Ford's Short-term Game Plan: Cull Cars, Slash Configurations, Boost Profits

by Steph Willems

January 17th, 2018 7:50 AM

fords short term game plan cull cars slash configurations boost profits

There’s a bell tolling for probably more than one Ford passenger car model, though we don’t know which ones just yet. Or do we?

As part of its updated operational strategy, detailed at the Deutsche Bank Global Auto Industry Conference in Detroit Tuesday, Ford Motor Company plans to sink $11 billion into electrification by 2022, release 16 fully electric models on a global scale, and field SUVs in every possible segment and sub-segment. Exhibit A: the subcompact EcoSport and brawn-ified Edge ST.

The company’s goal is greater profits and a healthier return for shareholders, not to mention a hoped-for lift in share value. Certainly, Ford’s declining stock did former CEO Mark Fields no favors.

Unfortunately, in order for Ford’s fortunes to soar, certain models will have to die. The company says it “will shift toward a lower volume passenger car lineup in North America and Europe.”

Jim Farley, Ford’s executive vice president and president of global markets, claims there’s no point in covering all segments anymore. And we all know which segment’s tanking these days.

“We have a rock solid foundation and we have seen growth in key areas, but we know we must evolve to be even more competitive, and narrow our full line of nameplates in all markets, to a more focused lineup that delivers stronger, more profitable growth, with better returns,” he said in a statement.

The automaker expects its North American SUV mix to grow by 10 percent in the next two years, with passenger cars falling by the same amount.

Already, we’ve seen Ford choose not to bring the next-generation Fiesta to North America, relegating the low-profit model in overseas markets and removing the Blue Oval from the subcompact car game. Just recently, we learned the midsize Fusion sedan’s planned redesign (for the 2020 model year) is now off the table. CEO Jim Hackett certainly didn’t seem all that sympathetic to the Fusion’s plight in a recent interview.

Should the Fusion go the way of the Tempo, that takes the model’s Lincoln MKZ platform mate and the European-market Mondeo off the market, too. We’ve long thought the full-size (and much-ignored) Taurus isn’t long for this world, what with limited retail interest and rising sales of SUV interceptors to police fleets.

In order to squeeze more dollars from the sale of its Escape, Fusion, and EcoSport models, Ford plans to drop the number of orderable configurations “from thousands, to just 10 to 20 combinations for each vehicle.” As for those electric vehicles, North America stands to see seven of the 16 planned EV models.

One of those vehicles, a performance-focused crossover, stirred up no shortage of controversy at this week’s North American International Auto Show after the automaker introduced it (verbally) under the Mach 1 name. Predictably, outrage ensued.

[Image: Steph Willems/The Truth About Cars]

#ElectricVehicles #EVs #Ford #FutureVehicles #PassengerCars #ProductPlanning #SUVs

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JustPassinThru on Jan 17, 2018

I think we've seen this strategy before. Usually, just before every recession/Arab Oil Embargo/contrived or political gas shortage. And each time it ends the same way; with records set for the German, later Japanese, later Korean makers. Maybe this next time it will be the Chinese brands. In 1979 it was AMC, heavily dependent on the Jeep lineup. In 2008, it was GM, sticking to luxo-trucks and pooh-poohing suggestions it focus on practical size-and-cost products. And, when the crunch came, each time...the social-engineer wags were all a-titter, damning the various makers for not making "socially responsible" products. Well, I reject "social responsibility" as an aim of manufacturing; but I do think they have a point: This Lux-Barge Market is driven, not by need but emotions; emotions and the sudden flush situation of various financiers and money-changers. That's not an endless market and the winds of change could blow the air out of their own sails. We are looking at a correction; it will be a costly one; and people will not HAVE $60.000, or what passes for it in the coming hyperinflation, for a one-ton dooley that hauls the pale face and soft hands of a Business-Admin graduate and his ego and manhood. Americans with honest jobs will need honest cars - inexpensive cars; the kind that Germans and Japanese needed after the war they lost. Because in this war on the dollar and on American savers and workers, today's workers will be the losers. And will have to adapt in their lifestyle. There won't be enough beaters and hoopties to go around.

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- TW5 on Jan 17, 2018
  
  How does a weak dollar hurt workers?
  
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- JustPassinThru on Jan 17, 2018
  
  @TW5 Weak as in how? INFLATION erodes savings; it devalues the wages you've agreed to work for. It makes buying something on time, like a car, riskier (as the cost of living rises, no one's sure how fast) and as interest rates rise over the inflation rate. This current Federal Reserve Zero-Interest is an artificial environment. Then there's the ginormous government deficit; and that will have to be serviced. Inflation will also push everyone into higher tax brackets. This is obvious to anyone who's lived through the 1970s or who has examined those times.
  
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- 28-Cars-Later on Jan 17, 2018
  
  @JustPassinThru "Inflation will also push everyone into higher tax brackets." Bingo. "This is obvious to anyone who’s lived through the 1970s or who has examined those times." You've been living in them again for nearly a decade. Stagflation, baby!
  
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- Dal20402 on Jan 17, 2018
  
  @JustPassinThru I see the goldbug crew is out in force. Major inflation (above 5%) is a real problem. Inflation of 3%, an amount of which the Fed is terrified, is no problem at all. Current inflation of 2% is fine, but could mean we're leaving some productivity on the table. Inflation below about 1.25%-1.5% actively harms workers. "INFLATION erodes savings." This hurts the moneyed class badly, but doesn't hurt workers much, as most of them have savings that are very small compared to current wages. "it devalues the wages you’ve agreed to work for." Wages in a balanced labor market will rise with inflation. If they don't, the problem isn't really inflation, it's an issue with the labor market. The 1970s were a good example; the working-age population increased massively without a corresponding addition of jobs. "It makes buying something on time, like a car, riskier." Quite the opposite. If you agree to make fixed payments on a house or car, inflation decreases your debt burden. Likewise, inflation does a nice job of reducing the "ginormous government debt." "Inflation will also push everyone into higher tax brackets." This is true under current law but Congress could change it at the stroke of a pen.
  
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- 28-Cars-Later on Jan 18, 2018
  
  @dal20402 "In 2008, it was GM, sticking to luxo-trucks and pooh-poohing suggestions it focus on practical size-and-cost products." GM could have sold the car with the magic 100 mpg carburetor, their goose was cooked no matter what for a number of reasons. "There won’t be enough beaters and hoopties to go around." Already there.
  
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- JustPassinThru on Jan 18, 2018
  
  @dal20402 You should pay more attention to our own history of a generation ago, and less to the FED cheerleaders. It's self-evident: Inflation erodes the value of savings and contracted/agreed-upon pay. Hurts the "moneyed class"? Only if you think that only "rich people" save, or should save. It hurts those who can only save a little, more. Those who are trying to plan a decent retirement, more than a $1000 antiSocial inSecurity check allows...THOSE are the ones hurt. Even as that thousand is debased and devalued. It destabilizes the economy and debases the currency. It benefits those who get the newly-created currency; at the expense, in corrupting the value of, those who worked and sacrificed for the money they do have.
  
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- TW5 on Jan 18, 2018
  
  @JustPassinThru You're mixing many metaphors. Currency depreciation is not necessarily synonymous with inflation. Furthermore, savers and consumers are not workers. Generally speaking, workers benefit from currency depreciation and devaluation. That's why Japan and China have purchased so much US debt to thwart their currencies from rising against the dollar.
  
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- JustPassinThru on Jan 18, 2018
  
  @TW5 No, it is you who are confused. INFLATION is, literally, inflation of the currency - pumping up the numbers of the unit without increasing backing value or wealth. PRICE INCREASES come from inflation - or other things, such as increased costs or rising demand that outstrips supply. Workers do not benefit from having the proceeds of their work, devalued after the fact. And a person who saves, can be a worker...obviously. A person who does not save for old age, is a FOOL. Rising prices from a vicious circle of money-printing, benefit no one...except the recipients of the "new" money. In the current case, that would be the financiers - who get it through the laundering process of ZIRP loans through the Fed; and then pour it mindlessly into the Dow and NASDAQ for their bank-bosses. Paying themselves commissions every step of the way. Finally, "gold bugs" are not the ones who worry about inflation. Gold PROTECTS from inflation. A gold-owner sees HIS value preserved, and sometimes increased, with mindless debasing of the currency through inflation. You're welcome.
  
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- Cdotson on Jan 18, 2018
  
  @TW5 "Gold bugs" are those who believe that gold is a hedge against inflation when historical gold prices do not bear out that assertion. Gold is a hedge against global instability, generally overperforming in times of economic crisis (especially oil shocks) and receding during the good times (mid-80s, late-90s).
  
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- Dal20402 on Jan 18, 2018
  
  @dal20402 Again, workers in the real world almost never have significant savings. Between mortgages and student loans, most of them have more debt than savings, which makes inflation a net benefit for them. I'm a professional worker with very good pay and significant savings and yet I'm still decisively in this category, thanks to a mortgage that's 3x my annual income. "contracted/agreed-upon pay." Almost no workers have employment contracts. The ones that do are almost exclusively top-level executives. At-will employment causes workers a lot of problems, but in a balanced labor market one of the big benefits it can bring to workers is the leverage to ensure that wages reflect current value. Again, in the real world, unless the labor market is badly out of whack, wages keep up with inflation. (Although they do not keep up with productivity gains, which is a separate problem mostly resulting from bad tax policy.)
  
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JustPassinThru on Jan 18, 2018

It's off topic...but the good times are bad for gold because gold offers no returns. When the currency is stable and the economy is roaring, as it was for two decades...only a fool would ignore the miracle of compound interest. When the FED is intentionally debasing the currency, while distorting the capital market with Zero-Percent at the Fed Discount window (to member banks) the economy roiles; and will whipsaw more with the distortions. Think Venezuela. Or Argentina. Or Zimbabwe. That's where gold becomes attractive.

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