Ford: Ending Production on Most Sedans

[Segnosaur]

So, it looks like Ford is making a major change to its vehicle lineup.... Dropping most of its sedans in favor of Trucks, SUVs and similar vehicles.

From: https://www.detroitnews.com/story/b...10/ford-motor-annual-meeting-sedans/34755947/
plans to cut its North American passenger car lineup by more than 80 percent, eliminating the Taurus, Fiesta, Fusion, C-Max and Focus sedans within a few years. Only the Mustang and a crossover version of the Focus will survive the cuts....The company plans for nearly 90 percent of its vehicles sold in 2020 to be a truck, SUV or commercial vehicle.

Now, they're not the only ones... Chrysler and GM have out some of the smaller cars from their product lines, but Ford seems to have the most extreme plans.

On one hand, it is understandable... people are just buying more SUVs/Trucks these days, and profit margins are higher on the larger vehicles. On the other hand, I'm really thinking this might really be a problem in the future. It reminds me of the time around the start of the recession, when the North American car companies had significant problems, and part of it was because they put so much effort into producing their large vehicles that they couldn't handle it when people at the time decided to switch to smaller cars.

Plus, there are 2 major problems that may greatly change the markets that should happen in the next few years (both of which can be traced back to a racist orangutan who happened to be made president thanks in part ot the Russians):
- Trump's cancelling of the Iran deal may cause oil prices to rise
- Trump had lowered emission/fuel economy standards, but in 2020 he is likely to lose the white house, and the Democrats will probably restore standards (if not make the more stringent)

 

[The Don]

There are echoes of the 1970s, where a US auto industry with a set of gas-guzzling vehicles was completely unprepared for a shift in customer demand to smaller, more fuel efficient vehicles. I think that Ford at the very least will be better placed this time around.

The increase in globalisation and global standards means that it will be less difficult to re-introduce other models than 45 years ago (GM OTOH would have greater challenges). I also think that there have been major advances in fuel efficient engines so that the US could still have enormous vehicles but that they won't be as woefully inefficient.

 

[Segnosaur]

The increase in globalisation and global standards means that it will be less difficult to re-introduce other models than 45 years ago (GM OTOH would have greater challenges).

yes, they could take models designed for the European or Asian markets and begin to sell them here. There are a couple of problems with that:

- It assumes that Ford will be quick enough to react if/when public demand for smaller cars suddenly spikes (or will they simply hold on to the higher-margin Trucks/SUVs until the bitter end, thinking "People will go back to SUVs eventually... we just have to wait a bit longer") If Trump starts bombing Iran and gas goes up $1/gallon, how long do you think it will take for Ford to start marketing sedans again in the United States? 6 months? A year? How many sales will they lose in the mean time?

- They are turning their back on a large segment of the market who want sedans NOW. Granted, as I pointed out, consumer demand has drifted towards larger vehicles. But even now, Ford does sell 10s of thousands of sedans in a year. They're basically giving up that market to other manufacturers. And while drivers are not always loyal to car brands, there will be at least a few entry-level drivers who buy low-end sedans out of necessity (because they can't afford anything else) and decided to stick with the brand (even when they go to higher-end models) simply because they were happy with the first purchase.

I myself drive a Hyundai Accent. My last car was a Civic. (I did look at other vehicles the last time I bought a car, including Toyotas, Chevs, Kias, Fords, etc.) I do not like driving big cars. Not only do I prefer smaller cars for the fuel efficiency, I also like their maneuverability (my Accent can fit into some pretty tight spaces) and their responsiveness (the car stops faster when I step on the breaks.) Plus, I do not see cars as some sort of "status symbol", and I do not get any pleasure out of buying some sort of high-end luxury car with features that I don't need. Give me basic, reliable transportation at a decent price. What Ford has done is guaranteed that the next time I shop for a car, I can avoid my local Ford dealership because they won't have what I want.

I also think that there have been major advances in fuel efficient engines so that the US could still have enormous vehicles but that they won't be as woefully inefficient.

Yes, cars are a lot more fuel efficient. But such things are relative. A small car will almost always be more efficient than an SUV. So when gas prices spike, people probably won't be comparing the fuel efficiency of their SUV with the SUVs from a decade ago, they will compare the fuel efficiency of the Honda Civic and Toyota Corolla.

Now, perhaps Ford will manage to do well with electric cars (which almost negates the whole "fuel efficiency" issue). But, there are many parts of the world where the technology isn't feasible now and probably won't be for some time. (I could not use an electric vehicle for example... I live in Canada, with a cold climate, and regularly have to drive 4 hours to see family along a stretch of road which has no places where late-night charging stations are feasible.) Plus, lets face it: North American manufacturers haven't always been that great when dealing with new automotive technology.

 

[LTC8K6]

Well, I probably wouldn't buy a Ford sedan now, knowing support will likely end in a couple years.

I bought my 5.7L V8 powered 4X4 Grand Cherokee when gasoline was over $4 a gallon. I got a nice discount as no one wanted the V8's.

I still have it 10 years later.

 

[Segnosaur]

Well, I probably wouldn't buy a Ford sedan now, knowing support will likely end in a couple years.

Which is another good point.

Almost seems like a self-fulfilling prophecy. "We're eliminating sedans soon because they don't sell well... and now that we said we're eliminating them people aren't buying. See, we were right! They don't sell!"

 

[lobosrul5]

Which is another good point.

Almost seems like a self-fulfilling prophecy. "We're eliminating sedans soon because they don't sell well... and now that we said we're eliminating them people aren't buying. See, we were right! They don't sell!"

Whats so weird is I see Ford Fusion's all over the place here. In fact they might be the most common sedan I see. They're very common fleet vehicles.

ETA: I guess sales have been tapering off since 2015 though. http://fordauthority.com/fmc/ford-m...ford-sales-numbers/ford-fusion-sales-numbers/

 

[Segnosaur]

Whats so weird is I see Ford Fusion's all over the place here. In fact they might be the most common sedan I see. They're very common fleet vehicles.

ETA: I guess sales have been tapering off since 2015 though. http://fordauthority.com/fmc/ford-m...ford-sales-numbers/ford-fusion-sales-numbers/

Makes sense... Looking back at a few charts, gas prices spiked in 2014, so in comparison 2015 gas prices must have looked pretty good. Furthermore, the recovery from the 2008 recession was slow, but it was happening... and thus by 2015 people had a little more money to spend on larger vehicles.

Of course, both factors could change rapidly depending on what happens with Iran and the economy in general.

 

[lobosrul5]

Makes sense... Looking back at a few charts, gas prices spiked in 2014, so in comparison 2015 gas prices must have looked pretty good. Furthermore, the recovery from the 2008 recession was slow, but it was happening... and thus by 2015 people had a little more money to spend on larger vehicles.

Of course, both factors could change rapidly depending on what happens with Iran and the economy in general.

By US standards the Fusion is a small vehicle with relatively good gas mileage.

 

[Segnosaur]

Makes sense... Looking back at a few charts, gas prices spiked in 2014, so in comparison 2015 gas prices must have looked pretty good. Furthermore, the recovery from the 2008 recession was slow, but it was happening... and thus by 2015 people had a little more money to spend on larger vehicles.

By US standards the Fusion is a small vehicle with relatively good gas mileage.

Yeah I know. That's why I suggested that sales of the Fusion may have tapered off after 2015... cheaper gas and a stronger economy by then mean that people don't want/need cars with good gas mileage anymore.

 

[TurkeysGhost]

Ford is in a tough spot. They make popular trucks and large vehicles, but the small vehicle market is hard to enter. Kia makes some decent small cars with small price tags, and Honda and Toyota's legendary reliability is available for not too much more. You also have Mazda and Hyundai making cars that span the price range. Lots of coverage here, hard to find an entry point for Ford.

I was looking for a small, inexpensive, reliable car when I bought my Corolla. Honestly, it feels kinda big. I would have bought a Yaris or Fit, but I didn't see any good condition ones near me with manual transmissions. I was intrigued by the small cars made by Chevy in theory, but their well known history of quality problems wouldn't let me consider them. Not a lot of options in the US for truly compact cars. It's a shame!

My fiance had one of the notorious Ford Fiestas that had the terrible transmissions. Three warranty rebuilds on the same transmission with less than 50k miles on a new car. She traded it in for a Honda. People looking for small cars are usually driven by budget and reliability concerns. Ford doesn't look very attractive compared to it's peers.

Confirmation bias alert. I was behind a Chevy Equinox in traffic yesterday that was burning oil like no tomorrow. Steady stream of blue/white smoke while idling and huge belches when it started forward. Couldn't have been more than 5-7 years old, by appearance. Imagine paying 20k for that heap of crap!

 

[Dr. Keith]

Ford is in a tough spot. They make popular trucks and large vehicles, but the small vehicle market is hard to enter.

Not just popular trucks, really good ones. I compared the Tundra to the F-150 because I was planning on keeping the truck for some time. Frankly, the Ford was just better in almost every measure and comparable when it came to reliability and resale.

As you point out, they are not as successful in the small car game. I looked at the Focus ST before I realized I would need a truck and it was designed for a teenager. It felt more like a game console than a vehicle. Really, I was considering a GTI even though I had been burned previously by VW's idea of reliability.

 

[theprestige]

The thing is, Ford is a pretty fantastic truck manufacturer. Their truck models compete on price and quality and are hugely popular. I don't see how it's a mistake to focus on that line of business (which really isn't going away), and not dilute that effort with a car market they don't necessarily need.

I guess a lot of people are filtering this news through the assumption that they understand the automobile manufacturing industry in general - - and Ford's lines of business in particular - - to pass judgement on Ford's decision. I tend to assume that the people running Ford know their business somewhat better than anyone commenting on it here. Bluntly speaking: Anyone saying that Ford has made a mistake is probably talking out their ass. That Ford has reached a contrary conclusion is in my opinion a more than sufficient rebuttal.

 

[TurkeysGhost]

Fair enough, but it's certainly noteworthy that a major US car company is basically surrendering the battle over the small car in its native markets. I wonder if this will leave them a bit exposed if the price of gas skyrockets again. Lots of people in this country drive trucks that really don't "need" them and would dump them if costs got too high.

 

[crescent]

I am under the impression that the majority - strong majority, of the sales of U.S. branded sedans has been to rental companies, with corporate and government (federal, state, and local) fleet vehicles coming in at second.

Direct sales of sedans and small cars to consumers has been peripheral to the American companies for a long time now.

That makes me think that the thing driving this is really the rental companies making decisions based upon reliability and cost.

 

[Segnosaur]

I guess a lot of people are filtering this news through the assumption that they understand the automobile manufacturing industry in general - - and Ford's lines of business in particular - - to pass judgement on Ford's decision. I tend to assume that the people running Ford know their business somewhat better than anyone commenting on it here. Bluntly speaking: Anyone saying that Ford has made a mistake is probably talking out their ass. That Ford has reached a contrary conclusion is in my opinion a more than sufficient rebuttal.

Around 2008, the "big three" automakers received billions in loans from the U.S. government. GM and Chrysler were looking at bankruptcy. While ford was in better shape, it still needed assistance to make changes to certain technologies.

If car manufacturers are requiring government loans to stay in business, I think its fair to say the executives may not understand the business that well themselves.

 

[theprestige]

Ah, yes, the mysterious anomaly of aught-eight! What was I thinking?

 

[Segnosaur]

I am under the impression that the majority - strong majority, of the sales of U.S. branded sedans has been to rental companies, with corporate and government (federal, state, and local) fleet vehicles coming in at second.

There are approximately 2 million cars available for rental in the United States. Rental companies replace cars after approximately 1 year. So, 2 million vehicles are purchased by rental companies. Now, not all of those are going to be sedans... rental companies rent SUVs and trucks too. Plus, they rent foreign cars as well as North American.

Ford/Chrysler/GM sold around 8 million vehicles total in 2016. The total market was (I think) around 17 million vehicles.

So, rental companies do make up a significant part of the market for cars, but I don't think it accounts for anywhere near a majority of sales.

https://www.statista.com/statistics...the-rental-car-industry-in-the-united-states/
http://www.latimes.com/business/autos/la-fi-hy-auto-sales-20170104-story.html

 

[Segnosaur]

Ah, yes, the mysterious anomaly of aught-eight! What was I thinking?

Not really sure what your point is.

Gas prices fluctuate. The economy as a whole (including disposable income and availability of credit) fluctuates.

Car companies in the past have had problems when those things happened because they didn't plan for or expect it. Any company who thinks "The good times will never end! SUVs for all!" may run into trouble when conditions change.

We have historical precedent of that happening.

Those who cannot remember the past are condemned to repeat it and all.

 

[lobosrul5]

Fair enough, but it's certainly noteworthy that a major US car company is basically surrendering the battle over the small car in its native markets. I wonder if this will leave them a bit exposed if the price of gas skyrockets again. Lots of people in this country drive trucks that really don't "need" them and would dump them if costs got too high.

And its not like they don't have a good affordable small car. They do pretty damn well in Europe.

https://www.fool.com/investing/2018/01/11/how-ford-managed-a-sales-gain-in-europe-in-2017.aspx

 

[xjx388]

I think it's a smart move concentrating on their strengths in the face of crazy competition both foreign and domestic. Ford has made, in my view, very boring cars. They can't compete with Toyota, Honda and Hyundai in the affordable sedan/coupe segments and forget the luxury segment. On the other hand, their Trucks/SUVs are pretty strong. I think history has shown that enough people are going to buy large/utility vehicles no matter what happens with gas prices and the commercial vehicle segment will always be strong.