2019; they are off nearly 30% for the year. That's offset slightly by the new Lincoln Aviator, Hinrichs said. Because it's a new addition to Ford's lineup, any sales of that vehicle would boost the bottom line. The automaker had sold fewer than 2,000 Aviators by the end of September.
"Ford will need a swift turnaround in the next few quarters to make up ground," said David Kudla, chief investment strategist at Grand Blanc-based Mainstay Capital Management. "GM and Fiat Chrysler are not sitting idly by."
Hinrichs told investors in late October that the automaker was off by around 13,000 wholesale units in the third quarter. But the line was cranking out almost one vehicle every minute now, effectively the same rate as before the changeover.
Meantime, Hinrichs said Ford is focused on quality control: "Things have stabilized. Just because we weren't producing at the rate we wanted doesn't mean we were sacrificing quality. It's not like we don't know how to launch vehicles. This was a very unique set of circumstances."