In its recent first-quarter financial report, Ford Motor Company bared its grand plan on how to stay profitable in the foreseeable future, and this involves streamlining its product development particularly where it concerns North America. Specifically, the automaker revealed that its passenger-car portfolio for the US market would now consist of just two models, neither one of which is a sedan.
Yep, Ford has essentially issued the death certificate of its conventional sedans in the US, allowing just a pair of passenger cars to soldier on together with its utility vehicle offerings. Those cars are the Mustang sports car and the Focus Active crossover. According to the company, “almost 90% of the Ford portfolio in North America will be trucks, utilities and commercial vehicles” by the year 2020. The brand is basically blaming “declining consumer demand and product profitability” for its decision to stop investing in “next generations of traditional Ford sedans” for the continent.
Ford president and CEO Jim Hackett explained things this way, “We are committed to taking the appropriate actions to drive profitable growth and maximize the returns of our business over the long term. Where we can raise the returns of underperforming parts of our business by making them more fit, we will. If appropriate returns are not on the horizon, we will shift that capital to where we can play and win.”
It should be noted that Ford isn’t the first car manufacturer to throw in the towel in the sedan arena. Three years ago, Mitsubishi shocked its loyal fans by disclosing that it was killing the Lancer and that it was focusing its attention on crossover vehicles. At the time, it seemed like an inconsequential move by a minor global industry player, but now that a huge organization like Ford has followed suit, the implications could be farther-reaching than we initially assumed.
A question needs to be asked: Is this a case of one car company passively letting fickle market trends dictate its product strategy instead of improving its existing products and making customers want them?
“The decision of what types of vehicles to produce depends on what types of cars the market needs or wants,” admits Lexus Asia executive vice-president Vince S. Socco, widely credited for leading the establishment of Toyota Motor Philippines’ dealership network in the early 1990s. “The customer gets to make that call. How to meet those needs and wants in the most compelling way — design, engines, interiors, amenities — at a price point that customers are willing to pay and that manufacturers can make a desired profit from is the task that automakers face.”
As for Ford’s announcement about discontinuing sedan products in the US, Mr. Socco says: “Ford seems to be betting big on trucks, SUVs and light commercial vehicles. Perhaps it is because they see customer preference for these products continuing to grow, and also perhaps these offer them a better margin. Maybe producing sedans just doesn’t provide as good a return as they once did.”
So it’s clear: Even industry trailblazers bow to the vacillating preferences of the market, especially if said preferences have a huge impact on the bottom line — not just in the present but more crucially in the coming years. If it seems like we’re getting a lot of diesel-powered midsize SUVs and small crossovers in our market, that’s because these are the vehicles we’ve been buying. You could say it’s for the very same reason Hollywood has been serving up a lot of superhero movies — these films are what’s driving box-office ticket sales. What the customer wants, the customer gets.
Killing a vehicle model or type is not easy. It’s not something top executives agree on over lunch. Conversely, continuing to produce a car model is just as vital to the business. Creating a new-generation vehicle isn’t cheap, for one. A chief engineer doesn’t simply show up to work one morning with a concept for a brand-new sedan. The research-and-development work such an idea requires actually costs millions of dollars — not to mention thousands of man-hours. A sensible auto company should not and will not waste this kind of resources on something that no longer yields a decent return. If a part of your body has gone into atrophy and is damaging other healthy members of your anatomy, you have it surgically removed — you don’t lovingly keep it for sentimental reasons. You’d die faster than you could spell gangrene.
Ford is doing the right thing here. This is good for the company’s mid- to long-term prospects. It only sucks if you like sedans. Thankfully, I don’t. Give me a retro-styled hatchback or SUV, period.