LAS VEGAS — Ford raised eyebrows — and no doubt some concern among its dealers — with its announcement earlier this year that it would phase out its remaining sedans and double-down on hot-selling utility vehicles. But top executives offered further rationale behind their thinking during a conference for Ford dealers here this week.
Ford in April announced its plans to do away with the Fiesta, Focus, Fusion and Taurus in the U.S. market. They’re all set to sunset, with Focus production already now discontinued but the Fusion living on at least through 2019.
Through September, Ford had sold a not-insignificant 378,533 cars, which was down 17.4 percent from the prior-year-to-date figure. But Ford has carefully studied the larger trends and says sedans have plummeted from making up 57 percent of the North American market in 2010 to an expected 30 percent by 2019, while utility vehicles have gone the other way, up from 36 percent to an anticipated 52 percent next year. Pickups have also grown share, but more modestly, from 14 percent to a projected 18 percent over the same period.
“We’re not getting out of passenger cars, we’re getting out of sedans,” said Kumar Galhotra, Ford’s group vice president and president of Ford North America. “It’s language, but it’s a very important distinction. I learned this from my boss, (CEO) Jim Hackett: Silhouettes are changing. The data is compelling that silhouettes are changing.”
Galhotra said Hackett served up to him the example of the Model T, asking him what happened to that automobile silhouette. It’s a line of thinking that suggests we may be on the cusp of a major revolution in automotive styling alone, to say nothing of electrification or other technologies. And like any company with limited capital and human resources, “We want to deploy them in segments that are growing and segments where we are strong,” Galhotra says. “I don’t think we need to apologize for that.”
Ford is also quick to add that pivoting away from traditional sedans doesn’t mean a shrinking number of vehicle nameplates. The company currently has 20 nameplates, will have 21 next year and will rise to 23 by 2023. Future products include the 2019 Ranger midsize pickup, 2019 Transit and Transit Connect vans, the Mustang Shelby GT500, plus all-new versions of the Super Duty pickup, Escape and Explorer, the revised Bronco nameplate, and a battery-electric utility vehicle for 2020, plus other planned products that have yet to leak from Dearborn.
“I feel better after seeing the product,” said Jim Seavitt, owner of Village Ford in Dearborn, Michigan, near the company’s headquarters.
After Morgan Stanley on Friday cut its price targets for Ford and General Motors Co due to slumping industry demand in China, Ford’s stock dipped to $8.19 – its lowest price since November 2009 – before recovering to $8.47. Ford is expected to report a decline in third-quarter profits on Oct. 24.
Dealers said the most important aspect of the meetings in Las Vegas was that Hackett laid out his vision for the company and explained to dealers how they fit in those plans — reassurances they said were long overdue.
“His (Hackett’s) first slide was a McKinsey-type slide and I was like, ‘Oh great, this is going to be like a consulting session here,’ but I found him to be very genuine,” Pete DeLongchamps, senior vice president with Group 1 Automotive, told Reuters. DeLongchamps’ Houston-based company owns 17 Ford stores.
Seavitt said what Hackett lacked in the “wow factor,” he made up for in sincerity and credibility.
One large dealer, who asked not to be identified, said Ford’s October sales were down double digits at his stores and criticized Ford’s product line and lack of aggression with incentives and advertising.
Meanwhile, Ford says it’s mindful of the need to retain offerings priced below $25,000, like the EcoSport, for entry-level car buyers, even if they aren’t technically sedans.
“I don’t wanna say it’s a concern,” said Mike Pallotta, owner of Pallotta Ford Lincoln in Wooster, Ohio, who attended the conference, about the demise of sedans. But he emphasized the importance of having affordable entry-level options in order to achieve Ford’s goal of building on its customer loyalty. “It’s very important come 2020 … what’s going to fill that gap. The price point is probably most important, rather than the silhouette of the vehicle.”
Information from Reuters was used in this report.