Ford Executives Stand Their Ground On Car Cutting Decision

Last week, Ford shocked the industry by announcing that it would cut most of its passenger car lineup. The only models that would remain are the Mustang and the upcoming Focus Active - due to arrive in 2019. The move has earned a fair amount of ire from various folks, but the company is trying to push back and explain their reasoning.

"We're going to feed the healthy part of our business and deal decisively with the parts that destroy value," said Ford CEO Jim Hackett to Automotive News.

The "healthy part" are Ford's utilities and trucks. According to Ford CFO Bob Shanks, this part made more than $3 billion in the first quarter of 2018. Ford is projecting that light trucks will make up 90 percent of North American sales in the near future.

The car side hasn't been faring as well with sales declining for the past few years. Ford hasn't said how much money they have been hemorrhaging on cars, but UBS analyst Colin Langan estimates Ford is losing $800 million per year on small cars in North America. Automotive News also notes that consumer demand for cars may be even weaker than first thought. Looking registration data from Polk, the outlet reports that a third of Fusions sold last year went to fleet buyers (about 69,874 models).

Shanks said there are other items that could be cut, including "most Lincoln products" and chunks of Ford's overseas business.

A number of people who hate this idea point out that this could hurt Ford if gas prices spike up like they did in the 2000s. But Jim Farley, Ford's head of global markets points out that the gap in fuel economy between sedans and crossovers has closed up significantly. The 2018 Fusion has a combined fuel economy rating of 27, while the Escape is rated at 26 mpg. 

Farley also insisted that Ford isn't repeating the mistakes from the mid-2000s with their utility vehicles that almost sent them to the brink. The industry he says has "fundamentally changed" since then.

"Customer view and experimentation on the utility side is so much more broad. Utilities are the preferred body style. This wasn't the case before the downturn," said Farley.

"We intend to expand our passenger car lineup in the U.S 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."

Still, there are some that are very skeptical about Ford's new strategy. 

"Eight years ago, Ford Motor Co. announced it was killing Mercury. It assured us not to worry, because there would be no problem taking care of Mercury customers at Ford dealerships — those customers would just buy Tauruses and Fusions," said Chris Lemley, owner of Sentry Auto Group near Boston.

Source: Automotive News (Subscription Required)