I’ve always been a Ford man. I guess that’s one of the many legacies I got from my late grandfather – along with my political interest and my love for writing and telling stories. Since college, when I was able to buy new(ish) vehicles of my own, I’ve always driven Fords.
So Ford’s recent announcement took me aback. The company is transforming itself, phasing out all but two cars and concentrating mainly on SUV/crossovers and trucks.
Ford announced plans late Wednesday to eliminate some of the company’s most well-known cars in North America, including the Fiesta subcompact, Fusion midsize sedan, Taurus large sedan and the C-Max van, according to Ford’s quarterly earnings statement. The decision followed years of declining car sales.
Ford said eliminating most of the company’s cars except for two models will allow the company to focus on their “winning portfolio” in the United States, Canada and Mexico.
Which cars will the company keep? The Mustang – naturally – and retooled version of the Focus, along with its Lincoln lineup of luxury sedans. The move comes in response to the changing tastes of baby boomers and millennials. (Wait – why does it always have to be about boomers and millennials? When do we Gen-X-ers get to have a say in things?)
Buyers are gravitating toward SUVs for versatility, space, and vehicle height. The fuel efficiency of crossovers and SUVs are getting better and better every year as well – in fact, Ford plans to launch 16 battery/electric models in the next four years. And, of course, Ford’s truck line remains strong.
It’s worth noting that Ford is cutting the fat of lesser-selling cars in a year when they report a profit of $1.7 billion the first quarter, up 9 percent from last year. Michelle Krebs, an executive analyst at AutoTrader.com, thinks the move works as a way to get rid of what’s not selling.
“Ford’s car sales have been abysmal,” she said, noting that she has expected Ford to abandon the Taurus for years. “They’re king of the truck market, and their SUVs do well, but they’re losing money on their cars.”
At least one other analyst says the move makes sense.
“The passenger car rationalization plan is just the sort of bold and decisive action we believe investors have been waiting for,” Ryan Brinkman, an auto analyst at JPMorgan Chase & Co., wrote in a report Thursday, according to Bloomberg. “It is indicative of a management team for whom there are no sacred cows and which seems increasingly likely to pull other such levers to aggressively improve earnings and shareholder value.”
Look, I’ll always be a Ford man; I don’t see that ever changing. But beyond my obvious bias, the move makes sense to me. We’ll see how it pays off in the long run.