Ford is Moving to Two Vehicles

Ford Motor Company 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 says 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. The Detroit automaker plans to keep the Ford Mustang sports car and a new Focus crossover, which will be released next year.


Simplifying the Ford Lineup

“We’re going to feed the healthy parts of our business and deal decisively with the areas that destroy value,” Hackett said. “It’s been easy to identify what’s wrong and what we need to do about it [...] We’re starting to understand what we need to do and making clear decisions there.”  Ford will not be killing its entire car lineup; it’s merely simplifying it. Soon, the only passenger cars Ford will be producing are the Mustang and Focus Active to be released in 2019. The company’s SUVs and trucks also aren’t being cut.

The most obvious factor behind Ford’s decision is OpEx. Management says it can cut $25.5 billion from costs by 2022 by trimming the fat in its lineup. Investors, of course, have applauded this bottom-line-boosting decision. But Ford’s move to drop models like the Fiesta, Fusion, and Taurus isn’t all about expenses. It’s also about staying ahead of new technology trends, specifically the emergence of autonomous vehicles and services. Although mainstream media has completely glossed over this decision, Ford was quite deliberate in its first-quarter conference call this week. While headlines were obsessing over the fact that Ford was cutting its sedan lineup, they ignored what was easily the most important aspect of that call: The company is transitioning to autonomous vehicles in what’s poised to be a momentous shake-up of the automaker business model.

Still, it seems that Ford is heading in a smart direction, pushing the focus to high-margin aspects of the business, and improving profitability in segments that are profitable that don’t currently make a lot of money; Ford is also cutting and changing the pieces of the company deemed “low performing”.

 

 

 


Categories: Industry News

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