Ford to Emphasize SUVs and Trucks
Ford, The company that literally introduced the automobile to the world is now taking a rather dramatic exit from car manufacturing … mostly.
According to a recent announcement, Ford Motor Co. is withdrawing most of its existing sedan lineup in the next four years. As a move to cut costs and focus on its more lucrative SUV and truck lines, this action will completely take away the Fusion, Taurus, and Fiesta.
The move does not come as a surprise to some industry experts. For the past several years, Ford has taken steps to maximize profits and cut costs where possible. Seeing more profits from SUVs and trucks like the top-selling F-150, it is only natural that axing the core of its sedan line is at the top of Ford’s to-do list. If successful, the company hopes to reduce general operating costs by nearly 25 billion dollars by 2020.
Do not expect the sedans to disappear tomorrow, however. Ford plans to let the affected models run to the end of their current lifecycles before pulling the plug. In addition, the company will keep the widely successful Mustang and introduce the Focus Active, a crossover hatchback, starting in 2019.
Is it smart for the company to cut a large portion of its family-friendly sedan lineup just to save a few billion bucks here and there? In the case of Ford, it just might be the competitive move it needs to stay near the top of the North American automotive market. As Ford’s CEO, Jim Hackett, explains, this is basically trimming the fat off of the company.
“We’re going to feed the healthy parts of our business and deal decisively with the parts that destroy value.” He stated to analysts earlier in the week.
This move reflects a growing trend in the American auto market: small cars suck. While there will always be customers who love a good Prius or Bolt, most auto consumers subscribe to the American stereotype of “bigger is better.” Ford trucks and SUVs continue to outperform the smaller sedans and hatchbacks each year. As the company wastes money and factory space on cars that do not sell as well, it is missing an opportunity to meet greater demands for mid- and full-size vehicles.
It is important to recognize how the automotive industry changes over a given time period. Sometimes, this timeframe spans decades when the change is slow. Other times, it may only take a couple of years for the purchasing preferences of customers to change. In the case of Ford’s drastic change, it has been a mixture of both.
For one thing, many people have always preferred larger vehicles over their smaller counterparts. To some, a larger SUV or truck gives them a better sense of control and safety on the road. With more mass comes a bigger feel. Even if it is just psychological, the feeling of being seen on the road contributes to the confidence large vehicle owners have while driving.
Smaller vehicles, on the other hand, have a different feel altogether. While some customers prefer the nimbler maneuverability of a small coupe or sedan, this type of feeling is not for everyone. When you are driving down on the highway, for example, you may feel overshadowed by the larger trucks and 18 wheelers that zip by every so often.
Ford’s announcement recognizes these changing preferences towards the larger side of automotive design. Since they have to accommodate these changing preferences in order to remain competitive, phasing out most of the sedan models sends the message that they are listening to current and potential Ford customers.
It should be no secret that the automotive industry is an expensive one. While most manufacturers make millions and billions of dollars each year, it takes a lot of money and resources to keep up with growing demand. For a company like Ford to remain operational, they have to make strategic decisions when it comes to making their product. Anytime they can cut costs; they are making a smart decision.
One way to cut costs is to analyze how well a product is doing. If you are spending money making a product that is not selling as much as others, this is an area you can save some money by shifting the focus. This is the exact logic that Ford is using with its major change. In theory, with sedans failing to produce the same numbers as SUVs and trucks, Ford can simply shift the money elsewhere.
In practice, it is a little more complicated. In order to keep people employed and factories operational, Ford will have to repurpose some production from sedans to larger vehicles. This may mean swapping out equipment and tools, retraining employees, and creating new production goals for the future.
In the end, the change looks simple on paper: take out the cars and build more SUVs/trucks. In practice, this will take more work and dedication to get right in order for Ford to see the fruits of its labor.
While it makes sense on paper, the move may not all be good news for Ford. Larger vehicles may still be in demand, but the days of accepting 12 miles per gallon in the city are long over. Ford’s competition is quickly ramping up for a more eco-friendly future that includes more hybrid/electric vehicles and more fuel-efficient engines. With the likes of Chevy and Toyota pouring billions into revamping their existing lines to increase fuel economy, Ford will need to follow to remain competitive with larger vehicles.
The fact that Ford is rolling out a new diesel F-150 with up to 30 MPG combined is a good sign. The reality that its fuel economy drops to 25 MPG for the 4×4 version proves Ford still has some work to do in the “high performance with great fuel efficiency” department. No amount of EcoBoost badges will keep the company successful if it cannot deliver where it matters most.