FORD WILL STOP PRODUCING MOST SEDANS FOR NORTH AMERICAN MARKET
May 7, 2018
Source: Marketing Daily article by Thom Forbes
Ford has seen the future - electric and hybrid vehicles - and the near future - trucks, SUVs and sport cars. What is doesn't see much of in coming years is that relic of 20th Century suburbia, the sedan.
The company announced yesterday that it will cease production of the Fusion, Fiesta and Taurus and that, by 2020, 90% of its lineup in North America will consist of trucks, SUVs and commercial vehicles.
"Given declining consumer demand and product profitability, the company will not invest in next-generations of traditional Ford sedans for North America. Over the next few years, the Ford car portfolio in North America will transition to two vehicles - the best-selling Mustang and the all-new Focus Active crossover coming out next year," it says in it first quarter 2018 financial roundup.
It also says that it's "exploring a new 'white space' vehicle that would combine 'the best attributes of cars and utilities, such as higher ride height, space, and versatility.' The company didn't say exactly what that means, but it sounds a lot like its current crossover vehicle models, like the Escape or the Focus Active. Ford's business decision does make sense, given the decades-long trend of trucks, especially Ford's own F-Series line, outselling traditional cars in the U.S.," writes Mike Murphy for Quartz.
"The automaker expects to save $25.5 billion by 2022, chief financial officer Bob Shanks told reporters Wednesday as Ford reported first-quarter earnings per share and revenue that beat estimates. The company now anticipates reaching an 8% profit margin by 2020, two years ahead of schedule," Keith Naughton writes for Bloomberg.
"The cuts are aimed at kick-starting a turnaround effort almost one year after Ford's board ousted its chief executive officer [Mark Fields]. New CEO Jim Hackett has been trying to convince investors that betting on a rebound is a worthwhile wager by laying out plans to get rid of slow-selling, low-margin car models," Naughton continues.
Its advertising and promotion budgets will be slashed, too.
"Ford said it expected to reduce sales, marketing, engineering and other costs by $11.5 billion between 2019 and 2022. That's on top of about $14 billion in efficiencies the company had already promised to achieve in the next several years," Neal E. Boudette reports for the New York Times.
"The fate of platform-sharing Lincoln cars was not divulged," Alisa Priddle reports for Motor Trend, but a Ford spokesman tells her that the full-size Lincoln Continental "remains an important part of the Lincoln lineup and is experiencing record sales in China." The "next-generation Lincoln MKZ mid-size sedan will be built in China to serve that market" as Reuters has reported, she writes - "one of five Lincoln products that will be built locally for China's consumers, most of them utility vehicles."
Yesterday's news comes as Wall Street remains tepid about turnaround efforts at the automaker; its stock is mired in what Investor Place's Bret Kenwell refers to as a "nasty multi-year downtrend." It had rebounded slightly in the months after Hackett briefed investors of his "fitness plan" for the company last October but slipped backwards following its presentation at the Detroit auto show in January.
"Ford has been criticized by Wall Street analysts for offering few details on Mr. Hackett's strategy for the company. In a conference call on Wednesday, the chief executive said Ford will outline a full turnaround plan for investors and analysts on Sept. 26," the NYT's Boudette reports.
Ford is not the only automaker experiencing hard times in the face of an unnerving future.
"The U.S. auto market is slumping after nearly a decade of growth, pressuring Ford and others to find additional ways to earn money at the same time big investments are needed for electric cars and driverless-vehicle research. Ford is committed to rolling out battery-powered cars that could compete with Tesla Inc. in 2020 and offering hybrid versions of its most popular sports cars, trucks and SUVs," observes Christina Rogers for the Wall Street Journal>/i>.
While Ford will shrink its car lineup, it also plans to add five all-new SUVs over the next two years, along with the 2019 Ranger midsize pickup that debuted at the Detroit auto show in January," writes Ian Thibodeau for the Detroit News.
"The company has said every new Ford or Lincoln vehicle introduced over the next two years will have either a hybrid or plug-in hybrid engine option, which should buffer against rising gas prices as the vehicles get bigger, according to Hackett and Jim Farley, Ford president of global markets," he continues.
We'll see just how far that buffering will take a company whose problems have been the inspiration for many a meme in recent times.