Monday, April 30, 2018
Ford's Near Abandonment of the Passenger Car Market Sends a Message from Detroit
Ford announced last week that it was reducing its new car production to the Ford Focus and Mustang. Gone will be the Fiesta, Fusion, C-Max, and Taurus. Ford will focus the future on light trucks, i.e. pickups and SUV’s, and electric vehicles. Left open is the question of Lincolns. President Obama’s administration focused on bringing Chrysler and GM out of bankruptcy with fuel efficient cars. The EPA adopted new higher Corporate Average Fuel Economy (CAFÉ) Standards to 54MPH by 2025. The goal was frustrated by Americans flocking to light trucks. The best selling vehicle in America for years has been the Ford F-150 pickup truck. High on the list are the Chevy Silverado and Dodge Ram pickups. SUV sales, including the smaller crossovers, are booming. The Nissan Rogue, Toyota RAV4 and Honda CRV are large sellers. Detroit CRV’s are catching on. Therein lies the problem for Detroit. They are having trouble selling sedans to Americans. Detroit is being squeezed from the top and bottom of the passenger car market. Toyota, Honda, Nissan, Mazda, Kia, and Hyundai are eating Detroit’s lunch in small and midsize cars. The top selling vehicle (sales include leases) in the U.S. last year was the Ford F-150 pickup truck, followed by the Chevy Silverado. The top selling car was the Honda Civic in eighth place. No U.S. passenger car was in the top 20 of vehicle sales, although several crossovers and Jeep models are on the list. March 2018 is a startling picture of the U.S. car market. 1,653,529 vehicles were sold. Light trucks outsold passenger cars roughly 2-1. 1,097,904 light trucks were sold compared to 555,625 cars. Orange County, California is an example of the duality of the American car market. The large Japanese dealers are overflowing with cars while the smaller American dealerships feature light trucks. Californians simply prefer the imported car models to those of Detroit. Cadillac was once the dominate luxury car in the United States. Only 156,440 were sold in the United States last year compared to 375,240 Mercedes, 305,685 BMW’s, 305,132 Lexus, and 226,511 Audis. Cadillac barely outsold Acura and Infiniti. Detroit’s problem is compounded because it cannot make money on small cars, even when built in Mexico. Detroit has had a problem since the 1970’s of building small cars that can match the Japanese in quality, amenities, and price. The imports, often made in the United States, come loaded whereas the Detroit models nickel and dime on “options.” Ford has seen the light. It’s following the market; Ford’s President Paul Hackett said: “We’ll going to invest in the healthy part of our business and deal decisively with areas that destroy value.” Detroit is being squeezed out of the passenger car market in the United States. Ford will be investing into light trucks and electrics. It plans to introduce 40 electric vehicles by 2022. Fiat Chrysler is down to three car models: Dodge Challenger, Dodge Charger, and the barely selling Chrysler 300. GM abandoned the Oldsmobile, Pontiac, Saturn, and Saab brands during its bankruptcy. Buick and Chevrolet models may soon be dropped. Ford is making one of the biggest gambles of its century old existence.