Ford Killing “Value Destroying” Sedans Because They Lose Money Every Year
Money is among the greatest of all motivators, and it was arguably the foremost factor in Ford’s decision to axe every sedan in its lineup within the next year. As the company shifts toward ensuring that 90% of its sales in North America come from higher-profit trucks and SUVs, the elimination of sedans in Ford’s lineup comes as the result of an ongoing loss of profitability that likely won’t be staunched any time soon.
Automotive News reports that Ford CFO Bob Shanks listed sedans as the biggest among Ford’s biggest “value destroyers,” a list which also includes aspects of Ford’s dealings overseas and “most Lincoln products.” While Shanks suggested that Ford is considering all options with respect to the other two—Lincoln seems to be pivoting away from sedans itself with rumors that the Continental will not be carried after the current generation—the choice to cut sedans was one made seemingly out of necessity.
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UBS analyst Colin Langan told Auto News that Ford loses approximately $800 million a year selling small cars in the United States, which stands in stark contrast to Ford’s estimated $3 billion first-quarter profit on truck and utility sales.
In the face of cries that Ford is being reactionary or impulsive, Ford Executive Vice President and President of Global Markets Jim Farley told Automotive News that the move is not as much a contraction at it is a refocusing of efforts.
“We intend to expand our passenger car lineup in the US,” Farley said. “We also intend to serve similar, affordable price points to today. What’s changed here is just the format of the vehicle. Our dealers will have just as much opportunity to grow, just with a different portfolio.”
Farley suggested that Ford’s plan is to upgrade its image and recapture wary sedan loyalists with new, “emotional” products, presumably including vehicles that play in a “white space” between conventional sedan styling and crossover functionality.
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News Source: Automotive News (subscription required)