Can Ford's New Fusion Knock off the Camry?

Photo credit: Ford Motor Company

Ford's (NYSE: F  ) new Fusion sedan has been turning heads since its launch late last year. It's easy to see why: With its sleek flanks, Aston Martin-inspired grille, and luxury-car-like interior, it really stands out in a sea of blander-looking competitors.

And lately, it's been drawing quite a few customers. For the year to date through March, sales were up 26% over the first three months of 2012, as the new Fusion continues to outshine its well-regarded predecessor.

But will the Fusion have what it takes to overcome America's best-selling car, Toyota's (NYSE: TM  ) ever-popular Camry?

Rapidly rising on the U.S. sales charts
Ford already has America's best-selling vehicle, of course. Its F-Series pickup trucks have been the best-seller for decades, followed by the perennial runner-up, General Motors' (NYSE: GM  ) Chevy Silverado pickup.

That's unlikely to change, because pickups are big business here in America. But it's after those two that the sales race gets interesting. So far in 2013, the next four biggest sellers are all midsized sedans: the Camry, Honda's (NYSE: HMC  ) Accord, Nissan's (NASDAQOTH: NSANY  ) Altima – and Ford's new Fusion.

The Fusion isn't far behind the Altima, with 80,558 sales through March to the Nissan's 86,952. But it has a ways to go to catch up to the Camry, which sold 100,830 through the first three months of the year.

Camry sales look strong, but they have been down 4% so far in 2013, thanks in part to the strength of the new Fusion. Does Ford's hot-looking sedan have a chance of catching up and dethroning the Camry?

Probably not, at least in the near term. Here's why.

Why Ford can't (yet) beat the Camry
Here's the problem: Ford's can't (yet) make enough Fusions to outsell the Camry. The company cut its North American production facilities way back during its painful restructuring last decade. That was a good move, one that has led to strong profits now that many of its factories are working overtime.

But it has a downside. With plants already running around the clock, Ford can't make many more Fusions than it is already making – at least, not easily. Ford U.S. sales chief Ken Czubay told reporters last week that strong sales and strong continuing demand for the Fusion in places like California and Florida could mean short supplies of the hot sedan in coming months.

Adding production means expensive investments in additional production lines, investments that Ford has been reluctant to make until it's sure it can sell the extra cars (and until it's sure that its suppliers will be able to keep up).

The good news is, with the Fusion, Ford is already preparing to step up production.

A $555 million investment to close the gap
Ford has already announced that it is adding a production line to build the Fusion at its Flat Rock, Mich., plant, where the Mustang is currently built. That isn't a cheap move: Ford is spending $555 million to install new tooling and facilities at the Flat Rock factory, and it's hiring 1,200 new hourly workers to staff the new production line. The production line should be up and running this fall.

These are big investments, but they're necessary ones if Ford is to realize the potential of its latest hit product.

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