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The leader of the pack

Date: 11 October 2006

Roelant de Waard, Ford of Britain's chairman and md, speaks about lobbying to overhaul the CO2 tax system, market leadership and his S-max with 20-inch wheels.

Guy Bird: Your lobbying for "well-to-wheel" tax breaks for biofuel could result in a complete overhaul of the present tailpipe-related CO2 company car tax system. Is the Government listening?

Roelant de Waard: I think they're going toward biofuel but I don't think they've really made up their minds yet; Transport for London is driving it now.

There's been no positive response [from the Government] since we announced our position in July, but the general desire from the Government for greener fuels could help. [Last year's Renewable Transport Fuel Obligation requires oil companies to make 5% of their overall fuel sales from a renewable (ie biofuel) source by 2010].

There are various scenarios. They could legislate to raise ethanol content in regular fuel by up to 10% and have it as the default fuel - ie you can't have anything else (like fluoride in water) - or incentivise a smaller number of drivers via tax breaks to use E85 fuel (85% ethanol/15% petrol). Either way, you could get similar progress in CO2 reduction benefits.

Are you more prescriptive now on what sort of tax breaks you want the Government to make?

No we're not. The way the Government is going on taxing vehicles according to their CO2 emissions is fine, as long as biofuel is looked at in a well-to-wheel measure.

What we want is a CO2 measure not a technology-related measure. At present, a hybrid vehicle is exempt from congestion charging in London because it's a hybrid - so you can have a Lexus RX400h 4x4 that may be relatively clean compared to other SUVs, but compared to a Fiesta [which isn't exempt] it's not.

Your eco march doesn't just involve biofuel. What other technologies can we look forward to?

We see direct-injection petrol engines as a major contributor. Diesel tech is very good at reducing CO2 but there is a downside on nitrogen oxide (NOX). You can achieve the same CO2 performance with direct-injection petrol without the NOX consequences. So if the attention on NOX gets bigger, and in stages Euro5 and 6 emissions legislation becomes written into the law, then petrol direct-injection will become an important answer.

How soon before the technology becomes available?

We've already had a Mondeo petrol direct-injection on sale and the tech is being developed further right now. It's basically round the corner - we're talking the next product cycle.

And could these petrol units really match diesel mpg?

Yes, and have less NOX too.

Would such new petrol engines work across the range?

They are more attractive in smaller engines because a smaller diesel can become really expensive if you have to equip it with a NOX trap. If the price of a NOX-compliant small diesel becomes too high then small vehicles will simply not have an answer, therefore this petrol technology - being more cost-effective - could be good solution. A lot will depend on the taxation system and if and when the CO2 bandings change.

What about Ford hybrids?

Hybrids are part of the plan, but 'full hybrids' [like the Prius] have quite a high cost and so are therefore not necessarily the solution for the smallest or lowest mileage vehicles.

Micro hybrids [with no separate motor and just using regeneration techniques from the alternator] can achieve some of the benefits at a lower expense. That is a good example of saying "well, we have to provide a solution that is relevant for the customer". If you design something that only gets to break-even or better beyond 60,000 miles a year it doesn't pay and that's where we are presently. In reality, these vehicles are bought for environmental consciousness rather than business case. We believe we need a business case to make the environmental case.

Lightweight materials like aluminium are also part of the plan for the Ford Group, with fuel cells by 2015 or so.

Do you think fleet discounts and market leadership is incompatible with strong residual values?

It's a constant balancing act. It's very difficult to be market leader without being strongly represented in all sectors. If we were to throttle back on what are clearly 'expensive' segments then you have to offset it somewhere else.

When you say 'expensive', you mean segments where you have to offer big discounts?

Yes. Fleet is an important element of our strategy, and we are going to be represented in all segments and plan to be number one in each. Those market segments where we're not, we're actively pursuing to be so, because if you're such a dominant player you can't afford to not fire on all cylinders.

But you have to carefully manage the quality of fleet sales. There are different types, from short cycle, medium, return business [cars bought back from customers at a pre-agreed price] versus non-returns. If you get it wrong it can hurt your RVs and that will hurt your retail sales again. But I see other carmakers with strong RVs - like VW - being increasingly active in fleet.

You're running at about 60% fleet business?

Which is slightly above the market average at 52% or so.

One thing I find very difficult to get a handle on here is to get an accurate take on the sales categories. You don't really know if a dealer demo ends up as 'retail' or 'fleet' and whether a contract hire sale is actually an employee sale, so it's difficult to judge. But we're not throttling back on our fleet business.

On the forthcoming Focus CC sales predictions you seem more optimistic than your product planners? Who's right?

The only reason I feel the CC could do 8000 per annum is that the Focus ST sold in a similar way. I think the 5500 sales figure of the product planners is conservative. We've had a very good response with the diesel model too. I think it will expand the market.

If the current best-selling CC - the Megane CC - sold 8200 in 2005, it will fall a little back in subsequent years, and I think there's some very hefty competition coming this year that will make life tough for some of the opposition. I think our business split will be higher than the 5-10% prediction too.

We have got a cracking offering with a very good-looking, great driving car with good functionality - you can fit four people in it and luggage - offering tremendous value. So all the ingredients are there for us to be market leader in this segment.

How is the S-max going? Is it cannibalising Galaxy sales?

The S-max has been very successful since its launch on the night of the Champions League final, not only because it's selling well but because it's selling in very high specifications (more than 50% in Titanium trim) and it's getting more than 50% conquest sales. Of course, we always have the ambition to get conquests, but this vehicle is one of our unique opportunities to truly grow with a new entry.

The fear was people would compare it to the Galaxy, but they don't.

Where are the new S-max drivers coming from?

From all over the place - on my most recent visits to dealers there was a Porsche Boxster customer, an Audi customer, and a Mondeo wagon 'upgrader'. They are people who have an aspirational vehicle but need more function, don't want to compromise and want to feel good - the S-max does all of that. I drive one myself with 20-inch wheels and everything on it.

How does your own S-max ride on 20s?

The ride is good as we have a relatively soft shoulder on the wheels. It's doing remarkably well - it's not at all bumpy. I get a lot of thumbs up with that vehicle, real head-turning stuff. I'm delighted.

What about C-max and Galaxy?

The C-max is increasing sales again. We repositioned it price-wise to fit the S-max above, so that I think it's now clear there is a separation in the C-segment MAVs [Multi-Activity Vehicles] between five and seven seaters. The sector is pulling apart.

With Galaxy it is too early to say, as there are certain derivatives to come - especially for the fleet market with diesel automatics - but the good thing is we can be flexible. If we sell more S-max, fine; if we sell more Mondeo, if we sell more Galaxy, fine - they all come off the same line in our plant in Ghenk, Belgium.

Talk to us about your jacked-up Focus 4x4 concept for 2008?

Well, it's not a jacked-up Focus. I think that's really important to say. Most of the spy shots were off the mark. The Iosis X is a very competent crossover.

Is it your answer to the Nissan Qashqai?

I don't know. We haven't decided yet.

Will it be called the X-max?

We haven't decided.

Is a part of the decision to launch it now because you feel less need to worry about what Land Rover does these days?

[Laughs] That's a great question - no, not at all. Product plans have a longer gestation period than the recent gossip about Jaguar and Land Rover. As you've heard our executive vice-president for international operations, Mark Schultz say, we don't have any plans to sell Jaguar and Land Rover.

I think what is important is that when you have a group of brands you compete as brands, operate at arm's length and do what is right for your brand. For a brand such as Ford and its competitors like Volkswagen or Vauxhall it is perfectly credible to have such an offering. And if we want to maintain our leadership we will have to compete in all relevant segments of the market place. That is why we are showing a possible entry to the crossover market.

Finally, what can you tell us about the next Mondeo?

With the car you saw at Paris, you're getting a good look at the future. It's quite untypical to show a vehicle that is not going to arrive until the second quarter of next year at the earliest and being open about its near-production intent. Along with the C-crossover, I think our strategy is quite aggressive - we could have shown a bunch of concepts with the approach of "well we might sell them, we might not", but we're pretty 'to the point' about our ones.