Importing Small Cars Costs Big Bucks

Chief Executive Alan Mulally is hoping to revive Ford Motor Co. by bringing European small cars to the U.S. market. His success may hinge in large part on a mundane component: the front bumper.

The Dearborn, Mich., auto maker reported a second-quarter loss of $8.7 billion, and is scrambling to adapt to this year's steep rise in gasoline prices. The run-up produced a sudden shift in consumer demand toward more fuel-efficient small cars and away from the trucks and sport-utility vehicles that generate most of the company's revenue in North America.

In July, Mr. Mulally announced a crash effort to retool three of Ford's North American truck plants so they can build at least six vehicles Ford now makes and sells in Europe. The company plans to spend $3 billion on that effort.

Ford's strategy may be trickier to pull off than it sounds. To make European cars comply with U.S. safety regulations and insurance standards, Ford will have to add some potentially costly parts and steel reinforcements. If the work isn't done efficiently, the vehicles could become too expensive for Ford to make money on them, or too heavy to deliver the kind of gas-mileage Americans now crave.

Bumpers present one of the biggest hurdles on the safety front. European regulations require auto makers to design bumpers that cause minimal injury to pedestrians. U.S. bumpers need to be much heavier to withstand direct impacts and front-end collisions against a solid barrier or a large vehicle like a truck or SUV.

Regardless of such challenges, Ford's rush to tailor its European cars for the U.S. market "is about our survival," according to Jim Farley, Ford's global sales and marketing vice president, who was in Europe last week for the launch preview of the newly designed Ford Fiesta subcompact. Originally intended for Europe and Asia, the Fiesta has been reworked for North America and is scheduled to arrive in dealer showrooms in the U.S. in the first half of 2010.

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