Is Ford Turning Lincoln Around?

Lincoln's new MKZ Hybrid. Lincoln chief Jim Farley hinted on Wednesday that the hybrid version of the new sedan is selling better than expected. Photo credit: Ford Motor Company

Over the last few years, Ford's (NYSE: F  ) ability to execute its ambitious plans has been top-notch.

Near death just a few short years ago, the iconic automaker is now strong and profitable, with a big cash reserve to hedge against future downturns.

After years of being criticized for its small-car efforts, its compact Focus is now the world's best-seller. Its SUVs have been reborn as high-tech, fuel-efficient darlings of auto critics around the world. And its latest midsized sedan is good enough to finally have Toyota (NYSE: TM  ) worried.

Almost everything Ford has done recently has worked out well, often very well.

Everything, that is, except the revival of its old luxury brand, Lincoln. But that could be on the verge of changing.

Is a Lincoln revival finally taking hold?
Ford's global sales and marketing chief – and Lincoln's boss – Jim Farley hinted to reporters on Wednesday that sales of Lincoln's new MKZ might be on the verge of taking off. After a few months of un-Ford-like production glitches that slowed the new sedan's rollout, Farley said that the cars are finally reaching dealers' lots – and flying off of them.

Farley didn't give specific numbers, but he did say that "we should have a really great story to tell" when sales are reported after the end of the month. The MKZ is "turning very well", Farley said, referring to the time that cars are spending on dealers' lots before being sold, and he is "very happy" with sales results so far.

Farley said that the percentage of MKZ hybrids sold has exceeded his expectations, as has the new sedan's success in the coastal regions of the U.S., where Ford has historically lost ground to import brands.

Of course, one would expect Farley to present any news in the best possible light. But any success for the MKZ would represent a ray of hope for Lincoln. Recent news has been dismal: The new MKZ's sales through March were down almost 50% versus year-ago sales of the old model, presumably in part because of those production glitches, and Lincoln's overall sales are down about 24% so far in 2013.

A brand that has so far eluded Ford's turnaround magic
Lincoln has had an up-and-down history ever since Ford bought it way back in 1922. But lately, the trend has been more down than up: After Ford discontinued the airport-limo-favorite Lincoln Town Car a couple of years ago, critics began to wonder if there was any reason left for the brand to exist at all. A series of marketing and operational stumbles since then haven't helped.

But Ford sees a big reason to revive Lincoln, and it has a lot to do with the company's global ambitions. A successful luxury-car brand can deliver outsized profits, because luxury cars carry much better margins than mass-market vehicles.

Those profits get even better with the global scale available to a giant automaker, as parts that are invisible to most buyers can be shared with the automaker's more mundane models. Volkswagen (NASDAQOTH: VLKAY  ) is a great example of this: Its Audi brand accounts for only a small portion of its global sales, but delivers almost half of its profits.

A lot of that profit comes from China, where the luxury-car market is growing quickly. That example hasn't been lost on VW archrival General Motors (NYSE: GM  ) , which has put a huge effort into turning its Cadillac brand into a serious global contender – in part, to drive profit gains in China.

Ford seems set on following the same path, but so far, its old luxury brand hasn't made much noise. If that is indeed set to change soon, it will be very good news for the Blue Oval.

Worried about Ford?
If you're concerned that Ford's turnaround has run its course, relax – there's good reason to think that the Blue Oval still has big growth opportunities ahead. We've outlined those opportunities in detail, in the Fool's premium Ford research service. If you're looking for some freshly updated guidance to Ford's prospects in coming years, you've come to the right place – click here to get started now.