By on September 25, 2017

2017 Ford Taurus

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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51 Comments on “Ford’s CEO Might Execute Lower-margin Vehicles to Boost Profits...”


  • avatar
    turbo_awd

    1) Yes, you need to keep the shareholders happy, for the most part
    2) As stated – investors as a whole are incredibly short-sighted and just want “the new shiny” every 4-6 months, spoiled by the velocity of tech innovations. You just CAN’T run a car company like that. Even pivoting every 2-3 years means anyone who tries to plan based on your products gets messed up.
    3) every once in a while, the CEO has to say: (*@&#$ the shareholders, we’re looking ahead more than 1-2 quarters..
    4) Not everything HAS to have 20%+ profits all the time

    I’m sure FCA can continue to crank out $20k Caravans/T&Cs for as long as they can meet safety standards, and keep selling ’em. At some point, heck, it might make sense even at $15k, just to keep people working, etc, even if it’s only a 5-10% profit. Tooling has been paid for long ago, I’m sure. Pacifica is doing well, I think, but isn’t setting the world on fire.

    Edit: I know the story is about Ford, the FCA example just came to mind – I’m not as familiar with Ford’s product lineup, etc..

  • avatar
    DeadWeight

    Genius!

    Aside from the facts that Ford already makes (mostly) garbage-quality vehicles that are significantly over-priced, what could go wrong?

    Just cede the complete market for sedans, coupes and non pickups and non SUVs/CUVs to Honda, Toyota, Nissan, Hyundai, Kia, etc., WHAT COULD GO WRKNG?

    Ford probably generates 85% of its entire net profit from the F Series and maybe two other SUVs/CUVs anyways, so it’s actually probably a pretty sound business case to turn Ford into a comps y that exclusively sells the F Series and maybe the Explorer.

    Shut all the other factories and lines down and watch profits increase dramatically.

  • avatar
    Speed3

    I have never understood this point. If Ford is still investing the R&D in the Fiesta and building it for other markets. Why walk away from the 40-50K sales in the US even of the margin is much lower? Is it because they don’t want to spend the marketing costs? Is it the cost to certify it for the US?

    Is it because Ford anticipates some potential Fiesta buyers will end up in an EcoSport instead?

    • 0 avatar

      Cost to certify and market.

      • 0 avatar
        gmichaelj

        So do you have an estimate on what it costs to certify?

        I think marketing would be covered by the ad charge per vehicle as would transportation (?)

        IF the revenues less variable costs for each Fiesta (or whatever) was say $4,000 (I just pulled this number out of my ass – I don’t know what the Contribution Margin is on a Fiesta) then you’d have to sell 250 Fiestas to cover every $1 million to certify. If CM is $2,000 then 500 units for every $1 million in certification costs

        And what happens if the market changes and oil prices go to $3.50+ /gal? Wouldn’t it be nice to have a currently low-margin car to mark-up and sell then?

        This move makes it LOOK like he is doing SOMETHING.

        • 0 avatar
          gmichaelj

          GoodCarBadCar says Ford sells ~45,000 Fiestas per yr in US. If the NET profit per car was only $500, which seems very small to me, that would kick over $22 million to the bottom line. Which for Ford is Peanuts, but would keep a product in the US bullpen. A product they are already going to make for UK, Germany and elsewhere.

    • 0 avatar
      Big Al from Oz

      Speed3,
      It seems Ford is moving “Back to the Future”. Do you remember Ford’s position in 2011?

      We don’t need the Ranger because people will buy a Focus or Explorer or whatever comment Ford made along those lines.

    • 0 avatar

      I’ve been told that the Fiesta actually does poorly under the US guidelines for manufacturers fuel economy. The system is set up based on a “footprint” so the F150 actually scores higher than the Fiesta. Good ol Washington! I own a ’15 Fiesta and intentionally picked it over the Focus because even if the Focus is a better value, the Fiesta is a better driving car. Manual of course! No one (other than me) intentionally gets a Fiesta though. I think Ford would be right to consider the sales they have cannibalized from the Focus line. (Former Ford Salesman)

    • 0 avatar
      scott25

      In the Fiesta’s case, it’ll free up space at the Mexican plant to build something else, maybe EcoSports eventually once Indian production stops making sense.

      • 0 avatar
        Mandalorian

        Yes, there is a big opportunity cost with the Fiesta in terms of production/logistics and dealer-wise as well. Slow moving Fiestas take up valuable inventory slots and lot space. Dealers want vehicles that turn over fast.

  • avatar
    mmreeses

    The days were the buying cycle for a person was:

    small domestic, then mid-sized domestic, then large domestic

    are long gone (i’d guess).

    How many Fiesta buyers eventually graduate to an Explorer or Edge within 15 years of buying a Fiesta?

    Surely some spreadsheet in Dearborn has the answer?

  • avatar
    28-Cars-Later

    So D4 goes fleet only in the future, which was inevitable when the new Explorer is spun up anyway. Fiesta and C-max get waxed.

    What a shock /s.

    • 0 avatar
      Adam Tonge

      D4 isn’t going to exist soon. Its days are numbered.

      Once the Explorer moves to the new platform, they’ll move the police vehicle too. There is no way they keep building the Taurus, even as a fleet vehicle, longer than another model year.

  • avatar
    bobmaxed

    Well I guess I’ve bought my last Ford. We currently are very happy with a C-Max and a Fiesta ST. Probably go back to buying Japanese vehicles again.

    • 0 avatar
      Wheatridger

      I wish they would blend those two cars together a little bit. A C-Max with an ST suspension would be a gas! If they cleaned up the Max’s styling (three grills, really?), it might become a hit marketed as the hybrid alternative to the TDI Golf, if not the sainted GTI. That’s how I think of my new car, anyway- a ’17 Energi Titanium, or, if you will, an NRGTi.

      • 0 avatar
        dal20402

        As a ’16 Energi owner… the only way it could compete with a GTI is if you doubled the power of the electric motor and somehow shaved 400 pounds in the process.

        Fortunately, it does plenty of things a GTI can’t do, like run nearly carbon-free on Seattle hydropower.

  • avatar
    deanst

    Too bad Ford can’t hook up with someone like Mazda, and put the Ford grill on a competitive subcompact.

    Oh wait,….

    • 0 avatar
      Rocket

      Yeah, because Mazda hatchbacks are in such demand. A re-badged 3 would be a real company-saver.

      For the record, the Fiesta is competitive. The new one looks quite impressive in fact. But being competitive in a dying, low-profit segment means little.

  • avatar
    zip89123

    A lot of people tried Ford when GM & FCA had the bankruptcy, and Ford burned them with the POS Fiesta & Focus transmissions. Those customers will never come back. Might as well get rid of them as Ford made sure they wouldn’t have a future.

  • avatar
    Big Al from Oz

    I think there are others factors weighing in on this position held by Hackett.

    Small vehicles are a part of it. Don’t forget the costs of the aluminium wonder trucks. Yes they are popular, but they cost Ford a sh!tload. All the R&D, complete retooling, etc needs to be paid for.

    I would think each F150 earns alot less than a GM or Ram pickup. Ford needs to better balance this additional burden as well.

    It seems since Ford headed down the path with the aluminium wunder trux everything other than the expensive change to them has been blamed to explain Ford’s less than stellar performance.

  • avatar
    hamish42

    What he’s doing is increasing the value of my car when it comes on the used car market 2-3 years from now. A certain segment of the buying population will not (or cannot) go above a certain price. If all Ford has is vehicles above that threshold, then the purchasers will consider my used car to be obtainable. The Ford offerings will not be.

  • avatar
    JohnTaurus

    Well, all the quacks are here and accounted for.

    Dw claiming all Ford vehicles are horribly low quality, but FCA SUVs are such leaders in this area.

    Then we have the “wait till gas prices go up” and “SUVs/CUVs are just fads” comments, with nothing to back that up. Because, as others pointed out, they haven’t been selling strong since Clinton first took office, only increasing by leaps and bounds since then? But, they need more cars that don’t sell and don’t make money, because one day soon, gas will be $8/gal.

    Oh, and Ford sells 50k Fiestas a year so it MUST be profitable, even if a huge chunk of those sales are to rental fleets, and the rest are usually sold with heavy incentives, all of which probably cause Ford to lose money on the car, because Americans *Don’t* *Want* *Small* *Cars*.

    And at last, we have BigHeadUpMyArse blaming everything (which is what? Ford sales in the tank? No. Ford is unprofitable? No.) on aluminum trucks, on which the average transaction price is hovering around $50k, and on the base of which Ford made a $10b profit last year, and with which completely dominate the market. Yes, that’s “alot” of money for a company that totally screwed up, BigMouthFromOz.

    All from an article that speculates that models that have been rumored to be cut soon are, again, rumored to be cut soon, while using the name of a new CEO to regurgitate the rumors again.

    So, what have we learned? Simple: Ford, you don’t know anything. You don’t have any information we lack, and all your decisions can be made by some clueless pundants who COULD build a multi-billion dollar car company on a Saturday afternoon, if they were so inclined.

    Slow selling models are possibly being cut, and that means everyone is an armchair CEO that knows the auto business far better than a company that makes more money in a week than they will make in their entire lives, probably combined.

    I’m not here to defend Ford, because they don’t need defending. They are a business that has an ultimate goal of being profitable, and they are, and any decision to add or subtract models from a given market is based on that goal. All this wishful thinking that Ford is circling the drain is just that, wishful thinking.

    So their stock price isn’t great? I suppose they need to be more like Tesla, as in not making money, using gimmicks that are poorly executed (gull wing doors that trap passengers inside and AutoPilot that doesn’t really pilot automatically), missed production dates, lofty goals that change with the wind, and only an inflated stock price (bubble) to show for it.

    • 0 avatar
      DeadWeight

      Ford has made such reliable, beautifully machined/fabricated, durable, elegant vehicle such as

      Tempo

      Escort

      Ka

      Fiesta

      Festiva

      Jelly Bean Taurus

      Focus

      Granada

      Bronco

      Bronco II

      Mustang II

      Exploder

      Expedition

      Windstar

      Pinto

      I could go on but don’t have the energy.

      The Baruth Brothers will be here soon to try and defend at least 1/2 of these automotive abortions soon.

      • 0 avatar
        ajla

        The full-size Bronco was awesome and some versions of the SUV Exploder were fine.

      • 0 avatar
        raph

        Everybody picks on the Mustang II yet it sold in pretty good numbers and had about the same build quality as just about every other malaise era car.

        Sigh… it was only about 12 inches of wheelbase away from greatness ( just Google V10 Mustang II )

        • 0 avatar
          DeadWeight

          I beg to differ as do many if not most – the Mustang II and the Bronco II were 2 of the worst vehicles, ever made and sold, in history.

          The Mustang II literally shared NO common components with the predecessor Mustang, but rather, shared its platform with the wretched subcompact-sized Ford Pinto.

          The Broncos II was literally a full-tilt Was ind head over a$$) death-trap.

          Even the 3rd gen Bronco was an ugly, unreliable turd.

          • 0 avatar
            Mandalorian

            What pray tell is wrong with the Expedition? I am curious. Also the WIndstar. Do that one next.

          • 0 avatar
            RHD

            Consumeraffairs dot com has the Windstar rated at two stars out of five… lots of transmission and electronics problems, and lower than rated MPG.
            It was not exactly Ford’s best ever vehicle.

      • 0 avatar
        CKNSLS Sierra SLT

        The Explorer and Expedition don’t belong on your list. Everything else I can agree with……

      • 0 avatar
        Ce he sin

        I know absolutely nothing about the American market cars, but what’s wrong with the Fiesta and Focus? They’re both popular on the used market where I am.

    • 0 avatar
      Big Al from Oz

      Well Johnnie?

      First, here’s some good info. Around the time Ford decided to go down the route of aluminium Ford, Ford received a $26 billion dollar interest free loan from the US taxpayers.

      The Ranger back in 2010 cost Ford $3.5 billion greenbacks and that was for a vehicle that used existing tech and I might add; engines, drivetrains, etc. So how much has Ford invested in those aluminium vunder trux?

      You even mention the p!ss poor profits on fleet vehicles. A huge investment in bringing the new aluminium F150 will impact Ford’s bottom line no differently. Just because Ford sells them for a high price doesn’t mean it returning anywhere’s the same profit as a Ram or GM pickup.

      Take your palm off of it and stop being such a one eyed, biased Ford fan.

  • avatar

    Hackett is turning out to be as loathsome as I thought he would. At least Fields had a vision for the future. This guy is incapable of thinking a day ahead. He is just another unimaginative wall street servant.

    • 0 avatar
      DeadWeight

      Well, Hackett was the former CEO of Steelcase, an office furniture company in Michigan primarily known for producing things such as square/rectangular metal cabinets and such – so it would stand to reason Ford should focus exclusively on the F Series (best selling vehicle in U.S. for many years/decades) and a few SUVs.

  • avatar
    mchan1

    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…

    • 0 avatar
      Shawnski

      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.

  • avatar
    SPPPP

    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?

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