Last week, Ford shocked the industry when it announced a plan to discontinue the majority of its U.S. car lineup. The Mustang will stick around, and we’ll get the Audi Allroad-esque Focus Active hatchback, but that’s it. The Fiesta, Focus sedan, Fusion, and Taurus will all disappear. Since the announcement, Ford’s faced plenty of criticism, but executives are already pushing back.
Automotive News reports that according to Ford CEO Jim Hackett, sedans weren’t profitable for the American automaker. “We’re going to feed the healthy part of our business and deal decisively with the parts that destroy value,” he said. Other “value destroyers” include some of its international operations and most of Lincoln’s current lineup. By Ford’s calculations, making those cuts will save the company more than $25 billion by 2022.
Ford hasn’t said exactly how much money it loses selling cars in North America, but UBS analyst Colin Langan told Automotive News he believes it’s around $800 million a year. In contrast, Ford says its “high performing” divisions earned more than $3 billion in first-quarter profits this year.
According to Jim Farley, Ford’s head of global markets, critics are wrong to suggest this is a repeat of the same mistakes that nearly toppled the American auto industry last time gas prices spiked. “Customer view and experimentation on the utility side is so much more broad,” Farley told Automotive News. “Utilities are the preferred body style. This wasn’t the case before the downturn.”
He also pointed out that modern crossovers are nearly as efficient as sedans. For example, the EPA’s combined fuel economy rating for the Ford Escape is only one mile per gallon less than a Fusion’s. And while compact and midsize sedans are still high-volume segments, Farley believes Ford will be able to recapture those buyers with tempting deals on crossovers. “We think we can tempt some of those customers with an image upgrade. Where Ford does best is where we play to our strength of emotional products,” Farley said.
Still, he’s aware this decision will require other changes. “We intend to expand our passenger car lineup in the U.S.,” he said. “We also intend to serve similar, affordable price points to today. What’s changed here is just the format of the vehicle. Our dealers will have just as much opportunity to grow, just with a different portfolio.”
Source: Automotive News (subscription required)