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Ford’s decision to kill most of its cars was inevitable

Last month in Las Vegas, dealers expressed their satisfaction with s product decisions made by CEO Jim Hackett at Ford.

But, surprisingly, on more than one occasion — and completely unprompted — some longtime retailers privately voiced to me their fear that Ford would exit the car business. While sedans haven’t been selling well, those dealers said they still filled a crucial role in their showrooms: as inexpensive starter vehicles that helped lure first-time buyers.

And, they were quick to remind me, not everyone wants a beefy pickup or SUV with interior room comparable to a New York studio apartment. Where would new customers turn for an entry-level offering when Ford’s North American dealerships no longer carry a single sedan?

Ford announced plans on Wednesday to ax all of its North American car lineup except for the Mustang and Focus, and that won’t be available in its traditional form anymore; the company said it will only offer a Focus Active hatchback that debuts in 2019. The Fiesta, Fusion and Taurus are getting axed, at least in this part of the world.

It’s the right business decision. Ford is losing money tying up capacity at plants across North America to make cars that customers don’t want. Honestly, when was the last time you got excited about a Ford car that didn’t have an ST or RS badge attached to it?

The sales figures suggest it’s been awhile.

Any benefits traditional sedans once held over SUVs have faded considerably. Fuel economy figures are comparable — the Escape gets just 1 mpg less than the Fusion. The Explorer actually has a slightly better EPA rating than the aging Taurus.

In addition, the driving experience of light trucks has become more refined, and customers now place a greater value on space and utility.

“We’re not going to invest where it doesn’t make sense”

“We’re not going to invest where it doesn’t make sense,” said CFO Bob Shanks.

But what once worked for Ford — and the rest of the industry — no longer makes sense. It’s a realization some executives  made faster than others, but one that felt inevitable for Ford, especially given Hackett’s musings about operational fitness and cost cutting.

As for dealers’ concerns about attracting entry-level buyers, it seems Ford will continue to offer plenty of options. By 2020, its small-vehicle lineup will include the Focus Active, a redesigned Escape, the EcoSport and a new small off-road SUV.

So instead of a Fiesta, customers now have an EcoSport. Instead of a Focus sedan, they’ll get a Focus wagon. Sure, buyers may pay around 20 percent more. That price hike is an unavoidable reality no matter what style you’re in as new technology being added.

And it’s unrealistic to think that the company founded on the principle of mobility for the masses would suddenly abandon an important part of its customer base.

“We will have a very diverse passenger car business,” Jim Farley, Ford’s president of global markets, said Wednesday. “It just won’t be traditional silhouetted sedans that tend to be commoditized.”

Wall Street generally liked the move, at least on Thursday, as shares rose 2.9 percent to close at $11.43.

 

By |2018-11-30T15:55:58+00:00April 29th, 2018|Categories: Ford, News by Brand|Tags: , , , , , , , , , , |0 Comments

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