(First published March 6, 1989, Financial Times of Canada)
By Adam Corelli
St. THOMAS, Ont. – ITS DESIGN is two decades old. It guzzles gas, hungrily. It handles like a small ocean liner, which is to say, not easily. It should be in a museum. One day it will be. But not yet. Not when farmers love it, cops love it, retirees love it. Not when the Ford LTD Crown Victoria is selling so well that the 3,800 workers who build it in St. Thomas, Ont., have been on overtime for four years. Not while Ford’s befuddled executives still regard this mild-mannered antique-mobile as a supercar and keep postponing the execution date because people just won’t stop buying it. “That car was supposed to be dead 10 years ago,” says Ottawa auto analyst Jim Dancey. “But there’s too much demand to kill it.”
The LTD’s popularity is one reason why Ford Canada last week reported a doubling of profits. Says New York auto analyst Philip Fricke: “You have to believe the profit margin on the LTD is unbelievable.” In the United States, where the LTD is no less durable, it helped contribute to the industry record profit – $5.3 billion (US) – achieved last year by Ford Motor Co.
For the St. Thomas plant, operating at 120% capacity, it is one of the world’s most profitable – the LTD is an investment that keeps paying dividends. While Ford and North America’s other automakers took lessons from the Japanese, spending billions of dollars on robots and computer-run assembly plants, the St. Thomas plant, with its capital costs amortized many times over, has simply plodded along, making huge wads of money. To company executives, the lesson of St. Thomas is that one does not always have to spend billions to make billions. “Some of the modernistic ways don’t run so well,” says plant manager Robert Kurtz. “Sometimes it’s better to follow the technological leap.”
Indeed, the St. Thomas plant is like an automotive time warp. Instead of rows of synchronous robots and new-age auto workers in white lab coats, the 21-kilometre assembly line is manned by thousands of blue-collar workers. Their job is tedious, manual, dirty and well-paying. The average pay, including overtime, for a 48-hour week: $857.35.
The LTD and its sister model, the Mercury Grand Marquis, were built at plants in Oakville, Ont., and St. Louis until the tooling and production were consolidated at St. Thomas in 1983. New plants can easily cost $1 billion, but by using an existing plant and old equipment, St. Thomas cost Ford less than $ 100 million.
Ford did invest another $ 100 million in St. Thomas, upgrading quality-control equipment. That step helped enable the car to win Ford’s highest-quality designation last year. But Ford designers have also avoided changing its appearance too much, for fear of losing loyal buyers. However, design isn’t the only factor in the LTD’s success. “There is still a need for that kind of vehicle,” explains Fricke. “And the availability of big cars has been reduced.” The LTD’s price – at $22,000 – is also below that of other big cars.
Inevitably, success has its price. During a two-hour plant tour last week, the assembly line was halted twice because of equipment breakdown. (The line runs 20 hours a day.) With the cars selling as fast as Ford can make them, each delay represents lost revenue. The available supply is a third below the industry average. Almost 250,000 units were built – and sold – last year.
How long the LTD relic will remain relevant is unclear. With more than half the buyers of the LTD Crown Victoria/Mercury Grand Marquis older than 60, Ford officials are unsure of whether the model will benefit from the aging population – or whether the traditional buyers are a dying breed. Paul Caron, Ford’s manager of sales planning and analysis, says the car will likely remain a strong seller if the economy turns sour – because retirees’ income tends to remain fixed through various economic cycles. Another 20% of the vehicles sell to fleet owners, mostly police forces; most of the remaining buyers are farmers. “Those rear-wheel-drive cars are still selling well,” says Toronto analyst Dennis DesRosiers. “It’s a fundamental problem Ford has. What do you do?”
Ford’s current plan is to discontinue the car in about 1991 – but it has delayed kill dates before. Even when the automaker does finally decide to replace it – and put a new line into St. Thomas – the LTD will be remembered as the tank-like antique that outsold the technological wizardry of a later generation.
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