Will Ford's new Explorer sell?

The popular SUV has been redesigned as a more-fuel-efficient crossover to compete with Toyota's Highlander and Honda's Pilot.

By InvestorPlace Jul 26, 2010 10:17AM

 © 2010 Ford Motor CompanyFord (F) has weathered the economic downturn far better than its Detroit counterparts GM and Chrysler, which both slid into bankruptcy in 2009. That's partially because Ford had plenty of cash on hand but also because its leaders realized they had to reinvent their line of cars and trucks to succeed.

The story of Ford’s reinvention is most striking in its current relaunch of one of its most iconic brands, the Explorer SUV. The new stylish, fuel-efficient crossover represents just how far the automaker has come and the vision Ford has for the future.

But the real question is: Will consumers continue to buy into the new Ford? Or will the latest incarnation of the Explorer fall flat as a step backward towards the heyday of sport-utility vehicles? Here are the details:

According to Ford, the V-6 Explorer will get 20% better fuel economy than the outgoing model -- and the turbocharged premium version will use 30% less gas. This is a clear mission to unseat Toyota (TM) and its Highlander and Honda (HMC) and its Pilot with a fuel-efficient but spacious vehicle. Post continues after video:

Among the tricks used to reduce fuel consumption are a sleek new aerodynamic design, a six-speed automatic transmission and a crossover frame instead of a repurposed truck frame that shed 100 pounds from the new Explorer.

The good news is that these changes add efficiency. Unfortunately, that “efficiency” isn’t all that impressive – with estimates pointing to “above 20 MPG” for combined highway-city driving.

Worse still, the redesigned crossover is less of the high-riding, boxy SUV that folks will remember from the late 1990s and early 2000s. Rather, the new Explorer embraces its “crossover” label with a trim, curvy design that may not immediately appear related to earlier versions of the brand that were so successful for Ford.

So the real measure of success for the Explorer, then, won’t be the formal fuel efficiency as certified by the EPA -- it will be whether consumers return to the driver’s seat of this model.

It’s worth noting that Ford has worked very hard in the past few years to move beyond the trucks and SUVs that fueled its success a decade ago.

At the 2010 North American International Auto Show earlier this year, Ford snagged both the Car of the Year award with its Fusion hybrid, and Truck of the Year award with its Transit Connect van. Sales continue to climb, and anticipation of a fuel-efficient European-styled Focus is high.

It’s also worth noting that Ford, as a company, has performed remarkably well thanks to this reinvention. Ford stock is up 27% this year, while the broader market is essentially flat, and up a stunning 88% in the past year compared with gains of just 14% or so for the Dow Jones. Ford has remained consistently profitable, topping Wall Street expectations dramatically for each of the past four quarters and growing profits each of the last four quarters as well.

But if we’ve learned anything about Detroit, it’s that past successes don’t mean a secure future. GM and Chrysler learned that the hard way – and if the Explorer flops, Ford could face that reality, too.

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