Back in January, my retrospective on the current generation Fusion pondered the idea of the vehicle being Ford’s last midsize. Today Ford confirmed that they plan to eliminate every car from their lineup save the Mustang and one variant of the Focus. Ladies and gentleman, the sedan apocalypse is truly upon us.
How often does an automaker announce the cancellation of four models simultaneously? Almost never. The last time anything remotely similar happened was during the recession, when GM and Ford killed off several divisions within their respective companies. But times have changed, and the increasing popularity of crossovers puts a target on the back of any unprofitable passenger car. Obviously, Ford feels that market has shifted permanently, and presumably CEO Hackett has enough confidence in the company’s future products to walk away from three segments.
| Year | Ford Focus | Ford Taurus | Ford Fusion | Ford Fiesta |
|---|---|---|---|---|
| 2013 | 234,570 | 79,960 | 295,280 | 71,073 |
| 2014 | 219,634 | 62,629 | 306,860 | 63,192 |
| 2015 | 202,478 | 48,816 | 300,170 | 64,458 |
| 2016 | 168,789 | 44,098 | 265,840 | 48,807 |
| 2017 | 158,385 | 41,236 | 209,623 | 46,209 |
All four models experienced sharp declines in sales over the last several years. Blame lower gas prices, increasingly refined crossovers, and an economy that allows more people to open up their wallets for the death of sedans. And the lack of all wheel drive too, although the Fusion did offer it.
Of course this news only applies to us North Americans. International markets currently have the option of picking up the new Fiesta, which was completely redesigned for the 2018 model year. And while North America isn’t getting most versions of the Focus, we will be receiving the Active trim level, which is most likely an all wheel drive competitor to something like the Subaru Crosstrek.
It’s especially strange that Ford decided to kill the Fusion since it received another refresh for 2019. But nothing is certain in this world, is it? And as long as Ford develops a plan to bring their future cars to America in case conditions change they’ll probably be fine.
I believe that Paul has mentioned this. I’d imagine GM will soon follow.
Going to be some good deals on a new Ford sedan.
When I first read this I was very surprised. I’m sure Ford has obviously thought this strategy through and though, but my question is this: Does Ford expect to transfer those 450,000ish car sales over into other products in the Ford showroom? That seems quite a tall order to me, and then begs the question if plant shutdowns are part of this plan? I know FCA has reduced their car lineup already, but they also weren’t ever even close to moving nearly half a million Darts and 200’s a year either…
I would imagine Ford will use the factory space for electrics and more CUV designs.
They already make an electric Focus. Sales are tiny, but I would think that Ford would see that things are moving in that direction. So is the electric Focus gone too?
Since Ford’s strategy is all about crossovers, SUV’s, and pickups, I imagine they’re content with letting some of those lost sales go in place of lower volume, but more profitable vehicle sales.
And I’m sure Ford is developing a number of electric and plug in electric vehicles that can take the place of all the culled models.
Strangely enough, Ford Australia seems to be selling about as many Mustangs nowadays as they were Falcons toward the end. Maybe even more. And that’s while selling Mondeos, Focuses and Fiestas here too.
Damn!! This sure is surprising to read. What will rental companies buy now?
Toyotas.
Nope- Nissans. They’re currently increasing their share of the US market, and fleet sales are a big part of that increase.
Yup. Nissan. I have also had Ford and FCA rentals in recent years, plus one Kia. Toyota and even GM seem able to avoid dumping into rental car fleets.
There are also a lot of CUVs in rental fleets. I drove by a rental lot every day and they are pushing half CUVs at times.
Two weeks ago a relative from California visited us. His rental? A Toyota RAV4.
Back in the ’90’s, the domestic manufacturers basically ceded the sedan market to the imports and decided to focus primarily on trucks and SUVs which they could still turn a profit on. Then gasoline spiked at $4.00 a gallon and truck and SUV sales plummeted.
Admittedly this is occurring because the public is not buying sedans anymore or not enough for them to be profitable for the domestic auto makers. A black swan event could throw everything into turmoil…it will be interesting to see how this turns out down the road.
This is it: Ford, no matter how nice its sedan/hatch products were, was just not working at a level high enough to re-convert people who moved on in the nineties, if not the malaise era, or more more ominously even people who never considered a Ford in the first place. Getting over that hump with R&D and marketing’s a big investment, and not one Ford needs to do with its trucks and CUV’s (even if the latter could easily support sedans). I can see the opportunity cost being too great.
That said I’m surprised they claim they’re actually losing money on their sedans—I wonder what combination of poor transaction prices, poor management, and post-hoc excuse making that is.
You’re quite right about retail buyers never really coming back to the Big Three for sedans after the 90s. Although GM and Ford finally figured out how to make a competitive sedan, it takes more than that, once the buyers have moved on. And they can’t make better cars than Toyota or Honda, so they’re screwed. This is the final straw of what started with the Vega and Pinto.
They’re either losing money on them, or making very little. The problem is this: the stock market is demanding high profit margins, like 10%. It used to be that only some premium makers and Toyota could achieve margins like that. But as various mass market makers have improved their margins (GM’s is 10.7% now) those that haven’t are going to be severely punished.
Ford’s margin is 8%, but the need to get to 10% asap. Selling cars that have 1-3% margins, or are losing money, isn’t going to get them there, right? I know it seems crazy, but killing a car line with a 3% profit margin is going to boost your margin when your trucks have a 20+% margin.
Ford is the current laggard of the Big Three; FCA’s stock has appreciated nicely this year, and GM is doing well. Ford’s stock is down to $11; that’s very poor. The Market is saying it doesn’t think Ford is lean and mean enough to be prepared for a very tumultuous period to come. Between ride-hailing and autonomous vehicles and EVs and other disruptive technologies coming down the pike, car makers need to be prepared to succeed in a very different environment.
One more thing: This all started with Honda’s Maryville, OH plant in the 70s, where they have been cranking out Civics and Accords by the hundreds of thousands in a hyper-efficient plant. And all the transplants imitated them, and as long as they can crank out 300+k of their various sedans, they can make good money at it. But if you’re only selling 200k or 150k or 100k, you’re screwed. How long do you think GM is going to keep the Cruze plant going at Lordstown with only one shift? You want to have three shifts to make big money; two at the very minimum.
When I worked for GM, I had a local Zone Rep (practically god in GM’s system at the time) tell that it was impossible to make money on less than 250k units, and that 400 k was desirable. That means the trucks are making money like mad, and the sedans are foundering.
The CUV thing is here to stay. There will still be sedans for quite a while, I’d wager.
exactly – Ford is losing money on the Fusion
then add the fact that the last gen Accord was better than the current Fusion, so it’s not competitive w/ the new Accord
so the Fusion can only go lower as a discount/fleet queen like Nissan has done w/ the Altima despite the new gen
You want to have three shifts to make big money; two at the very minimum.
That is a thought I have been pondering. Right now, SUV and truck plants are going full blast, while plants producing passenger cars are dark frequently. I can’t imagine how GM keeps Orion Township going for the trickle of Sonics and Bolts it builds.
So what happens to all the plants that have been building sedans? Convert all that production capacity to building yet more SUVs and pickups, the way FCA has with the plants that used to build the Dart and 200, and the market is flooded and margins evaporate as the manufacturers try to clear the inventory.
What happens when everyone tries to build an SUV for every possible niche, like Ford is doing with the Ecosport, the raised and plastic cladded Focus and the revived Bronco on top of the other existing SUVs. Volume for each model falls as they cannibalize each other, while development costs soar. Margins evaporate.
I used to hold stock in Sandisk. The flash ram industry was almost comical. Demand was booming. Profit margins would soar as supply tightened. Then everyone would rush to build more fab capacity. Demand would still be booming, but fab capacity would overrun demand. Margins would evaporate.
In a couple years, I would laff myself silly if, suddenly, FCA and Ford, who bet their companies on an infinite demand for SUVs at steep markups, suddenly aren’t getting a 20% margin, or a 10% margin, but are actively losing money on some of their “sure thing” products, because all the competition they ran away from in sedans is now in their face with SUVs.
Marchionne will not care. He retires in a year, with probably an 8 or 9 figure check in his pocket. Hackett will not care either. He already retired from Steelcase. He can bail out of Ford the moment things start getting dicey, and he’ll probably exit with an 8 figure check in his pocket.
Just rented a Cruze a couple of weeks ago in LA, nominally a competitor to the Golf Sportwagen I drive everyday. Competent, bland outside and over-designed and under-materialed inside. And too many little cost-cutting moves, like no auto-up or down on the windows, except the driver’s which was auto-down only. i get the labor advantages the transplants have, but as many have noted, they haven’t given sedans real thought for decades.
Also worth noting Sergio Marchionne was ahead of both GM and Ford on this, pulling the Dart and 200 to free up capacity for more profitable and in-demand products truly designed for this market.
Shows where the country is going. Very few jobs are secure today, yet people are spending an average of $34,000 on a vehicle when for $10,000 less they can get a very good mid-sized car. Vanity supersedes prudence. For that $10,000 I am acquiring a solar home generation system which will generate nearly all my electrical needs.
Oh, there you go being practicle.
I suspect what you’re seeing is the effect of an entire generation that’s been so financially brutalized that the ones who aren’t tech industry mavens selling your personal information to Russian hackers have a decade or more of student loan payments before new car buying is a realistic option. The trends in the auto market, including transaction price averages, suggest a graying customer base.
The trends in the auto market, including transaction price averages, suggest a graying customer base.
Not according to this analysis: https://www.motherjones.com/kevin-drum/2018/04/not-so-raw-data-whos-buying-new-cars/
And loan terms are just getting longer. As in 70+ months for pickups, on average.
Between lower interest rates and longer loan terms, buyers (including younger ones) feel they can afford more expensive trucks.I suspect few gray-haired buyers are taking 72 month loans
I have been smelling the end of the Focus for some time. The idea of putting such a popular model on hiatus for a year, when production for the Chinese market starts this June, reeked of a marketing experiment to spend the year seeing how many Focus prospects can be shoved into an Escape instead, and if enough people are shifted to an Escape, then drop the Focus before it ever gets here.
Yes, this strategy has worked for FCA. They announced the death of their mass market sedans at the start of 2016, and FCA is more profitable now than ever. The difference is that the Chrysler mass market sedans had been pretty second rate products for a long time, so they weren’t missed. The Fusion has always been a top pick in it’s segment and, except for the wretched Powershift trans, the Focus has also been highly regarded.
Of course, if something happened to oil supplies and gas soared over $4/gallon, Ford, and FCA, would be caught with their faces hanging out. Not that Marchionne would care. He retires in a year, with probably 8 or 9 figures of loot in his pocket. Hackett already retired from Steelcase, so if his short term gamble pays off, he’ll also exit with 8 or 9 figures of jingle in his pocket.
When new the Focus and Fusion were highly regarded by the automotive press, but I wonder how much that came from the Köln halo and admiration of Mullaly (that’s a long time ago now!). That broader narrative around the new Fords (the sense of “finally, we’re getting the good stuff Europe gets!”) doesn’t mean anything to your average car buyer, whereas the cars’ shortcomings—like the transmission and interior (and sometimes build quality—the Fusion, especially early on, could be quite panel-gap-y) did, especially since Ford was trying to push its cars slightly upmarket (at least at first). As nice as the Titanium may have been I doubt they drew a lot of upper-trim Toyota, Honda, and Subaru buyers. And at lower trims the Koreans offer better value (and even if there’s less character that’s an advantage for many buyers).
Gas prices probably won’t be an issue, we are less than 10 years away from the disappearance of the internal combustion engine in favor of electric cars.
Even if not CUV mileage isn’t that divergent from sedan mileage.
not really
you prediction was also made @1910
electric cars exist because of subsidies and outside of limited areas they will not be competitive w/ ICE powered vehicles
hybrids will show the way
Tesla’s cars offer range comparable to gasoline powered cars. And we’ve got better batteries coming
” except for the wretched Powershift trans, the Focus has also been highly regarded.” After renting a Focus, not only would I never buy one, I refuse them as rentals.
Ford… got a better idea?
Recently went car shopping for the wife, who is not a car person. It wasn’t going to be anything other than an Accord or a Camry, that’s just the way it was, despite my pleas to take a look at the Fusion. I think there is a lot of that attitude going around. BTW, the Accord we leased is a magnificently engineered and put together car.
The other element of the equation is that the domestic car companies are closer to the government and the regulators than they used to be. They can go for the high-profit SUVs and trucks, and then claim that they are out of business if the government tries to reinstate tough mileage regulations. They gain some regulatory leverage by taking themselves out of the traditional car business.
See my long comment higher up. But your experience nails it; this is the crux of the problem. The Big Three learned how to make competitive sedans…four decades too late. Game over.
It’s all about retail demand. If you’re propping up poor retail demand with fleet sales and high incentives, you’re screwed. Profit margins on sedans are to thin to start with, as they’re a commodity, but when you can’t keep your factory humming with 2-3 shifts (300+k per year), you’re going to lose money, or make peanuts.
MT just tested the Accord ag/ the Audi A4
2018 AUDI A4 ULTRA PREMIUM VS. 2018 HONDA ACCORD 2.0T TOURING: BLURRED LINES
Who builds the better luxury family sedan?
http://www.motortrend.com/cars/audi/a4/2018/2018-audi-a4-ultra-premium-vs-2018-honda-accord-20t-touring-comparison-review/
They picked the Accord.
Verdict: It’s close, but at this 40 grand price point the Accord Touring is a more convincing luxury car than the A4 Ultra. “Audi does a superb job of dressing up the A4 to keep your eyes away from the cost-saving measures,” Evans said, “but when you dig even a little bit, you find them.” That, coupled with its imperfect road manners, sinks the Audi. The Accord, on the other hand, makes a strong effort at defining the holistic luxury experience. It’s not perfect, but it does just above everything a little bit better than the A4—it’s nicer to drive, more sophisticated, and more rewarding to spend time in. Is luxury worth it? Sometimes. But in this case, the mainstream is luxury.
But again, it takes a while for perception to catch up with reality.
The new Accord is very good value if you plan to *buy* one, but even the $25k LX and Sport *lease* for BMW/Mercedes money while a Camry can be leased for much less.
From the article, regarding the Audi:
“Our tester added options such as gray paint for $575 (black or white paint are the only free colors) ”
How horrible and depressing is that to read?
It’s a prisoner’s dilemma with crossovers. People first got them so they could look out over traffic. But as SUVs got more popular, people in normal cars found it impossible to see over the traffic so they got SUVs and so on.
And since they’re still inexplicably classed as “light trucks” most have legal factory rear window tint, so nobody can see around each other at all no matter what you pick. Way to go, society.
Imagine what it was like when cars began to get lower – people in the ’40 not being able to see past the Model T in front.
In 1958, popular science discussed the big problem caused by ever lower rooflines: The intrusion of the driveshaft tunnel into the passenger comparment. It was suggested that all cars would need to switch to transaxles, front wheel drive, or rear engine.
I am thinking that this is largely a ploy to end domestic manufacturing of these sedans. Probably won’t be long before they are importing from China, etc., making a nice per unit profit, but claiming that volume just is not there to restart production here.
Probably won’t be long before they are importing from China, etc., making a nice per unit profit, but claiming that volume just is not there to restart production here.
The gen 4 Focus was supposed to be exported from China to the US. Now, all we will get is the jacked up Outback wannabe version. The Fiesta plant in Mexico has already been reassigned to an SUV. That leaves the fate of Hermosillo open.
Puzzles me how Ford managed to, they claim, lose money on the Fusion. It’s built in Mexico with $5/hr labor, and it’s competing with the US built Camry and Accord, with workers making several times as much money as the workers at Hermosillo.
You have nailed it. The small cars were going to Chinese production prior to the announcement, so if (and when) gas price rises, they simply bring over cars built by non-union Chinese factories. Really, it is not much difference from when production shifted mainly to Mexico. Build what sells most locally, build less profitable ones where labor is cheaper. They can pull from Europe as well, as a lot of factories are in lower wage EU aligned countries Romania and Spain along with Germany and UK plants.
Suddenly, Sergio is looking like a genius for his ripping the bandaid off at FCA a few years ago. When he kills Dodge, don’t be surprised. I bet that will happen now within 5 years, probably 2. GM may want to follow suit and dispose of a brand or two in the US like, oh, I don’t know, maybe Buick in America? Think about it, morph the current Buick CUVs into the Cadillac line with a few tweaks, stop worrying about replacement of the Opel sedans, and two problems solved at once.
As to crying about it, don’t, unless you personally bought a Ford sedan within the last couple of years. Ford is out for a profit, not to make you personally happy with choices for possible sales that you never pull the trigger on.
As to crying about it, don’t, unless you personally bought a Ford sedan within the last couple of years.
I find this retort ever more ironic. And I’m not saying you’re wrong either, but American brands got(and still get) lambasted for planned obsolescence and frequent styling updates only selling extra “sizzle”, and since manufacturers stopped doing that, producing cars that don’t even show their age for 10 years, what incentive is there to trade in a five year old, mostly identical 13 Fusion for a new one? Do Camcord buyers do that?
And the same thing will quickly happen with Crossover offerings. The proliferation in the market only recently has approached its peak in new sales and selection, and may still grow to the point where no sedans are left at all. But crossovers live the same long lifecycles, are just as reliable, and the incentive to “trade up” to the latest and greatest will quickly be no more enticing to buyers than sedans now as the used inventory of crossovers gets broader, better and less discernible from new, as sedans have been for quite a long time.
This also solves the manufacturing capacity utilization issue that is driving Ford’s passenger vehicle production out of North America. I’m sure it’s cheaper to build USDM variants of the Focus/Fiesta/Fusion in a Chinese plant running flat-out, and produce high-margin USDM Escapes locally, than it is to have two sets of passenger car tooling in two factories, each running at a slower pace for the forseeable future.
Buick isn’t going anywhere. It’s too popular in China. If it was going to be killed, it would have been at the same time Pontiac, Saturn and Hummer were 86ed.
Most Americans live in a fantasy land. When car shopping they think of every possible need that they might ever have in a vehicle, and then buy what suits their perceived reality, cost be damned. The truth is it is far cheaper to pay for delivery. Most people need a seat for every ass and room for groceries. That’s it. They just don’t know it.
That’s what Henry Ford said, about his Model T. 🙂
You make a good point, Mr. Hardboiled.
Maybe FORD should bring back their high-powered 1975 Granada models. You can go grocery shopping in those easily enough. 🙂
If Ford had a sales winner like the Granada in their lineup, they wouldn’t be cancelling it.
I am shocked about the Fusion and Focus. They sold well and in a lot of car rags there is considerable agreement that the Fusion was a very good Camry and Accord competitor.
I am not surprised about the Taurus as it was big on the outside and cramped on the inside with a intrusive center console.
I am also not surprised about the Fiesta ether. Don’t get me wrong, I love the Fiesta and my 2012 was one of the most fun driving cars I have ever owned but I should have spent the extra money on a Focus. You are not losing much in the way of mpg for the bigger Focus.
Of course while some folks think that SUVs are a nightmare and no good. I firmly believe that the SUV and crossover is taking us back to our automobile roots. Cars started out as carriages with a motor in them. Up until the 1930’s the car sat up high with large wheels (to cover for the horrible roads)
The average crossover is just a wagon that sits a bit higher then your folks old 1985 Caprice Classic wagon.
The other problem with the Fiesta was that it’s unusually cramped even for a B-segment car. The Honda Fit is effectively a size bigger in terms of usable space without casting a bigger shadow (Now if Honda would only build a Fit Si).
A few B-segment cars in North America are marketed as B-segment MPVs, rather than ordinary passenger cars, in other markets. This includes the Honda Fit and Nissan Versa Note. The Honda City (defunct in mature markets) and Nissan Micra are true B-segment passenger cars. Then throw in the Nissan Versa sedan, which is a C-segment sedan decontented to a B-segment price point, and you have a B-segment in North America with some unusually spacious competitors to the rather cramped Fiesta.
I’m reminded of Nissan Australia’s decision last year to axe the Micra, Pulsar, Almera and Altima, leaving only two sports cars (GT-R and 370Z) in an otherwise crossover and truck-only range.
And you know what? Their sales only dropped around 13%. They’re still in the Top 10 best-selling brands and the X-Trail is still one of Australia’s best-selling cars.
Now, granted, Nissan’s passenger cars were lousy sellers here. Ford’s passenger cars tend to be among the better sellers in their respective segments. But the B-segment is small as Americans only seem to remember subcompacts exist when gas prices shoot through the roof. So the Fiesta being axed is no surprise. Nor is the Taurus’ axing, considering its segment is in terminal decline and Ford NA passed on the Fusion-based Chinese Taurus.
Dropping the Focus sedan? Meh. Hatchback sales are on the rise and a crossover-ifeid hatch is exactly what the market wants. My only hope is Ford continues to import the ST and RS, purely because of the halo effect they have and the fact that in that sub-segment of the compact segment, people aren’t as price-conscious.
That leaves, for me, the big surprise: the death of the Fusion. It’s disappointing because Ford has tried so hard to topple the Camry and Accord and the Fusion has improved with each redesign. It’s a damn good car. But now Toyota and Honda are apparently seeing sales declines with the all-new Accord and Camry so is the segment just no longer worth it? Could Ford replace the Fusion with a TourX-ified Mondeo wagon, imported from elsewhere? That’s actually a good suggestion: a Fusion Active to pair with the Focus Active.
Of course, that’s supposing Ford even keeps the Mondeo. The D-segment in Europe has been atrophying for years and the Mondeo sells around half what it did 10 years ago. Honda and Nissan already left the segment, could Ford follow?
Now, my question is: will Lincoln follow the Ford brand’s direction? Continental sales are average although it’s likely profitable. And the MKZ is on the decline. Could Lincoln, as Brendan Saur suggested to me earlier, become an American Range Rover? The new Aviator and Navigator are mighty impressive after all and the Navi is very profitable. With a hybrid F-150 being developed, it’s probably not too difficult to make a Hybrid Navi. And we already know the Aviator will have a plug-in variant.
As galling as news like this can be, automakers are looking for profits. And while I’m sure other subcompacts and compacts will see sales spikes the next time gas prices go up, we aren’t looking at 2008 redux here. Crossovers have narrowed the gap in terms of fuel economy and they’re hardly BOF SUVs.
Ford’s announcement today included the fact that all of Lincoln’s sedans in the US are money-losers. I don’t want to repeat myself, but I’ve covered some of these other issues in some lengthy comments here already.
My inside source at Ford confirms that Lincoln sedans are getting the hatchet.
I think Brendan is right about Lincoln. At the very least they’re gonna cull the MKZ. I can see them keeping the Continental as a halo car. My guess is the next generation goes rear wheel drive and gets a bit bigger. But even Lincoln might not have a future. In addition to announcing all their product changes, Ford also said that Lincoln as a whole is not making money, and that only a few of their products are profitable (I assume those products are the Navigator and MKX/Nautilus, and possibly the MKC).
I would expect if the Navigator continues its’ streak – after years of being the “Is Pepsi OK?” to the Escalade, the big BOF Ford SUVs have leapfrogged the GM offerings – and the Aviator posts similar gains Lincoln’s future is safe.
> the Mondeo sells around half what it did 10 years ago.
That strikes me as quite a lot, in fact. The Mondeo was already 2 years old by the time it finally arrived here, and the new Passat had been launched in the meantime. Wouldn’t surprise me if the Mondeo were to not be replaced here, either – many customers already bought a Kuga (Escape) instead.
Still, the Fiesta and Focus will be alive as ever here – last year, the then 9 year-old Fiesta was in fact the best-selling car on the continent. The new one isn’t much different under the skin.
In general, the D-segment cars launched here are clearly no longer focused on major volumes. The new Peugeot 508 is in fact smaller than the outgoing one, clearly focusing on the more upmarket segment. Besides the German Premium Three only the Passat still sells in serious numbers, and even that’s considerably less than before.
Ford cars are selling poorly in their segments in Australia. The Mondeo is outsold by the Mercedes C class, Focus is way down the list of small cars too. I don’t have the figures to hand but it is a long time since the glory days when the Laser was the best selling small car.
Mind you the SUVs are no better, they have not gotten those right either.
Isn’t Lincoln still proposing a sedan?
This is reminding me of the SUV bubble a bit. If the US economy tanks (sub-prime auto loans, anyone?) and/or oil shoots back up for whatever reason, things may change yet again in five years.
And this is only Ford US — as pointed out in the post. Globally, Ford will continue making sedans: over 3.5m of the 6.6m Ford vehicles made in 2017 were sold (and usually produced) outside the US. Ford is a true global automaker. They recognize the specificity of the US market, but they also sell a lot of cars to folks who want a basic four-door (ie the rest of the world).
GM, now that it has developed a Chinese footprint and chopped off Holden and Opel, is centered very differently. It will be interesting to see what they do in the next few years with Chevrolet, which is more or less their only really global marque.
Off-topic, just a pet peeve: IT’S = it is / it has; ITS = belongs to it.
Yes, autocorrect can let these slip through. It’s just this (otherwise extremely informative and well-written) post has in its title the most common (and avoidable) grammatical error in the English language. Pet peeve over.
The headline has been fixed.
Lincoln’s sedans are all losing money too; that was in Ford’s announcement too. So don’t hold your breath for a new Lincoln sedan.
How long before Ford does a Frexit, following GM’s footsteps? Their announcement today made it very clear that they were also going to look at exiting from any markets that don’t generate (or offer the prospects) of healthy profit margins. That spells Europe, as well as possibly other regions.
I left a long comment further up, but in a nutshell, the stock market is demanding ever-higher profit margins. It was 8% a few years ago, now it’s 10%. GM currently has a 10.7% margin; Ford’s is 8%.
Europe is a low margin business for the mass-market companies (at best). The European market has bifurcated into two: low end and premium. On the low end, Dacia has been a screaming success for Renault, and is madly profitable. We know who is dominating the premium sector. In the middle, everyone is getting squeezed, Opel and Ford among the worst.
Cars are all mostly the same nowadays, compared to decades ago. So what distinguishes them now is only one thing: the brand. So with the premium European brands having gone ever deeper downmarket, why would the typically prestige-fashion-brand conscious buyer want an Opel or Ford when they can have an Audi, BMW, or Mercedes?
The cheapskates will buy a Dacia, and be very happy with that. But not the buyer who is doing reasonably well or better, is socially aware and fashion/brand conscious, and sees Ford or Opel as a dowdy old-man brand.
It’s exactly what killed Cadillac in the US. And has hugely impacted other parts of the Big Three’s former portfolio. And this inexorable movement to ever-greater fashion-brand consciousness, due to the web and social media, is exactly what’s killing Opel and Ford in Europe, as well as many other parts of the world. There really is a reason why Ford’s stock is down. Investors don’t see a rosy future. Neither do I.
Your line of thinking may have made sense 10,20 or 30 years ago, but this is 2018, and the industry is going through a very tumultuous period. There is a great disruption going on, and only the best are going to ride it out successfully.
BTW, Ford is also doing very poorly in China, unlike GM. South America is a constant yo-yo, with mostly losses in recent years. Globalism isn’t the panacea that it once was. The only solution Ford is seeing is to retreat and just build trucks in the US.
And their brand for trucks is very strong. One needs to understand that Ford’s image and brand for trucks is VERY different than for their cars. essentially nobody out here on the West Coast buys a Ford passenger car, but their trucks are of course madly popular. A stereotypical driveway here has a Ford truck and a Toyota car or CUV.
Disruption is one word for it. Structural change, as opposed to cyclical, is probably more apt – as you’ve written in the recent past.
It’s both, more or less at the same time. The disruption is coming from ride-hailing, autonomy, and other new mobility technologies. That’s on top of the structural changes that have been at work for decades. The next decade or two will be the most turbulent in the industry since its very early days, the Model T and the Depression.
The car industry has been dealing with over production for decades now, and this is simply a sign of it. Car makers are going into their specific niches, such as Dacia with their line of good, cheap transportation, and Ford with their F-150.
I agree on virtually everything, but 2018 is surely no more tumultuous than 2008, when Ford kept their head out of the water while GM and Chrysler went down. Demanding a 10% profit margin is kind of crazy. That bubble might burst — they usually do. Maybe 2020 will be far more tumultuous than now.
The image thing is a problem, perhaps the biggest. Ford always had a conservative quality that may have hampered their image at various times, but they used to be good at counterbalancing that with a few exciting offerings. Seems that’s no longer the case these days.
I didn’t know Ford were not doing well in China. If you’re not there, you’re nowhere. They’ve increased their presence in ASEAN with their Thai factory, producing pickups and Focus sedans since 2012. Within a couple of years, there were new Fords pretty much throughout the region. ASEAN is a smaller market than China of course, but Ford’s presence is now much bigger than GM’s, which was not the case five years ago.
Still, it’s not rosy, as you say. And Brexit and talk of trade wars are further muddying the waters. Plenty of storm clouds looming. Local showers or Cat.5 hurricane?
Investors expecting a 10% margin isn’t crazy, when a increasing number of other big manufacturers are doing it. Ford has become the laggard.
2008 is irrelevant now. They only squeaked by by the skin of their teeth. FWIW, GM and FCA are in part so healthy financially precisely because they went through bankruptcy, which allowed them to shed massive liabilities, dying divisions, and escape crushing pension obligations. Ford din’t.
Ford is in China, but their sales are stalled. They had zero growth in 2017; GM was up like 50%, strongly outpacing the market as a whole. And Lincoln has just a minimal presence there, while Cadillac is huge in China, with sales now well ahead of the US.
The Chinese are not aware of what happened to Cadillac in the US; it’s a very strong and untarnished brand there.
Ford had rather look elsewhere in the process if they barely make money with what was Europe’s best-selling car at 9 years old for some time last year.
What exactly is it that makes Ford believe that their CUV’s (Ecosport, Escape, Edge, Explorer) aren’t or won’t be bettered by the foreign competition that seems to be able to make money on their sedans that are actually built here in the US and then those buyers are lost as well?
Another decade and maybe they’ll kill that segment off too, leaving the low-volume Mustang (for what possible profit purpose??) and the F150 and I suppose the Navigator. And then what? I know F150 is pretty much all the profit but there are feeder paths to the mothership too, not everyone starts out with an F150, plenty of people start small and stay in the family as their needs or desires grow as long as the product is of quality and value. I think it’ll be harder to get people to switch from their import-badged but likely US-assembled sedan or hatchback to a Ford truck when they decide they need a truck…I certainly have no particular loyalty to a US truck manufacturer, I like a couple of them but I know if I seriously look I will look at EVERYone out there. If I currently drove a Ford I’d start there but I don’t and now the chances of me doing so just got less.
As someone above said I don’t understand how they can manufacture in Mexico and NOT make money on the product, the volumes don’t seem tiny. And yes, I get it, lose the 3% profit line and it’s not a drain on the 20% profit line anymore on paper. But that’s a typical American business short term view, isn’t it? Just enough to get the current executive suite into a comfortable parachute, as usual.
Gas prices have definitely been heading up against much recent prognostication of such an event both here and other sources and there hasn’t really been any kind of real disruptive event to precipitate it doing so. Perhaps it’s because American producers have realized that they can get more for their oil elsewhere than in the US and are now shipping it abroad since that was finally legalized a couple of years ago.
If the electric future does arrive soon, I see the various trucks getting even MORE similar rather than less so. The engines will be motors and will be less distinctively different from each other. Once a V8 is no longer offered in an F150 or any other truck line, I’d say many once loyal customers may start to look around again in earnest.
I wonder if they’re assuming the trade war and the destruction of NAFTA is going to make Mexican production impractical.
Jim,
The Escape sells pretty well, about 300k per year. And they’ll probably sell more once another plant (likely one that was building cars) is commissioned to build them. The Explorer sits on a platform that dates back to the late 90’s and it’s still the best selling model in its segment. And Ford is currently one of the few automakers in the midsize crossover segment. Toyota failed to make a compelling rival in the Venza and Honda isn’t even in that segment. Brands matter. Ford’s reputation is now tilted far more heavily towards trucks and SUV’s than ever before.
“I think it’ll be harder to get people to switch from their import-badged but likely US-assembled sedan or hatchback to a Ford truck when they decide they need a truck…I certainly have no particular loyalty to a US truck manufacturer,”
But that’s the whole point, isn’t it? People are already sticking to certain brands for their cars. Where could Ford go? The Camry and Accord can command higher prices because people are familiar with their reputation and willing to pay higher prices for them. Nissan made a deliberate choice to undercut everyone with the Altima and it paid off handsomely for them.
“As someone above said I don’t understand how they can manufacture in Mexico and NOT make money on the product, the volumes don’t seem tiny. And yes, I get it, lose the 3% profit line and it’s not a drain on the 20% profit line anymore on paper.”
Think about it another way: there is a growing opportunity cost to NOT producing more crossovers. The plants that are building these cars can be converted to manufacture something else. Michigan Assembly, which currently produces the Focus and C-MAX, will go offline next month so it can be gutted and remodeled to construct the Ranger and Bronco. The plants that currently build the Fusion and Fiesta are going to be converted into factories that will either build crossovers or EV’s.
“If the electric future does arrive soon, I see the various trucks getting even MORE similar rather than less so. The engines will be motors and will be less distinctively different from each other. Once a V8 is no longer offered in an F150 or any other truck line, I’d say many once loyal customers may start to look around again in earnest.”
There are still ways to innovate in the truck segment. Look at what Ram is doing with their RamBox and what GM has done with their split tailgate. It’s going to come down to features and suspension tuning. As for engines, Ford introduced the twin turbo 3.5 EcoBoost V6 in 2011 and it immediately became the volume powertrain in the lineup. The current generation even added another turbocharged engine into the mix. Have sales decreased? At GM and Ram they certainly have, but the F-150 is doing fine.
And I do think pickup owners would consider an alternative energy F-150 if it suited them. Ford has already stated that the next generation will have a full hybrid model and that their strategy isn’t going to rely on them marketing it for its fuel efficiency. Instead they’ll tout its ability to power tools and its instant torque. If done effectively, it has a real chance to work, just like the turbocharged engines are working for Ford today.
And we still don’t know what new vehicles Ford is currently working on. Notice how yesterday’s announcements didn’t reveal any new products? Ford could very well introduce a whole lineup of electric cars designed to replace all the conventionally powered ones they just canceled.
No time for a long reply right now, sorry, but the Escape, while selling 300k, is solidly in last place behind the RAV4, CRV, and Rogue. Just like the Fusion is behind those companies’ mid-size sedans.
The Edge sells about on par with the Hyundai Santa Fe and its volume is BELOW what the Fusion was. I suppose the higher transaction price helps in that case?
The Explorer is a genuine hit. But getting very long in the tooth and frankly the interior is somewhat cramped for its exterior bulk. I’ll be interested in seeing the followup to it.
I haven’t yet seen the EcoSport but all reports I’ve seen so far pretty much pan it. Heavily.
I get that the factory space can be used for producing more crossovers but those people that ARE buying sedans and hatchbacks aren’t necessarily in the market for anything bigger. Or don’t want to pay more for them.
It’ll be interesting to watch, that’s for sure!
the Escape, while selling 300k, is solidly in last place behind the RAV4, CRV, and Rogue.
What Ford and FCA are saying is they can’t handle the competition in certain segments of the market, so they are running away to a segment where they have a strong enough position to get a higher profit margin. That is what AMC and Studebaker tried in the late 50s. It only worked for them until the big three brought their compacts to market.
I keep seeing press releases from other automakers along the lines of “we are going to introduce 10 new SUVs over the next three years”.
What happens when all that new SUV supply hits the market? Vast oversupply of SUVs, with many many overlapping models. Margins will crash.
Running away from competition is not a sustainable business model, because above average margins will attract the competition the companies were trying to run away from.
What will FCA and Ford do when all of the Asian manufacturers are matching their SUVs, model for model? Run away from the SUV market and make nothing but giant pickups? And how long would the Asians let the big three have the giant pickup market, unchallenged?
That’s been what I’ve been mulling over in my head last night and waking up this morning. I keep seeing “Ford sedans can’t be competitive against camcords” yet, what exactly are Ford CUVs directly based on? They are all sedan derived with the lone exception of Pickups.
And I don’t get these promises of introducing multiple new S/CUV models on top of lineups with three or four already. All that separates them is size, and how many sizes can possibly be needed that these companies don’t already offer?
I also see echos of Studebaker and AMC more than anything, and I don’t think the inevitable outcome will be any different. Who knows, maybe Ford will inevitably merge with a brand interested in having the F-series truck line like so many suitors wanted with Jeep. I’m sure the investment bankers would be happy, that’s all that matters anymore.
Steve, that’s my point, exactly. It’s a short term mentality. Toyota, Nissan, and Honda are easily outselling the Escape while only offering ONE normal engine and ONE (or none for Honda) Hybrid powertrain in each model of these models (CRV, RAV4, and Rogue). I don’t know how many different engines the Escape has had in its lifespan but it’s been a lot more than that which obviously drives up costs. In addition the Rav4 is about to be redesigned and already seems like it will ratchet up even higher sales, the CRV is VERY nice inside, and the Rogue, well, it competes on price but is attractive and not at all bad. The Escape is long in the tooth and plagued by recalls.
The only domestic SUV/CUV maker that is borderline safe is Jeep and only then due to the mystique of the name/brand for some reason. The offerings are decidely mediocre and average (or at least perceived that way by many buyers) and if they were badged something else likely wouldn’t sell in anywhere near the current volumes.
As Paul mentioned below many people do have an import car/CUV but a domestic truck. And they are a good product, currently, no question. However, they serve MANY niches which is a good thing for sales as there is something for everyone but this is also something that can be replicated. Yes, the Ridgeline doesn’t sell particularly well and the Tundra and Titan sell less than the domestics but I would believe that if one has a Toyota or Honda or Nissan car or CUV in their driveway that they are happy with and they decided they needed a truck, that they would at least give their current brand a look along with the domestic competition. If the import brands offered more depth and breadth in their truck lines to be able to offer EXACTLY what a buyer wants, their sales may in fact increase, obviously to the detriment of Detroit.
I just don’t believe that a Nissan or Toyota or Honda owner wakes up and says I want a truck and it HAS to be a Ford (or it has to be a RAM or whatever). I think they look for what is the best tool for the job and whoever makes the best particular configuration wins the business. The imports are perfectly capable of engineering more and different configurations in addition to what they currently offer.
Also, as far as electrification goes, I have yet to see much leadership in that regard out of the domestics. I think the Volt and the Bolt are both very impressive but if the Bolt really loses $9000 each then that’s not sustainable going forward. I believe Nissan makes money on the Leaf (or certainly loses less than $9k each) and could scale that up or down to other form factors. Toyota just needs to be willing to embrace full electrification and should have the necessary talent already on board, and Honda seems to be showing some concepts that appear almost ready to go. Ford and FCA, not so much, in fact they seem to be lagging behind the Europeans even, in that regard, the same Europeans who were decidedly in last place in all things electric not a decade ago now appear to be all in.
Well said Steve. The shrinking overall volume also hurts dealers, and struggling dealers hurts sales too.
Focus ST owner here, and worked on the installation of the Focus line at Wayne assembly. Funny fact the final assembly line was made in china. We had a crew of Chinese guys and their translator to deal with.
This is apocalyptic in its awfulness. Ford is the only one of the domestic brands that had products I would consider buying; I will never buy a Ford truck or SUV, so this means that if I’m ever in the market again, Ford is completely off the menu.
There’s a place in the world for trucks and crossovers, but “sole option” sure as hell ain’t it.
This is disastrous for consumers, bad for aggregate fuel economy, and a really bad sign for the automotive market. But, I guess some Ford shareholders will get short-term dividends, and that’s literally all the business world cares about these days.
Let’s not forget that in 1947 GM killed the Cadet compact because it couldn’t meet GM’s then-standard 30% profit margin.
This is nothing new, actually. And the Big Three are just retreating back to 1959, when all they made was big cars, which are today’s big trucks. It turns out everything they tried to do since 1960 didn’t really pan out. Chasing compacts and the imports turned out to be a disaster, in the end.
Isn’t that the right perspective from a big picture POV? How we’ll see it 30 years from now?
The world is fragmenting into ever-more narrowly defined brands. FCA only exists to build Jeeps and Rams; but globally. Everything else is largely incidental.
Ford will be the pickup counterpart to Jeep, and don’t think they’re not hoping to expand their truck brand globally, but it will be a bit harder than with Jeep. But who’s to say pickups won’t become huge globally, like Jeeps? It’s already happening to one degree or another.
I’m glad you liked Ford cars. I used to, but stopped doing so some years back. They’ve appealed less and less to me in recent years. No great loss to me.
And there’s plenty of other choices for consumers; well, a reasonable but dwindling number, actually. 🙂
Sure but in 1959 there was MUCH less competition on these shores and none of the competition was building a really large car. However it didn’t take long for everything to change. I have no doubt that Toyota could easily, if it had the desire or need, build numerous more configurations of the next Tundra and go head to head with Ford. Nissan likely has the resources as well. They’ve both had mis-steps with their large trucks but to count them out for good in the full-size truck market would be a grave error, ESPECIALLY as the market gets ever more electrified. Both makers have significantly more experience with building electrified vehicles and both (I believe) enjoy a reputation of higher build quality than Ford. I’m not saying Fords or the F150 are junk, just that I believe Toyota and Nissan could easily meet and exceed if they so chose. Politics may in fact play a larger part in their current “inability” than is perceived, in that it’s OK to win the game, but it’s not OK to humiliate the other team. They are playing the long game, Ford (and the other US teams in their league) is looking at 2Q18 and maybe 3Q18.
My comment was somewhat tongue-in-cheek.
As to the electrification of pickups, you do realize that these will be the last to make that transition in any significant number? That a substantial percentage of the drivers of American pickups still look down on EVs (as they felt about the Prius in the not distant past) as some kind of alien species to best be flattened with their jacked-up 4×4 coal-spewing trucks, sporting a big American flag on the back?
Ok; that’s stereotyping, but don’t hold your breath for EV F Series (if and when they happen) sales to become significant. Remember how well GM’s attempt at hybrid pickups in the 00’s went over?
As to Toyota and Nissan, it’s my distinct belief that they have no easy path to greater market share in the full-size pickup segment. I believe that Ford, GM and Ram pickups have become a brand unto themselves (each of them), and will be hard to challenge. The Tacoma and its compact predecessors were massively popular for decades, but Toyota could never translate that into meaningful success for the Tundra, which is stuck at about 100k sales.
My bigger concern is that the Tundra is falling behind, because Toyota can’t afford to pour money into its continued development like Ford, GM and FCA can, and do. It’s essentially the same truck for some 10 years now. And Nissan is barely hanging on. I have a hard time seeing profit margins for the Tundra, and certainly not for the Nissan.
I don’t think Toyota has a material advantage over the Big three in trucks like they did over them with sedans in decades past. Just because they did well in certain segments does not guarantee them success with big pickups. Frankly, the Tundra has performed poorer than I expected. Folks here buy Toyota cars and CUVs, and Ford and Ram trucks. You see both side by side here all the time. These folks would never buy a Ford car, but they’re buying Ford trucks. And this is the very heart of Toyota country. Sure, there’s proportionally more Tundras here than probbaly anywhere, but it’s not anywhere near the volume that Ford and Ram have here.
As to that picture: Just how much more ‘Murican can you get? Rolling coal with a big twin Harley-Davidson parked off to the side.
Seriously doubt there’s many Hilary fans in that household.
Some of us do cling to the idea that there are qualities that are as important as short-term shareholder value, and in that light, this is a disaster.
I regard it in the same light as Microsoft deciding they’ll no longer sell Office except as a software-as-a-service rental. There’s zero consumer upside.
Google offers just about everything Office does, for free. How’s that for consumer friendly?
First comment – while I am sad that Ford is exiting the sedan / small car market, it’s understandable. Either you are one of the top manufacturers, or you are also-ran. In a shrinking market, that is even more important. Driving past the local Ford dealership in town showed that while there was turnover in the Truck & SUV lineups, the small small cars inventory stayed fairly static.
Second comment – ever look at LibreOffice as a replacement for MS Office if you don’t want everything up in the cloud? Also free, without the worries that Google will
Yes, and Google is just as bad as Facebook if not worse when it comes to “sharing” your data. I’m not on FB, but do use Gmail, so all of my info is already out there.
While I can appreciate that Ford is just doing what they have to do, it’s still a sad day when the company that gave us the Model T, Mustang, and Taurus is throwing in the towel on mainstream sedans.
Damn. As I’ve said here before, my mom got a 16 Fusion and I am sure that is the best-built and best-designed vehicle she has ever owned, after about 40 years of GMs. And the Fusion is crazy big here in Chicago- I counted three on my block alone as I walked out to work today. I’m sure that they’ve done the math and it works out, but from here it just looks like a lot of future sales they are leaving on the table.
Wow.
With kids driving, we’ve been adding sedans to our longtime truck / SUV fleet.
I suppose the fact that we bought in January a 2016 off lease Fusion with 22,121 miles for $16,000 COD vs. a MSRP of $28,335 is a statement in itself.
It’s a really nice car with options including a sunroof that make it fun. Compared to my sometimes ponderous 2012 F-150 Supercrew, it is a blast to drive, even if it really could use the Taurus 3.5 NA V-6 to give it some go.
But, with the somewhat slow-to-go 2.5 NA 4, we can’t seem to drag average gas mileage below 24 and can just about pull 30 on the highway. Trust my first hand experience, you can’t make a V-6 Ford CUV product get anywhere close to that, and there is a reason they call anything with EcoBoost EcoThirst. Put your foot in the fun zone and you get V-8 mileage without the melodious tones of what makes many hearts go pitter-patter.
I’ve long posited the obvious that CAFE has mucked with the “car” as we know it since day one. The GM Arlington B-body plant that went all Tahoe all the time made that self explanatory. I imagine the current “footprint” CAFE plan is again working against cars in a big way. Who the heck wants to await the three cylinder Fusion of the future?
The margin chase may also be another testimony to our stratified economy. Having spent years self employed in real estate, I know the holy grail of my business was the high end customer. The middle is slim pickens, and the bottom end was busy work with sub Wal-Mart wages.
But, as I thought the American economy learned during the recession; that you can only fire so many workers and offshore their jobs before you have nobody to buy your products, it appears the auto industry missed the memo and no longer has interest in average vehicles for average people.
That last statement is ironic in no small way in a post about Ford. Old Henry may have been a man of the many faults of his time, but he understood that a well paid middle class could create a huge market for the products of his assembly line. Bill Ford has a challenged track record with highs like Mulally, and too many lows. Hackett may prove a hack, and looking 20 years older than he is, may not be around for long. Well, he left his mark, I guess.
So, when all sedans are gone, Ford will have to start deeply discounting Ecosports to move the metal. That’s just a matter of time.
In an advance scouting report on the future of Ford for you, I spent some time messing with an Ecosport in the showroom two weeks ago during a wait for service visit. It’s more cramped than our Fusion, the gas mileage sucks for what it is, and holy MSRP, what are they thinking?
Striking up a conversation with another waiting customer, we couldn’t figure out where the mass market is for just high-end (or more accurately, high priced) Ford products.
Oh and one thing about the EcoSport- that is a vehicle that was was just clearly brought over to fill a market void. We looked at one and the seats were terribly narrow. Funny enough, the last time I considered a FoMoCo product was the 98 Cougar, and I was a good 50 pounds lighter and the Cougar seats felt the same way on my then 140 pound frame. Told my wife “I can’t be in this car more than a half hour” and that was it. Plus the back door swings out. Well, some of us park on the street and a swing out door will get you about 2 feet out until you hit the car behind you.
At first glance, I thought this was an April Fools day joke, but I was wrong.First the coupes-except Mustang, now the sedans. I DON`T wanna drive a CUV or SUV!
Ford moving its focus and capacity to trucks
Can anyone clarify a baffled European how these CAFE car/truck classifications really work, and whether/how all those slightly jacked-up cars somehow “benefit” from them?
I bought a 2013 Focus new and recently got it paid off. I’ve been highly satisfied with it, but now that I’m ready to upgrade, the same Focus, Fusion, and Taurus that were sitting on dealer lots in 2013 are still there with only minor refreshes. Before the car culling was announced, the question that was on my mind is why would I get another Ford? I don’t know if Ford needed better product planning or investment or both to make things work, but it seems like they just didn’t have things figured out well enough to keep buyers interested.
And now they’re going with their big SUV/truck product plan right as gas prices start heading up. Even sales of most of those vehicles (except the F-series, of course) aren’t keeping up with the imports. They seem like they’re going to continue to be a step or two behind for the forseeable future.
Did youse see the Mercedes/Maybach “ultimate luxury” concept shown in Beijing a few days ago? It’s an SUV. It’s also a sedan. I think you’re going to see alot of these if manufacturers go all-truck. More proof that modern “crossovers” are what until sometime in the 1950s were called “cars”….
Dear God, but that thing is ugly. Does no one want to look graceful or sleek any more.
Almost looks like a donked out version of a European Chrysler 300.
Wow, even split pane glass, welcome to 1948.
If Ford turns out be ahead of the curve on dropping sedans and the Toyota’s and Hondas eventually do the same, making all models available anywhere crossovers, I could very much see this as the future of sedans. “CUV based cars”.
As a car owner/driver who recently hit “retirement age”, I am saddened by this announcement. I really LOVE cars, Trucks and SUVs/CUVs? Meh. I expected to be able to buy a new car….indefinitely, preferably a Ford.
After reading one of the many fine and insightful comments from P. N. I was reminded of the many articles that I have read in CAR magazine for more than a decade. In Europe, buyers were/are very brand/fashion conscious and with BMW and Mercedes Benz going “down market”, brands that were usually bought by middle class consumers suffered more and more. When buyers had discovered that they had a choice between an “inexpensive” BMW or a loaded Ford….they suddenly switched to the brand with the higher cachet. And once they switched, they were hooked. As popular as the Accord and Camry are here in the US, in Europe they have almost no appeal/presence.
As for the question: where will buyers go if the Big 3 cease production of cars? More and more to whatever is left, be it a foreign BRANDED sedan, or anyone’s SUV/CUV.
As much as I’ll decry Ford’s move, like the majority of the respondents to this item, I have to look at it thru a great deal of personal reality.
First off, I’m 67, pulling Social Security, still working three days a week (to pay off that Gold Wing I bought last year), and while I’m financially set to a point that the middle class isn’t supposed to achieve nowadays, it’s all non-spendable funds. For me, it’s a hedge against possible future medical costs. Yes, I’m still in the condition where 600 mile motorcycle trips, and 40 mile bicycle trips are a doddle, but reality says that sometime in the next 10-15 years I’m going to end up in the hospital. For an expensive visit.
Realistically, given the above, my budget for a ‘new’ car is approximately $15,000 (and that was really driven home by my purchase of the Wing at $23,000 has been a major financial crimp for me for 2018). Which means, since I really don’t want to own some uninteresting base line penalty box, a new car is out of the question for me, and has been for quite a few years. I don’t lease, I rarely do payments (my Fiat the and Wing were major exceptions, the former was paid off in a year, the latter is scheduled for 18 months).
Which means, I’m not going to be buying a new anything when it comes to automobiles, for the rest of my life. And, quite frankly, I’m probably only going to be buying one more automobile (barring accident, etc.) as my daily driver – probably about five years from now.
I wonder how many others out there are in parallel/identical situations to myself? None of us are doing the automobile industry any good, and quite honestly, any of the long-term, loud blathering we do on auto forums regarding the future of the automobile industry is bull, since we will never back up our opinions with our wallets.
I like to think that this has a lot to do with the current problems of the auto industry. Add into that the demands of the investors (a lot of whom wouldn’t be caught dead in anything not of the German Big 3), and it’s not a good time for lovers of the traditional automobile.
I can only imagine the smirk on Akio Toyoda’s face.
Terrible news from the perspective of a multi-decade car enthusiast. This is another notch in accelerating my disinterest in new vehicles. However, I wonder if one of the new niches that Ford talks about in their press release is the creation of truck-based sedans – sort of like what the flop Lincoln Blackwood was intended to be but with much more forethought.
As a Canadian, this troubles me. We rarely get different vehicles than the US market beyond the odd small car, so this affects us as well.
Gas prices have not remained cheap here like in the US. Our dollar has taken a hit over the past couple of years, and since oil is priced in US dollars, our gas prices have pretty much reached the same level they were at before the price crash in 2008. It’s $1.25 per litre here this morning and that’s far cheaper than the most expensive areas in the country, which are as high as $1.55 per litre. And yes, I know it’s still cheap from a global point of view.
I am one of those people who owns and actually needs a full sized truck (Ecoboost F-150). My family enjoys ATVing and camping. We haul an ATV in the back of the truck along with a side by side on our trailer on a regular basis. During camping season, we haul a large travel trailer. We own rural property that requires regular hauling of wood, gravel, tools, etc. In the winter, the 4×4 comes in handy for the drive to town or work.
For everything else, we use the car (a Ford as well). It gets much better mileage and is more comfortable.
I have no desire to own an SUV/CUV. I inherited one from my mother a few years ago, but traded it in on a car after 6 months. It just didn’t make sense to have one. I know the fuel economy of CUVs is much better than they were in 2008, but they still generally can’t match that of small cars. CUVs are popular here for sure, but small cars are everywhere as well.
If this decision by Ford is a sign of things to come, I suspect my next car (in a year or two) is going to be coming from one of the Japanese brands. Let’s hope they don’t follow suit.
We use a Caravan / Focus combo in much the same way. I don’t think I’ll be too sad to drive a CUV for a DD as long as I have and old car and a motorcycle for fun driving.
I wonder what my father in law the Ford sales associate will do? He’s driven a Ford sedan company car forever, Crown Vic for many years, Taurus, and most recently a Fusion. He’s 68, maybe he’ll just retire when he is assigned a CUV.
You would think that between Canada and California, there’d be enough volume to sustain at least a non-raised hatchback Focus and sales of them elsewhere would basically be gravy.
I think they’re jumping the gun a bit… or more like a lot. I understand that they sell more CUVs/SUVs/Trucks in the U.S. especially, and the CUVs/SUVs worldwide, and that they are more profitable and continue growing in popularity. But Ford still sells millions of sedans worldwide each year. There’s still a significant market for them on all continents. It’s not like sedans are fullsize wagons in 1991 when Ford sold only around 20-30K worldwide.
I know decreasing popularity in sedans and increasing popularity in CUVs is the trend, but I think it is a much slower trend than Ford is basing their decision on. I mean who knows, maybe in 10 years CUVs could be out? Unlikely, but always a possibility. I truly hope that other automakers don’t follow suit. I like driving low to the ground!
Ford just screwed the pooch for me. The only new car dealer where I live is Ford, so a Fusion would have been on the ‘must drive’ list. The nearest Chevrolet dealer is in DeQueen AR, about 47 miles south of me, so I suppose a Malibu is in my future, unless Chevy kills their sedans, too.
And gas prices are rising. Oil was $67 a barrel yesterday. Brent crude is about to hit $74 a barrel. Remember how truck sales crashed during the last gasoline price spike?
I suppose a long-term profit of 3 or 4% doesn’t look as good as a short-term 20%, but this is a bad idea.
Yeah, it seems like Ford is putting all of their automotive eggs in the low oil price basket.
When the inevitable spike in fossil fuel prices occur, Ford may find themselves in a very bad way. For a company that not that long ago was deftly able to stave off bankruptcy (unlike GM and Chrysler), I’m not sure eliminating their sedans is a good long-term strategy.
And I don’t want one of their rolling monstrosities. IF I was to buy a Ford pickup, I’d get something from the 90s with a standard and the V-6. The new ones don’t interest me at all.
It’s a shame, but I can’t say I’m surprised. When a Fusion drives like a Corolla, drives like an Accord, drives like an Impala… etc… Who cares where you go anymore? Most modern cars feel, drive, and look almost exactly the same. It’s just a matter of who’s brand you want to represent. :/
So not counting trucks, Ford’s lineup will basically match Mitsubishi’s.
I found out something interesting. The 1939 Chevrolet was 68 inches tall. The 2018 Chevrolet Equinox is 65 inches tall. We’ve gone full circle in our vehicle height preferences. If only we hadn’t been so demanding of ever lower rakish designs, we wouldn’t have to be killing off our most beloved nameplates
Interesting. With Ford exiting the sedan market, I wonder if GM will rethink Chevy doing the same. The sedan market could be a lot more attractive if something like 300K units pulls out of the market and not everyone wants an Accord or Camry.
I am a little surprised that the Fusion is going away. I could see the others and wonder if most of those buyers might have migrated to Fusion after cancellation of the others. But we will never know, it appears.
I’d be surprised if Cadillac doesn’t kill of their sedans. If I’m not mistaken, the SRX (or XT5 as it’s now called) and the Escalade are responsible for all of that brands profits.
Cadillac will be launching a new car to replace the cts in 2019.
I don’t see GM dropping their sedans anytime soon, at least not in the near future. Those Ford sedan buyers have to go somewhere. Ford is banking on them moving to their other products but they may find that previous Ford sedan owners are now buying GM sedans. When the number of Ford sedan buyers number in the hundreds of thousands, while that might not be a high enough number to make an adequate profit for them, it’s not an inconsequential number of sales, either.
That’s the irony in Ford’s decision. It might not help Ford so much as help their competitors (primarily GM). It doesn’t seem that much different in how Chrysler managed to stay afloat for a long time by scarfing up former independent buyers as those brands became defunct. Or maybe how GM’s market share took a big jump in 1962 when Chrysler had their disastrous downsizing fiasco.
There’s a few other sedans out there beyond Accord and Camry. Nissan, Hyundai and Kia come to mind, but then there’s also Mercedes, BMW and Audi who are increasingly going for the lower end of the market.
All this will do is to make these manufacturers even more aggressive in going after market share.
Chevrolet’s problem with sedans is the same as Ford’s: there’s very little genuine retail interest in their sedans. Which means heavy fleet sales and big incentives. Which means little or no profits. Given how quickly the sedan market is shrinking overall, I do not see Chevy getting much help from this. Maybe a bit.
The Lordstown plant that builds the Cruze just cut back to a single shift. That means it’s unprofitable. I don’t see Cruze sales coming back to warrant a second shift. So it’s highly vulnerable.
The Impala competes in a segment that is absolutely moribund (large sedans). It’s dead.
The Sonic just got the axe.
So yes, the Malibu may stay around for a bit longer. But it really depends on how quickly the sedan market keeps shrinking. Chevy doesn’t have enough volume with the Malibu to fight aggressively for market share against the Asians and Germans, so I still am not optimistic about its long term survival.
This trend is obvious and clear across all demographics of the marketplace. Recently while shopping for a <$1500 grocery getter I was interested to find that a 2002 Saturn SL2 with roughly just over 100K on the odometer is selling in my area for 3-500 dollars less than a same-year PT Cruiser with 150K tired miles on it. Neither of these cars is exactly high on too many people's "want" lists, but clearly even the currently unloved and "uncool" PT Cruiser has more cache than a less used and less abused small sedan.
Cars with trunks and low-slung driving positions just aren't what people want, especially ion an area where Silverados and F-150s rule the roads.
“This all started with Honda’s Maryville, OH plant in the 70s…”
I don’t think this is #1 reason. Accord sales are down this year, and on a new model, too. Honda had to finally offer incentives, due to dealer demands.
So, it is not solely because “Ford can’t compete with Accord”. It’s buyers wanting more room and high ride position.
Accord is no longer #1 selling Honda, it is CR-V. And current Civic is a hit, since it is bigger than the first few Accord gens.
Another problem was car buyers are more ‘persnickety’ and demand lowest price, for the most features. While trucks get more money due to the long said “more pounds for your bucks” mantra.
Can wring hands all day, but US buyers just don’t care about ‘driving dynamics’ and “fun in the twisties” as car buffs do. Manual trans are hardly available, and the German brands are selling more “American” type vehicles, like BMW X5, Audi Q7, etc.
If another gas spike, will be a run on hybrids and small CUV’s like Chevy Trax or Honda HR-V.
oh well, such is life
You almost completely missed the point of my comment about Marysville. It’s about scale and efficiency and quality, not so much about what specific model they build there. It could just as well be 400k CRVs per year.
My point is that the Japanese transplants can profitably build even small sedans (at so far) because they built much better small sedans than the Big Three back in the 70s, 80s, and 90s, hence their sedans that retail buyers mostly want, and with these very efficient factories running 2-3 shifts per day, they can build them profitably.
Honda has historically always had much lower incentives than all of its competitors, and not done fleet sales. This explains why they have made such fat profits for decades from the Civic and Accord while the Big Three made little or none selling their cars to fleets and/or with continual big incentives, and at lower volumes to boot. That’s not going to cut it over the long haul.
Yes, Honda is facing a bit of a challenge at the moment with its new Accord. They will have to increase incentives some (they just did, actually). But unless the sedan market totally collapses, they’ll probably be ok. Especially with the Big Three getting out of sedans. Don’t think this news from Ford didn’t just make Honda USA a whole lot more optimistic.
Agree about the success of Import Transplants led to better resale value and more profits. But, it’s not “the 70’s, 80’s, and 90’s”
Market has changed. Honda is moving to more CUV’s and Accord production is getting cut. They aren’t getting “fat profits” from Accord/Camry anymore. Toyota as said [Automotive News] that the KY plant will have to make some cuts to keep Camry profitable, sound familiar?
Honda dealers have said [AN] they will stop taking new Accords, since there are so many unsold and demanded incentives to move the metal. I don’t think that’s something ‘optimistic’. Honda is planning a 3 row C-RV.
Days of the Accord being the “perfect car” and #1 pick are over. Sure, it’s hey day was the 70’s, 80’s, and 90’s, but to younger folks, it’s “their parent’s car”. Again, sounds familiar.
Import dealers will still sell mid size cars, but for how much longer? Toyota would love to sell more Tundras, by the way.
A clue may be gleaned by looking at what happened to minivans.
GM and Ford abandoned this segment in the mid-2000s.
Chrysler, Honda and Toyota continued to offer minivans. Today, their respective minivan offerings aren’t their best-selling vehicle, but they sell in steady numbers, and aren’t exactly cheap.
The Honda Odyssey shares a platform with other Hondas and Acuras, which means it is most likely profitable. And Odysseys aren’t being sold on low price. Price a Honda Odyssey…
If GM is smart (and at time, that is a big IF), they won’t drop their cars. They’ll collect some of the Ford and Chrysler car buyers, which will GM’s cars more profitable.
THEN, if (when?) fuel prices spike, GM will have cars to offer.
Getting rid of all your cars is the stupidest, idiotic and moronic thing an auto maker can do. hope GM stays smart and does not follow. this cuv craze is the most ridiculous craze to hit the automotive world. most car makers will be caught with their pants down when the craze ends(and it will end soon) how long are people going to buy look a like vehicles with the same boring shape?? i like the Cadillac cuv’s at least they stand out as well as the Suburban/Tahoe and Escalade(GMC is redundant)suv’s. also i like to see the actions of the car in front of the car in front of me try doing that behind an suv/cuv.
Ford shares are up 2% so far in today’s trading, so the stock market is reacting favorably to the news.
Initially I was surprised that FoMoCo broomed all of its sedans, I thought the Fusion and Focus would make it. But…. if you take a cold, hard look at the segments, mid-size and compact cars are declining in overall sales volume. In mid-sized sedans, the new Accord and Camry–both very good designs–are down. If the strong new products from the category leaders can’t lift sales, then what can? So why would Ford pour money into the Fusion–indicators are that it would never pay off. They are far better off investing more product dollars in fewer products–in growing categories–so as to improve their competitiveness. For example, Ford could invest more to make a better Escape, as that category is booming and they could have a fighting chance for gaining profitable share if they serve up a really compelling offering.
As for Lincoln, I have to think that they will be moving to an all-SUV range (like Land Rover), as that is where the bucks seem to be now in the high-end market.
Of course it is. The stock market is looking at the current quarter. Period.
This news won’t impact Ford’s current quarter, I think investors are reacting to the longer-term quest for profitability. As PN has pointed out above, Ford’s margins trail its peers, and I think the market views these moves as a way for the company to address the gap over the next 12-24 months.
That said, it’s not like the stock is soaring, but perhaps they’ve stopped the decline in the share price. They had to do something, because the stock has not been doing well of late.
There is one thing that has to be said about Ford doing this: stupid, stupid, stupid! Not everybody wants a CUV/SUV “thing”, and if they can’t get it from one place, they’ll simply go somewhere else. No wonder why vehicles like Camry and Accord are perennial best sellers…it’s because Toyota and Honda are smart enough to realize there are people who want sedans (even if they are boring appliances on wheels). Plus, you have Ford saying “we don’t want this business so here, you take it from us”. I can also see people being turned off by the increasingly weird designs of the Camcord and just move somewhere else (if the sales of Camry and Accord are down, I don’t think it can be entirely blamed on the move away from sedans to CUVs/SUVs).
I think this is going to come back and bite Ford in the ass pretty hard. Gas prices will rise again. Where is that going to leave them? Plus, as a dear friend of mine (now deceased) always said nothing lasts forever. There will be an eventual shift away from CUVs/SUVs and (hopefully) back to cars. When this happens, where will this leave Ford? I’m sure everybody remembers during the height of the minivan craze how it was thought that would never end. My, how times have changed…and they will change again. I just hope auto manufacturers are smart enough to not turn their backs on an entire segment.
The “stupid” point is that Ford is betting the current market is the future market. Including the far future market. They are, in essence, saying that they can’t see any change in American buying habits in the foreseeable future.
Right now we’re watching another company coming off the downside of having made that same decision: Harley-Davidson. Between 1984 and 1987 they got on a roll, brought out a new engine, improved the bikes, lucked into a marketing wave (yes, it was luck, not design) and by 1987 there was a year waiting list for their bikes. That situation lasted about ten years until production caught up, and sales still stayed excellent for an additional ten.
They took a shake with the 2008 downturn, and answered it by dropping the lines that weren’t making the big profit (killed off Buell which were being bought by younger riders, sold off the recently bought MV Augusta which closed a totally different possible market), and rolled everything on their line of traditional V-twins. That worked for a couple of more years.
Then bang! They loyal clientele stopped buying (age, death and infirmity), and the groups that they expected to take up the slack (because everybody wants a CUV, er, big fat cruiser of course) aren’t interested. Period.
Now they’re talking about bringing out the electric Lightning. In two years.
Could this be the future of Ford?
The fundamental difference between cars and motorcycles is that non-enthusisasts buy cars (in the broader sense of the term) in massive numbers and motorcycles hardly at all (in developed countries).
“.. eventual shift away from CUVs/SUVs and (hopefully) back to cars.”
Hmm, been good sellers for 30+ years, when is this supposed to happen? 2048?
Maybe will probably be a shift to autonomous [ish] vehicles. And they won’t be low slung, stylish, sedans, coupes, wagons, or other ‘car guy’ favorites/
And, “weird designs of the Camcord” are losing sales? Then, where are those “loyal” buyers going? Because Hyundai Sonata sales are way down, too. Led to firing of US leader. Altima, same thing. What’s left? Mazda 6? On life support.
FCA was called “stupid” 2 years ago dropping Dart/200. And now making profits. Wonder why?
I’d guess a lot of those buyers take a look at those “weird new Camcords”, then take a look at the less weird, perfectly good, absolutely nothing wrong with it Camcord that’s already in the their driveway and decide that they really don’t need a new car. Eventually, of course, that car will need to be replaced, and who knows what’s going to happen in a few years.
Of course, the CUV market will almost certainly have the same problem in a few years. They’ll completely saturate it, and sales and profit margins will inevitably drop off. It could already be starting – I know someone who is keeping their existing Lexus RX as the new ones are just too weird.
A while back, GM announced that some models, like the Impy and Sonic, were under review for possible elimination. The Cruze and Malibu were not on that list however.
With both Ford and FCA abandoning passenger cars entirely, in the name of short term profit, the financial industry will probably put irresistible pressure on GM to do the same, for the same short term profit pop, and drop everything, including the Cruze and Malibu, leaving the passenger car market completely uncontested for the foreign brands.
UV’s are not a “fad” as some say. Sales have been going up since the S-10 Blazer and compact Cherokee came out. Then, accelerated with 1991 Explorer.
Can say “stupid” 3 times, but it’s not going to change the market. Go to a parent with kids and car seats and try telling them that they “Should buy a car instead” and they will laugh in your face. They don’t care about ‘handling in the twisties’ and don’t have fond memories of “annual styling changes”. Car enthusiasts don’t decide what get bought anymore, period.
And “gas is going to go up”? Yeah, maybe, but then it goes back down again, too. If some say “history always repeats”. And when it does again, there’s small CUV’s and Hybrids
Main point, car companies are not “charities” to sell cars at loss, nor “art houses” to only make stuff to “wow car guys”, who most of the time buy used cars, saying “let the rich guys pay the deprecation”. The ‘rich guys’ are leasing SUV’s more and more, and again, don’t care about car styling, dynamics, or “traditions”.
Anyway, as an advice columnist said a lot “Wake up and smell the coffee!”.
The values of my Crown Vic and Grand Marquis just went up again. It’s hard to imagine how valuable they’d be if the paint just stayed on ’em.
This is my take on this. The bottom line in any company is to get the most money for the least amount invested. Cuv are basicly a jacked up sedan/ wagon. I don’t like the idea of loosing the sedans but I do understand why people buy them. My wife is not interested in any car. It’s much easier to get the kids out if something that you do not have to bend way down in.
If fuel prices climb again electric cars like the chevy bolt are in place now. Adding a hybrid or electric escape and such is easy.
A website like CC is filled with car enthusiasts, and while they might decry the passing of the Ford sedan, there’s just no getting around it: Ford is simply rolling with the times. The eventual outcome will likely be one of two scenarios: Ford selling nothing but SUVs and trucks (and a few niche vehicles like Mustang) will be successful and continue for years to come, in which case management will be hailed as geniuses.
Or market forces will show that Ford dropping their sedans and concentrating on other products will be their death knell, in which case Ford management will be labeled incompetent boobs.
The bottom line is it’s a big gamble, but Ford’s willing to roll the dice. Based on how, on average, Ford has been better than GM or Chrysler at making the right call, I’d bet on it being the right move.
Does nobody remember Chrysler getting caught with their pants down when the early 70s fuel crisis hit? They had nothing to offer but gas guzzling barges that nobody wanted to buy. I’m just questioning the wisdom of betting the farm on vehicles who’s appeal is dependant on cheap gas.
Gas is up to $2.82 near me. There was a major refinery explosion in Wisconsin today. $3.00 or more can’t be too far off. Hopefully the political scene stays quiet.
Perhaps Ford should have dumped the Taurus and Fiesta 3-4 years ago, added the jacked-up Focus, and offered the Fusion wagon (derived from the Mondeo available in Europe) in Outback-ish trim. Maybe the market would bear 2 sedan-based vehicles instead of 4, but now none of them have sustainable volumes.
I really like my ’15 Fusion, but I am apparently in the minority.
Is the Police Interceptor being discontinued as well? I haven’t seen anything about that.
The police departments around here have largely switched over to Explorers and Tahoes.
I’m curious as to why the Fusion has dropped a third of its sales in 2 years. That is a lot more than product cycle ageing, or SUV transition when compared to its competitors or the other models. Can anyone shed any light on this?
For the same reason Ford is killing it: it never had really strong retail demand, and they got tired of selling it cheap to fleets and with large incentives on its hood. What little retail demand it had has just kept shrinking. You could ask the same thing about any Big Three sedan.
I don’t fully understand why this is really such a big deal. Generally, a CUV is merely a passenger car with a more upright shape, better to get older folks and child seats in and out, at slightly higher price point. If tastes change, retool sedan bodies for the same platforms.
$3.50 average regular gas prices here in California dont appear to have changed retail car and truck buying habits too much. $4 diesel and the VW “dieselgate” have killed off most diesel car and some diesel light truck sales, but that was relatively small volume anyway. There has not been a surge in hybrid or electrics, either. The electric market here is mostly luxury buyers who want “green” or “tech” cred. Free access to toll lanes for “zero emission” vehicles is ending in June.
Meanwhile, in Mississippi, Toyota is spending $170 million on their plant for building the next Corolla. IIRC, Toyota sold almost 800,000 Camrys and Corollas in the U.S. last year.
There’s also one more factor going on…Let’s call it the AMF Sunfish problem. All manufacturers are finally starting to build their products so well that they are fully competing with used versions of their vehicles from a few years ago. AMF built their Sunfish boats so well that they saturated the market and couldn’t compete on price with the old product in the marketplace. I’d take a used Fusion or A4, let alone a Camry or Accord, over a new one any day, and keep $10K-$20K in my pocket.
Don’t forget that back in 1996 (during the first SUV boom), General Motors retooled their plant in Arlington TX (that used to build RWD full size cars like the Chevy Caprice) to build Chevy Tahoes,Suburbans and GMC Yukons.
Ford is making a huge mistake! Crossovers and SUVs are hot now, but gas prices are fairly low. When they go up, and they will sooner rather than later, these gas guzzlers will be unsellable. This is an incredibly short-sighted decision and will come back to bite Ford in the ass. Crossovers are a fad and like all fads, they will eventually end and the good old sedan will come back in style again. Fiat is making the same mistake by concentrating on Jeep and the Ram brand. They discontinued the Dodge Dart and the Chrysler 200. Fiat still makes the 500 but it is a “boutique” car that is never going to sell in large numbers. Both companies will wish they had kept more fuel efficient cars in the lineup when gas prices skyrocket. At least Chevrolet still sells the Spark and Sonic.