Ford Will Stop Selling Nearly All North American Cars; Refocus Only On Trucks And SUVs

As Ford pushes ahead to achieve its profitability target of 8% by 2020, a level that would once again place it ahead of Chrysler-Fiat in the Detroit automaker profitability depth league tables...

Ford

... the company announced Thursday that it's shuttering the last of its US sedan brands as it shifts its focus to international markets, trucks and SUVs. It is a drastic move, as the company will be phasing out sedan models that have a long history with the company, including models like the recently revamped Ford Taurus.

The closures are expected to save Ford $25.5 billion by 2022, Ford Chief Financial Officer Bob Shanks told reporters on Wednesday during the company's first-quarter earnings call. When the company is finished with the cutbacks, the only non-SUV, non-truck cars Ford will sell in North America will be the Mustang and the as-yet-unannounced Focus Active, according to TechCrunch, which pointed out that the closures were "a long time coming."

Currently, Ford sells six sedans and coupes in North America: the Fiesta, Focus, Fusion, C-Max, Mustang and Taurus. This lineup hits multiple segments, from the compact Fiesta to the mid-size Focus, C-Max and Fusion to the full-size Taurus. The Mustang stands alone as the lone coupe.

It’s likely Lincoln’s sedans will also disappear, though this was not explicitly stated in today’s press release. Lincoln currently sells the mid-size MKZ and full-size Continental — both share platforms with Ford counterparts. If Ford is phasing out development of sedan platforms, Lincoln will likely suffer, too.

This reduction in traditional cars was a long time coming. North America consumers have increasingly turned to crossovers, trucks and SUVs over sedans and small cars. A trip to any parking lot will likely produce more evidence to this movement. There are several factors involved, from more fuel-efficient and better-equipped trucks and SUVs to improved safety ratings and ride qualities of these vehicles.

The company also reaffirmed that it will soon install hybrid-electric powertrains on its F-150, Mustang, Explorer, Escape and the upcoming Bronco.

The turnaround comes as domestic sedans have led the dropoff in new car sales that has continued this year; the company will now focus exclusively on higher margin models, as Bloomberg  writes:

“We’re going to feed the healthy part of our business and deal decisively with areas that destroy value,” Hackett said on an earnings call Wednesday. “We aren’t just exploring partnerships; we’ve now done them. We aren’t just talking about ideas; we’ve made decisions.”

Ford finds itself on a road similar to the route Fiat Chrysler Automobiles NV followed to pass Ford in North American profitability. Fiat Chrysler CEO Sergio Marchionne now wants to eclipse General Motors Co. before his retirement in 2019.

For Ford, these higher margin vehicles mean not only canning its previous sedan efforts, but also failing to invest in new sedans for the North American market in the future. A similar fate looks like it could be on the way for Lincoln, as well:

Ford said it won’t invest in new generations of sedans for the North American market, eventually reducing its car lineup to the Mustang and an all-new Focus Active crossover coming next year. By 2020, almost 90 percent of its portfolio in the region will be pickups, SUVs and commercial vehicles.

That means the end of the road for slow-selling sedans such as the Taurus, Fusion and Fiesta in the U.S. The automaker conspicuously left the Lincoln Continental and MKZ sedans off its hit list, but since those models share mechanical foundations with Ford siblings, their futures also are in doubt.

“For Ford, doubling down on trucks and SUVs could be just what the brand needs,” Jessica Caldwell, an analyst for Edmunds.com, said in an email. “But this move isn’t without risk: Ford is willingly alienating its car owners and conceding market share.”

New CEO Jim Hackett is pressing ahead with these changes as Fiat Chrysler CEO Sergio Marchionne's success at turnaround the company's moribund profitability has him now gunning to surpass General Motors in profitability by the time he retires in 2019. By 2020, almost 90% of Ford's North American portfolio will consist of pickups, SUVs and commercial vehicles.

Of course, the changes will likely take a few years to produce results.

Ford’s profit margin should "bottom out" this year, Hackett said on the call. The Asia Pacific region will probably lose money in the second quarter before returning to profit in the back half of the year. The company also is reviewing its strategic plans for South America.

"Everything will be on the table" to fix Ford, Shanks told reporters at the company’s headquarters in Dearborn, Michigan. "We can make different investments, we can partner, we can exit products, markets -- and we will do that."

One factor that had been contributing to investor pessimism has been commodity costs, which Ford expects will be a $1.5 billion headwind this year. About $500 million of that came in the first quarter, Shanks said. The automaker began the year flagging to investors that pricier raw materials including steel and aluminum would contribute to profit declining in 2018.

Ford's first quarter adjusted earnings rose to 43 cents a share, topping analysts' average estimate of 41 cents. Ford’s automotive revenue increased to $39 billion, higher than the average projection for $37.2 billion from a Bloomberg survey.

And while Shanks, the chief financial officer, warned that certain markets, like the company's Asia business - where it was slow to break into the Chinese market - could see profitability bottom out during the second quarter, it's expected to rebound during the second half of the year.  For now analysts are optimistic, althought they expect it will take a few years for the turnaround at Ford to bear results.

"For Ford, doubling down on trucks and SUVs could be just what the brand needs," Jessica Caldwell, an analyst for Edmunds.com, said in an email. "But this move isn’t without risk: Ford is willingly alienating its car owners and conceding market share."

...

"It’s not that the market has permanently given up on good news ever happening at Ford,” said David Whiston, an analyst with Morningstar Inc. who recently lowered his rating on the stock to the equivalent of a hold. “But most people aren’t expecting it until late 2019 or 2020 and that brings up the wild card of, ‘Will we be in a recession by then?’"

Still, even once Ford fixes its problems in the North American market, it still needs to play catch up in China if it ever hopes to outmaneuver its Big Three rivals.

Comments

FireBrander ___ read.between___ Thu, 04/26/2018 - 09:12 Permalink

#1 Resale value of the discontinued Models just went into the toilet.
#2 Hopefully there are enough idiots to keep buying the remaining discontinued models.
#3 Hitching your wagon to $50k, $60k, $70k+ vehicles (that depend on low interest financing) in a bubble economy with rising interest rates is SUICIDAL!

YIKES! Probably would be less risky to just take the money to Vegas and bet on Red or Black.

PS. No Electric or Hybrid vehicles? I hope Ford has tenured "systemically important" status; they're going to need it...

PSS. Look at Ford's sales number for the F-Series; follows the bubble economy perfectly:

Expanding bubble = Expanding sales and vice-versa.
While Focus sales pick up after the bubble pops...looks like Ford is betting on a permanently expanding bubble!

http://carsalesbase.com/us-car-sales-data/ford/ford-f-series/

Edit:
I wonder if Ford is "closing" these car lines in order to ditch the veteran/well-paid union workforce?

My 2021 prediction: Ford CEO..."We made a mistake! We need small cars! Now hiring 5000 people! Starting wage is $10/hr."...I would not bet against that reality.

In reply to by ___ read.between___

Creative_Destruct thisandthat Thu, 04/26/2018 - 14:29 Permalink

Article describes yet another idiotic linear extrapolation of current bubble conditions into the future. This particular straight-line stupidity tells them to keep foisting the 40-80K vehicles on the indentured broke debt slaves. Likely to  result in near-term savings and long-term ruin.

See the pension crisis for yet another prominent example of straight-line STUPID- extrapolated all these unsustainable bubble returns.

"Stupid is as stupid does," and it seems everyone is doing stupid like an expert.

 

In reply to by thisandthat

GeezerGeek RU4Au Thu, 04/26/2018 - 10:21 Permalink

Without the Mustang the Ford race fans would have nothing to root for beyond the NASCAR truck series, and few care about that. Imagine NASCAR without Ford. The GM/Chevy entries already switched to the Camaro body style for the major series, dropping the sedan-named versions. Last time I went to a Ford dealer and asked for a 2-door Fusion I just got a blank stare anyway.

At this point, if I were willing to spend $40-50K on a Ford I'd go get an old Galaxy or Crown Vic and add a crate engine. At least I'd have a decent amount of interior room and trunk space.

The American auto industry's decline has mirrored its social/cultural decline. We're about to go down the drain entirely.

In reply to by RU4Au

El Vaquero GeezerGeek Thu, 04/26/2018 - 10:50 Permalink

Government dictates higher fuel mileage standards.  Which tends towards lighter vehicles.  Then it dictates higher safety standards.  Which dictates heavier vehicles.  Then there's the connectivity shit in new vehicles. 

 

And people wonder why new cars are so expensive.

 

I'll stick to my OBD1 Jeep.  At least I can work on the fucker, and it's paid for.

In reply to by GeezerGeek

Chauncey Gardener Whoa Dammit Fri, 04/27/2018 - 07:00 Permalink

They are NOT keeping the Fusion. I know the owner of a local Ford dealership. He's LIVID. Yeah, let's repeat that visionary management decision to drop the Ford Ranger, literally giving the marketshare to GM (Chevy Colorado, GMC Canyon), Nissan & Toyota. So now, let's give all the sedan business to Acura, Fiat/Chrysler, GM, Honda, Kia, Nissan & Toyota. Brilliant move. Oh, then, there's the ALL-NEW Ranger, just one engine/one transmission available. More marketing/voodoo economic vision. Speaking of marketing tunnel-vision, there's ample rumors in the automotive press that the product planning braintrust in Dearbornistan is all hot and bothered about making the new Bronco a hybrid or full electric. Yeah, that's it, should be a real winner...Short Ford now if you own it. Just dump it. I can hardly wait to see their stock prices when oil hits $100 a barrel...

In reply to by Whoa Dammit

Big Brother El Vaquero Thu, 04/26/2018 - 13:58 Permalink

I think we're at peak automotive complexity.

--

I prefer working on my inline six cylinder with no variable valve timing or direct injection.

It also devoid of the following:

  • No air bags.
  • No back-up camera.
  • No lane departure warning.
  • No infotainment system.
  • No auto-braking system.
  • No auto-parking system.
  • No tire pressure sensor monitors.
  • No push-button start.
  • No plastic key-fob.
  • No electric power steering pump.
  • No drive-by-wire throttle body.
  • No belt-driven or double-clutch automatic transmission.
  • No LED head or tail lights.

*there probably some other options I missed.  Most of these were not even available 10 years ago with exception of some luxury cars; that now seem to be standard on nearly everything.

It isn't necessarily the upfront cost, but the additional gadgetry that will eventually fail the makes me think twice about buying a new car.

In reply to by El Vaquero

glenlloyd 0valueleft Thu, 04/26/2018 - 12:50 Permalink

So when this new strategy at Ford (courtesy of the MBA crowd with all the alleged brains) fails and fuel prices begin their inexorable march higher will Ford be at the White House on bended knee begging for bailout money like GM did when it dragged that awful Volt (disguised as a Cruze) to Congress because they had kited some checks and it was all over?

Automakers will be back at the govt wanting more...and why? Because they never learned anything from the first go round because their failure was prevented with tax payer dollars.

In reply to by 0valueleft

DocBerg asteroids Thu, 04/26/2018 - 12:14 Permalink

I'm sure glad that I dumped my Ford stock several years ago. I should have sold it years earlier, like when I was a city administrator, and had my city buy a new Crown Victoria squad car. It spent its first month in the dealership getting most of the factory mistakes fixed. At the same time the mayor's Taurus was in the same dealership getting its 5th transmission rebuild under warranty. I was driving a 1986 1/2 Pontiac Fiero GT then, and compared with those Fords, it was a paragon of reliability!

In reply to by asteroids

NeedtoSecede FEDbuster Thu, 04/26/2018 - 11:21 Permalink

@fedbuster, I had a '66 Bronco and wish I still had that old rig!  I put a roll bar in it, and a week later rolled it over.  A cop was parked in the middle of an icy road around a blind corner.  I was about to slide winch-first into a small car that was sideways in the road-I would have killed that lady!  I steered the Bronco over the raised median and thought I was going to ride it out fine, but a huge boulder was on the other side of the median.  Slammed it with my front tire and over I went...  Everything slowed down as metal crunched in around me.  Bronco landed on its wheels and that roll bar saved my ass.  Poor old Bronco was done, and I ended up selling it for the parts.  If I had some extra FRNs burning a whole in my wallet, I would love to find another one...

In reply to by FEDbuster

Tapeworm Angry Panda Sat, 04/28/2018 - 13:32 Permalink

My girlfriend at the time had a strippo Pinto. I liked that thong for it's simplicity, although the GF was too simple for me.

 The Pinto had a huge amount of go-faster parts that allowed cheapskates to go SCCA racing and beat up on Porsche. They also furnished drivetrains for four cylinder class stock car racing.

 The exploding gas tank was common to all, but the Pinto was down the list on tendency to fire.

In reply to by Angry Panda