luxury autos

The next thin slice of luxury from Ford

January 23, 2014: 11:47 AM ET

The 2015 Lincoln Navigator gives the company a model that competes against the Range Rover and Escalade, but building a luxe brand is a long slog.

By Doron Levin

The 2015 Lincoln Navigator

The 2015 Lincoln Navigator

FORTUNE -- The new Lincoln Navigator signifies a spruced-up addition to Ford Motor Co.'s vehicle lineup. More importantly, the big and fancy SUV proves that Ford hasn't lost its determination to recreate the Lincoln luxury brand.

Taken alone, the 2015 Navigator, which will go into production later this year, gives few hints that Ford (F) has "broken the code" on making Lincoln mean luxury. That's because there is no code, no instant formula. Creating a luxury brand is a long, hard, expensive slog. Ask Nissan, which has struggled for nearly 30 years with Infiniti. Or General Motors (GM), which has spent prodigiously in the quest to fix Cadillac.

The new Navigator's two most important improvements are a restyled exterior and interior, featuring the characteristic "twin-wing grille," as well as a turbocharged V6 engine that's more powerful than the V8 it replaces.

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No single model, no matter how impressive, can overnight create a luxury brand like BMW or Mercedes or Lexus. It takes 10 to 20 years of determined work by engineers, marketers, and designers, juiced with multiple billions of dollars. The answer as to why any automaker would undertake such a mission is simple: Lacking a luxury brand means forgoing huge profits. The global head of Infiniti, Johan de Nysschen described the propostion this way: "Premium luxury cars account for only 11% of global sales, but 50% of profit."

Two vehicles may look and perform similarly. Slap a BMW badge on one of them, suddenly customers are prepared to pay tens of thousands of dollars more.

Nissan and Toyota (TM) created their luxury brands in the late 1980s. While Toyota's Lexus turned into a big moneymaker, Nissan's Infiniti languished. Carlos Ghosn, Nissan's chief executive officer, lured de Nysschen from Audi last year to begin the long, arduous, and costly job of revitalizing Infiniti into a global luxury brand.

Ford Motor chief executive officer Alan Mulally and chief marketing officer Jim Farley are overseeing Lincoln's renovation. The refreshed Navigator won't tempt many Range Rover owners to switch. But the new model will sustain U.S. Lincoln dealers with a vehicle they can sell against Cadillac Escalade, Range Rover, and the Mercedes-Benz GL. Keeping the dealer body financially healthy and enthusiastic is an important element to repairing the brand.

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"Patience is critical for Ford management," said Larry Dominique, president of ALG, a service that estimates the value of new vehicles after they have been leased for varying amounts of time. Automakers must be prepared to invest in new models and brand promotion for long periods, even if the increase in profit and prestige is slow.

A comparison of the current Navigator against more prestigious competitors illustrates the point about profit. The 2014 Navigator starts at about $54,400, according to Edmunds.com. The 2014 Cadillac Escalade starts at $61,800, and the 2014 Range Rover starts at $85,700. While not identical, the three vehicles are similar in size, power, capability -- while generating remarkably different amounts of revenue for their makers. The difference reflects how customers regard the brands.

Audi, which has long aspired to be considered a luxury brand, spent 20 years and untold billions climbing toward the premium pinnacle following a controversy in the late 1980s over accusations -- never proven -- that its cars accelerated unintentionally.

Ultimately, the goal of automotive top managements at Ford, GM, Nissan, Toyota, and others is for their luxury brands to be considered on a par with BMW, Mercedes-Benz, and Audi, the German triumvirate that commands top prices in all global vehicle markets.

Ford Motor's Lincoln brand eventually may count itself among the world's most esteemed and pricey, though not anytime soon. A future generation of Ford management might be the first to enjoy the fruits of this one's labors.

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