Ford Motor Co. is betting $1 billion that it can sell two similar cars at two different prices in large enough quantities to increase its share of the domestic auto market.
It is a gamble that raises anew questions about whether the various divisions of U.S. automakers are offering products different enough to justify hundreds of dollars of difference in sticker prices.
The question has been debated extensively here at Ford headquarters, home of the nation's second largest car manufacturer, and at General Motors Corp. headquarters in nearby Detroit.
The two companies occupy nearly 60 percent of the domestic car market, with GM taking more than 40 percent of that share.
Both companies traditionally have operated under the doctrine, as stated by GM, of "a car for every purse and purpose." But both have been criticized for serving up specious variety in their desire to be all things to all people in the face of rising production costs.
That, partly, is the background behind the highly theatrical launch today of the Ford Tempo and Mercury Topaz--Ford Motor Co.'s newest entries in the domestic car wars.
Ford Chairman Philip Caldwell said his company has spent $1 billion since 1979 developing the new models, which he said represent Ford's "response to the all-important and fiercely contested mid-range of the U.S. market."
The Ford Tempo has a projected annual sales rate of 300,000 units, compared with 100,000 for the Topaz, according to Ford officials. Ford also announced today that the Hertz Corp. rental car company has ordered 15,200 Tempos and Topazes at a cost of about $139 million.
The Tempo and Topaz are being sent into battle against GM's mid-size J cars, which are fighting one another, with varying degrees of success, in GM's five car divisions. The new Ford models also are designed to attack Chrysler Corp.'s mid-size Ks, as well as an array of Japanese models, including the popular Honda Prelude and the recently introduced Toyota Camry.
Ford's success in that endeavor largely will depend on its ability to persuade buyers to spend at least $6,840 for the Tempo and $7,355 for the Topaz, whose differences primarily are cosmetic.
Both cars have the same 2.3 liter "high-swirl combustion" (fast-burn) engines, and both are offered in standard form with 4-speed, manual transaxles (front-wheel-drive transmission and axle arrangements). Both have the same body construction, and the same steering and braking arrangements. And both share what amounts to a true innovation in their size category--rear wheels with fully independent suspension.
The differences are in styling. Topaz, designed to appeal to younger buyers, has a sportier roof line and fixed side windows. Tempo, whose "typical buyer" is expected to be "a family man, about 40 years old with one child," according to Ford, has a more formal roof line with four side windows. There also are some differences in interior appointments.
But are the Topaz's differences worth the higher price?
They are, according to Harold Poling, vice president of Ford's North American Automotive Operations. "We have two distribution organizations," Ford and Lincoln/Mercury, Poling said. "We try to create a difference that is distinctive in terms of appearance," with the Lincoln-Mercury image being more luxurious than that of its Ford counterpart.
"We have conveyed that image to the public, and that's what we offer in the two divisions," Poling said.
However, Poling conceded that, "In the past, we have been on many occasions too close in terms of the exterior identifications of our cars." But he said Ford has spent thousands of man-hours and millions of dollars to come up with new body styles and interior appointments to break its past look-alike pattern.
"You have to keep in mind how rapidly the marketplace changes. It literally changes on a yearly basis," said Donald H. McPherson, a GM vice president and top executive of GM's North American Car Group.
"Unless you're a full-line producer of automobiles, all the way from the bottom to the top, you're going to miss a very large market segment at some stage," McPherson said. But some analysts, such as those at J. D. Power & Assoc., an automotive consumer research firm in Westlake Village, Calif., criticized GM's penchant for loading its divisions with similar cars.
"People are confused and bewildered by the proliferation of GM models," said John Hemphill, a Power vice president.
Hemphill said that GM in particular, and domestic automakers in general, may be losing sales to imports because import dealers tend to give customers "a clearer choice" of products with a "clearer price difference."
But Poling and McPherson say that is a bum rap.
Toyota Motor Corp., Japan's largest automaker and the largest car exporter to the United States, "only has one distribution organization," Poling said. Toyota only designs a Toyota car that is sold to Toyota dealers. "If Toyota had two or three distribution organizations, they'd be in the same position as Ford and General Motors," Poling said.