Finance: Ford's decision to eliminate passenger cars and concentrate on pickups and SUVs is paying off (F)
Ford posted US sales gains in August even as the overall market has flattened. Pickup trucks and SUVs drove the gains. Ford made a strategic decision to all but eliminate passenger cars from its portfolio in coming years.
- Ford posted US sales gains in August even as the overall market has flattened or declined.
- Ford pickup trucks and SUVs drove the gains.
- Ford made a strategic decision to all but eliminate passenger cars from its portfolio in coming years.
Ford reported August US sales on Tuesday, and although the market has been weakening compared with 2017, the automaker's tally was up about 4% versus a year ago.
The story was all about pickup trucks and SUVs, vindicating a decision that Ford, under CEO Jim Hackett, made earlier this year to reduce its future passenger-car offerings in the US to essentially one vehicle: the iconic Mustang.
Hackett's goal: to improve Ford's competitive fitness and give Wall Street a reasons to get excited about the automaker's stock, which has lagged behind peers'.
In a statement, Mark LaNeve, Ford's VP of US marketing, sales and service, cited 16 months of gains for the F-Series line of pickup trucks, along with a 21% improvement in sales of SUVs, as August highlights.
"Sales of our all-new Expedition were up a strong 95 percent," he added. "Right now, the hottest vehicle in America is our all-new Lincoln Navigator, which saw sales expand by more than 100 percent in August."
A strategic move away from passenger cars
In an interview with Business Insider, LaNeve commented on Ford's strategic move away from passenger cars, which for decades have been at the core of the US market but have been displaced in the past few years as new sales records have been set.
"We've been seeing the trends coming on for a while," LaNeve said. "But it's been accelerating in 2018 over 2016 and 2017."
He indicated that Ford is starting to see the benefits of it move away from cars, whose future has been much-debated in the industry amid consumer buying patterns that suggest a structural shift is underway and that Americans may never revise the four-door sedan.
"We're focusing our marketing resources," LaNeve said. "We're not spending money advertising passenger cars."
Ford has been in a similar position before. Prior to the financial crisis, it was easy to think of the company as a maker of Mustangs and pickups. Former CEO Alan Mullaly sought to bring more fuel-efficient vehicles into the mix, but for several years now, consumers have voted against those products with their wallets.
Back to the future — but a different future
"It’s back to the future for Ford," Autotrader analyst Michelle Krebs said in a email. "Ford is back to being largely a truck company. Its August sales performance demonstrated its strength in trucks."
LaNeve, however, pointed out that Ford's new future is different from its old one. Buyers no longer have to compromise when buying an SUV or pickup as they did in the past, when these vehicles delivered poor fuel economy relative to sedans. Technological advancement has greatly improved engine efficiency, putting many SUVs and crossovers on par with with their sedan stablemates.
"It's a generational shift," LaNeve said, adding that passengers cars aren't coming back. He recalled his time at Cadillac in the early 1980s, when the entire luxury market in the US was made up of big sedans and two-door coupés. "In the course of my career, the entire market has shifted."
And the onetime complaint against Ford has also changed.
"We're probably a truck and Mustang company," he said. But he said it with pride — and not without noting that Ford is also aggressively pursuing electrification of its vehicles, as well as autonomous mobility.
It certainly helps that Ford's pickups and SUVs are highly profitable, funding a potentially costly restructuring outlined by Hackett.
"You've got to pick the places where you want to compete," LaNeve said. "As the market shrinks, there's less demand, and the demand that's left is less profitable."
Ford also has a bit of a secret weapon outside of passenger cars: commercial vehicles. Its Transit van saw a 25% sales boost in August.
"Commercial is number one by a wider margin than retail trucks," LaNeve said. "Our team really knows that business."
Click here to read the full text by Matthew DeBord