Ford's CEO Might Execute Lower-margin Vehicles to Boost Profits

Matt Posky
by Matt Posky
ford s ceo might execute lower margin vehicles to boost profits

Ford’s new CEO, Jim Hackett, has been milling around the company trying to get a sense of what the automaker needs to thrive in today’s car market. Conducting a summer-long assessment of the company’s current status and action points, Hackett is setting himself up with a greater understanding of where Ford stands in order to share his vision of the automaker’s future with investors in early October.

However, we already have some sense of what that future entails. Hackett has already spoken with leadership from the United Auto Workers, easing union fears that he might try to clean house and cut jobs. But his reassurance that there probably won’t be massive layoffs under his leadership doesn’t guarantee low-margin automobiles won’t be at risk.

This isn’t entirely down to Hackett’s management style, either. Investors were becoming annoyed with former CEO Mark Fields’ lofty long-term strategy, which featured fewer near-term goals aimed at bolstering profitability. Some analysts expect Hackett to end production of models that aren’t big earners — which includes just about everything that isn’t an SUV, crossover, or pickup truck.

Even though Ford is already getting into the midsize truck game with the 2019 Ranger (and has the EcoSport compact crossover prepped for next year), its investment base is annoyed that access to these growing segments isn’t available already. According to Automotive News, industry experts expect Hackett to appease shareholders by trimming the fat in less-desirable segments and focusing on what’s hot.

“There’s a lot of low-hanging fruit,” said Dave Sullivan, manager of product analysis at AutoPacific. “They need to be able to react faster to consumer demand.”

Shifting focus off less-desirable segments means some models will likely get the axe at the end of their current product cycle. We’re not expecting to see a return of the C-Max. Despite hanging on better than some of its competitors this year, hybrid car sales are down across the board for 2017 and the C-Max was never a value leader for the company. Annual sales in the peaked in 2013 with 35,210 U.S. deliveries but fell to 19,834 units in 2016.

Ford’s Fiesta experienced a similar decline between the same timeframe — going from 71,073 units to 48,807. While overseas customers will enjoy their Fiestas for some time to come, American buyers won’t see a seventh-generation model. Not even an ST.

Automotive News also tossed in the Taurus for good measure, but that one is a little more difficult to predict. While Taurus sales dropped at roughly the same rate as the Fiesta post-2013, and the model looks poised for an exceptionally bad 2017, fleet sales to law enforcement agencies could keep it afloat for quite some time — mimicking what happened with the Crown Victoria.

Regardless of how it happens, Ford will assuredly make crossovers and trucks a bigger priority while allowing cars to take a backseat in future production strategies.

“This is an industry that has historically only thought as far forward as the next quarter and how things affect earnings,” Sullivan said. “I think there has to be more of a blend of looking forward to the next quarter and year, but also having an understanding of what the future of the auto industry is going to look like and building the foundation for that now.”

Hackett will address Ford’s shareholders and industry analysts in New York on October 3rd.

[Image: Ford Motor Company]

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3 of 51 comments
  • Mchan1 Mchan1 on Sep 26, 2017

    Why don't Ford just become a truck seller as that's what it's really known for? Leave the other vehicles to the other automakers, which it already had, like Honda, Toyota, Nissan, etc...

    • Shawnski Shawnski on Sep 27, 2017

      Because everyone sells "trucks". Maybe because their cars are prolly more interesting than most of the brands you site, at least the sporting versions of Focus, Fiesta, Mustang. Ford of Europe designs and competes in the car market. A foreign engineered car modified for our market, again just like the brands you site.

  • SPPPP SPPPP on Sep 27, 2017

    I guess I missed the part where the guy explains how leaving numerous market segments makes Ford "able to react faster to consumer demand". If consumer tastes change and a different segment gets hot, shouldn't Ford already be in that segment? Rather than reacting to what's hot, shouldn't they anticipate what will be hot next? Which means you have to build some things that aren't hot ... until they get hot?

  • MaintenanceCosts We need cheaper batteries. This is a difficult proposition at $50k base/$60k as tested but would be pretty compelling at $40k base/$50k as tested.
  • Scott ?Wonder what Toyota will be using when they enter the market?
  • Fred The bigger issue is what happens to the other systems as demand dwindles? Will thet convert or will they just just shut down?
  • Roger hopkins Why do they all have to be 4 door??? Why not a "cab & a half" and a bit longer box. This is just another station wagon of the 21st century. Maybe they should put fake woodgrain on the side lol...
  • Greg Add me to the list: 2017 Sorento EX AWD w/2.0 Turbo GDI 68K miles. Changed oil religiously with only synthetic. Checked oil level before a rare long road trip and Ievel was at least 2 quarts down. That was less than 6 months after the last oil change. I'm now adding a quart of oil every 1000 miles and checking every 500 miles because I read reports that the oil usage gets worse. Too bad, really like the 2023 Tuscon. But I have not seen Hyundai/Kia doing anything new in terms of engine development. Therefore, I have to suspect that I will ony become a victim of a fatally flawed engine development program if I were to a purchase another Kia/Hyundai.