One on One with David Mondragon
David Mondragon arrived from the U.S. to be the President of Ford of Canada just in time for the the most challenging times ever for the North American car industry. Between getting in touch with Ford’s Canadian dealers and customers, and managing the company in a difficult economy, he is a busy man. He took the time to chat with RPM at the recent Vancouver International Auto Show.
RPM – Besides the economy, what has been your biggest challenge in your first seven months on the job at Ford of Canada?
David Mondragon – The first phase of starting this job was grounding myself on the economy and the industry. It took a while; I traveled a lot, and my first three months were basically on the road. I went to every province and met as many dealers as I could, spoke to as many government officials as possible, really tried to ground myself as to what is happening in Canada, and how much Canada differentiates itself from other areas of North America. The business conditions in Canada are unfortunately fairly similar to what is happening in the U.S., but there is great resilience here with regard to the banking system and the financial capacity of most consumers, so we are optimistic as a manufacturer, and there is good opportunity for the industry to rebound quickly here.
RPM – How is Ford doing things differently than GM and Chrysler, especially with regard to bailouts and government loans?
DM – We are doing quite a few things differently. First and foremost, we started our transformation a few years ago; it didn’t just happen when the economy went down. We closed 17 plants to right-size our capacity, and we have established a manufacturing footprint that is viable going forward. And we have taken some big steps with regard to giving ourselves financial viability. We don’t plan to ask for government loans; one of our mantras is financial independence and to manage our way through these difficult times. All these steps we have taken over the years have put us in a stronger position right now.
RPM – What do you feel the government’s role is in helping to create a stronger market?
DM – It has many roles. First, infrastructure support with regard to growing the manufacturing footprint in Canada, and I think they have been very supportive with regard to helping manufacturers keep their production base here. The government today is needed to help stimulate the economy, more so than ever before. And that stimulation, to me, comes in the form of the scrappage program. The Canadian economy is very dependent on auto sales; 20 percent of all retail sales are auto related. So, while there is no silver bullet, no one thing that is going to fix the economy in total, helping our economy stabilize sales and put it back on the road to recovery is one of the strongest actions the government can take.
RPM – How much further do the governments need to take the scrappage program?
DM – We need to go ten times further. The national scrappage program is $300 per unit. It needs to be $3,500 per unit. The average ten-year old vehicle is worth between $3-4000. People need compensation for their vehicle that is of value, something that will warrant their exercising of that opportunity. Also, the scrappage program offers an opportunity to stimulate consumers in a different way. There are consumers who don’t want to be driving a ten-year old vehicle, but they don’t have the financial resources to trade it in and buy a new vehicle. A lot of those sales, that would come with taking older vehicles off the road, would be truly incremental to our industry. It would be a long-term strategy to stabilize the industry and help those Canadians most in need of help. The environmental, economy and safety benefits alone make it worthwhile.
RPM – How does scrapping a $3,000 car help the owner of such a car, who could walk onto your lot and get a trade-in value of $3,000 towards one of your new cars that he still can’t afford? Where is the extra incentive?
DM – A dealer is not going to pay you $3,000 for a car that is ten years old. It’s going to be purchased at a discount, then refurbished, a lot of money has to go into the vehicle, and the dealer has to make his margin. A lot of people will continue to drive that vehicle with a book value of $3,000 without such an incentive. So you combine that with the normal incentives from a manufacturer on a new car, and you get some real robust impact on the economy. It has been proven in Germany, where new car sales rose 20 percent in a world-wide down market.
RPM – What has been the effect on the manufacturing side of Ford of Canada with what has been going on in the U.S.? Has it had more of a negative effect on Ford of Canada than has the sale of all Ford vehicles here?
DM – There has been an impact. Over 80 percent of our production goes to the U.S. There is a ripple effect in terms of our assembly productivity and our cost of producing. There are parallel issues that face the industry. One is from the manufacturing side and the other is from the sales end. We are focused on both right now. The issue that I see as being more prevalent in the industry today is the actual retail sales. The industry continues to decline month after month, and we need to stem that level of decline. We represent such a large percentage of overall retail transactions in Canada and the U.S, that it is imperative that the auto industry get back on a level footing. Once it is, the overall economy will start to show a great improvement as well.
RPM – On the dealer side, what do you see as a best case/worst case scenario as far as losing dealers in these market conditions?
DM – That’s a huge issue across the industry. We have a very good footing right now in Canada, with 440 dealers and 60 branches and satellite operations. The throughput in our dealerships is sound today, and the profitability in our stores is still fairly stable, due to the fact that we have a good back-end part of our business. We have the highest levels of customer satisfaction we have experienced in over a decade. People are satisfied with their service experience, and that is helping to keep our dealers above water. That said, still close to ten percent of our dealers in Canada are losing money, but in the U.S., the figure was close to 50 percent last year. Industry-wide, all manufacturers are starting to feel the pressure, and there will be some downsizing of dealerships.
RPM – What are people saying about Ford these days?
DM – People are finally seeing Ford’s attributes, the value that we offer to the Canadian consumer. People for so long over the last year were so tied up in the financial stories. We are past a lot of that. We still have some very difficult times ahead of us, but we can finance our way through the difficult times. Consumers are finally starting to hear the true stories about Ford, how the fuel economy ratings are the best in every segment, how the safety standards are the best in the industry, plus the technology story. Almost 50 percent of the new vehicles we are bringing to market are experiencing conquest sales, so new customers are coming to our showrooms.
Related Posts
© Copyright RPM Media Inc. All Rights Reserved. Site Designed by JC Design