Ford And GM's Decision To Abandon Small Cars Is Already Costing Them

[probowler]

Not specific to Ford, but relevant still. I've always been skeptical of the decision to abandon the car market. A big part of ford's woes imo is outdated product and poor quality control. 

 

https://jalopnik.com/ford-and-gms-decision-to-abandon-small-cars-is-already-1839858417

Edited November 15, 2019 by probowler
Spelling

[rperez817]

Thanks for sharing this article probowler sir. I agree with you that Ford's outdated product and quality problems contribute the company's woes.

 

But I think Ford made a very smart decision to abandon certain passenger car segments (gasoline powered subcompact, compact and midsize sedans & hatchbacks). Ford would have to invest a lot of resources to design and market products that are competitive with the best in the industry in those segments. But Ford has never figured out how to get a good internal rate of return on them. Ford can't win in those segments no matter how hard they try.

 

So Ford should instead put its efforts into what does best. Trucks and SUVs. And on what will define the future of the whole automotive industry. Electric vehicles, fully autonomous vehicles, and mobility services.

[akirby]

Ford made $2B last quarter not counting one time restructuring costs.  Without Focus and Fiesta.  I don’t call that “ in trouble” - I call it smart business.  Especially if only 23%-31% switched brands.  And that was before the new Escape arrived so I think that will get a lot of Focus owners.

 

I disagree that small cheap cars are a gateway to other vehicles and brand loyalty.  I don’t think brand loyalty is a thing like it used to be.

[J-150]

How much are they losing? Did the margin on Fiesta and Focus even cover development and manufacture costs?

[akirby]

Just now, J-150 said:

How much are they losing? Did the margin on Fiesta and Focus even cover development and manufacture costs?

 

I doubt it.   I mean, they were making $2B/qtr with Focus and Fiesta and they made $2B last quarter without them, so what does that tell you?

[RadicalX]

Ford took plenty of time to take Accord and Camry sales and position itself among the best-selling sedans. Taurus, Focus, Mondeo (Contour) were critically praised cars, but fell into reliability issues. Fusion had great moments, especially in 2009, but Ford missed due to failures in the second generation launch. It's not as if the sedan market isn't profitable, it's about how Ford couldn't retain and steal sales from outside manufacturers within his own country due to the constant search for cost cutting.

Edited November 15, 2019 by RadicalX

[grbeck]

2 hours ago, akirby said:

Ford made $2B last quarter not counting one time restructuring costs.  Without Focus and Fiesta.  I don’t call that “ in trouble” - I call it smart business.  Especially if only 23%-31% switched brands.  And that was before the new Escape arrived so I think that will get a lot of Focus owners.

 

I disagree that small cheap cars are a gateway to other vehicles and brand loyalty.  I don’t think brand loyalty is a thing like it used to be.

Yes and no.

 

I wouldn't treat Ford's four non-Mustang passenger cars the same.

 

Dropping the Fiesta and Taurus made sense, because even if Ford had done everything right - no crappy Fiesta transmission, regular updates on the Taurus - sales would still be falling below sustainability levels. Americans have never loved very small cars, and non-premium large sedans are under serious pressure from crossovers and SUVs.

 

The Fusion and Focus, however, were viable offerings hurt by bad decisions. Ford cheapened out on meaningful styling updates (Fusion) and refused to fix one car's only major flaw (the Focus automatic transmission).

 

At this point, I'm not sure we've yet seen how all of this will ultimately turn out.

[akirby]

14 minutes ago, grbeck said:

Yes and no.

 

I wouldn't treat Ford's four non-Mustang passenger cars the same.

 

Dropping the Fiesta and Taurus made sense, because even if Ford had done everything right - no crappy Fiesta transmission, regular updates on the Taurus - sales would still be falling below sustainability levels. Americans have never loved very small cars, and non-premium large sedans are under serious pressure from crossovers and SUVs.

 

The Fusion and Focus, however, were viable offerings hurt by bad decisions. Ford cheapened out on meaningful styling updates (Fusion) and refused to fix one car's only major flaw (the Focus automatic transmission).

 

At this point, I'm not sure we've yet seen how all of this will ultimately turn out.

 

It is true we won't know the long term effects for a few years.   However, I don't think the decision to kill Focus and Fusion had anything to do with lack of updates or the powershift transmission.   Sales were still pretty good on both.   The problem was car buyers who used to buy premium cars (titaniums, loaded SEs or SELs, AWD) switched to crossovers.   At the same time Kia and Hyundai entered the market with viable products and now Ford was stuck with a somewhat premium platform (higher cost than most of the competition) but having to compete on price with lower end models requiring big rebates.   That simply killed profitability to the point that Ford could make more money by investing that time and those resources elsewhere.   They could still sell both here and eke out some profit after moving both to C2 (which could still happen, especially with Focus after they convert the factories to C2).  But the juice isn't worth the squeeze right now.

[akirby]

21 minutes ago, RadicalX said:

 It's not as if the sedan market isn't profitable

 

Yes it is.  Most premium buyers moved to crossovers and most mid sized sedans seem to be lower end vehicles, not Titaniums.  And even those need $4K rebates.  Midsized sedans have become a commodity with multiple choices and people seem to be buying on price nowadays.

[akirby]

And don't forget Ford didn't stop making Focus globally.  They could easily bring it back to NA if it makes sense.

[Harley Lover]

3 hours ago, rperez817 said:

And on what will define the future of the whole automotive industry. Electric vehicles, fully autonomous vehicles, and mobility services.

 

You're going to have to listen to what is being said about autonomy, a new consensus is building (here's the latest to agree):  https://arstechnica.com/cars/2019/11/daimler-will-cut-back-spending-on-self-driving-taxis-ceo-says/

[probowler]

I realize you usually charge out the wazoo for these features on high demand vehicles but i have to believe a stylish, up-to-date focus with a strong stereo, touch screen radio, ambient interior lighting, and maybe a sporty appearance package would have been a fine seller.

 

As others have stated most premium buyers have upsized their vehicle purchases but those features don't seem that expensive to include standard... Maybe the profit margin wouldn't be amazing, but if you can build something cool and reliable, hopefully you gain that brand loyalty. 

 

I don't think Ford is doing a bad job, not at all... I just wish they hadn't conceded defeat in this market. Maybe been more aggressive and of course dedicated to producing QUALITY vehicles. 

[twintornados]

1 hour ago, akirby said:

And don't forget Ford didn't stop making Focus globally.  They could easily bring it back to NA if it makes sense.

 

And Fusion/Mondeo is still being produced.

[grbeck]

2 hours ago, akirby said:

 

It is true we won't know the long term effects for a few years.   However, I don't think the decision to kill Focus and Fusion had anything to do with lack of updates or the powershift transmission.   Sales were still pretty good on both.   The problem was car buyers who used to buy premium cars (titaniums, loaded SEs or SELs, AWD) switched to crossovers.   At the same time Kia and Hyundai entered the market with viable products and now Ford was stuck with a somewhat premium platform (higher cost than most of the competition) but having to compete on price with lower end models requiring big rebates.   That simply killed profitability to the point that Ford could make more money by investing that time and those resources elsewhere.   They could still sell both here and eke out some profit after moving both to C2 (which could still happen, especially with Focus after they convert the factories to C2).  But the juice isn't worth the squeeze right now.

I do give Ford credit for having a long-term plan to attract some of these customers (EcoSport, Baby Bronco, more carlike 2020 Escape).

 

It would be nice if we would at least receive a renewed Focus in the future. It's not like it would be a North American-only vehicle.

[snooter]

8 hours ago, akirby said:

 

I doubt it.   I mean, they were making $2B/qtr with Focus and Fiesta and they made $2B last quarter without them, so what does that tell you?

Because ford is pushing heavily laden optioned vehicles...they do not want money from customers who only want a vehicle and do not want there expensive optioned crap..case in point is the new F series..yah!...they offer the mini console finally in the f350 single cab...then when i punch 4×4 it requires i get there crap i do not want in a truck...i can get the truck i want to order but only in the 2 wheel drive version...in  the largest economic wealth epansions in history F stock is still at $8.95...there is a problmen...when the access to easy auto credit bubble bursts its going to be worse than what we went thru in 2009...

[jpd80]

 

Buyers are moving away from cars but Ford did pull the trigger more quickly than normal because it needs the plants

and that was probably a mistake, Focus and Fiesta could have continued as a double act from a Mexican plant

but I get that Ford now wants to do other things with production space there..

 

 

From what I see, most of Ford's buyers actually like bundled options as a way of saving money on popular packages,

 at certain times of the year, those bundled packages can end up coming with big incentives attached.

[ausrutherford]

The midsize car market is 50% the size it was roughly a decade ago. 

 

I would bet the subcompact market is a 1/10 is was a decade ago

 

The compact market is at least 50% down.

 

The full size market is probably 1/10th as well.

 

They are for the moment dying breeds. 

[T-dubz]

37 minutes ago, jpd80 said:

 

From what I see, most of Ford's buyers actually like bundled options as a way of saving money on popular packages,

 at certain times of the year, those bundled packages can end up coming with big incentives attached.

Except when all of the bundled packages are $5000 or more. I’d say bundles around 2k are the real sweet spot. 
 

 

[rperez817]

9 hours ago, probowler said:

if you can build something cool and reliable, hopefully you gain that brand loyalty.

 

The Ford brand won the IHS Markit award for "highest overall loyalty to make" for 2018. I wouldn't be surprised if Ford wins that award again for 2019. There are a lot of Ford owners who won't hesitate to buy another Ford, even if their car or truck had reliability issues. https://ihsmarkit.com/awards/customer-recognition-awards-automotive-loyalty-2018.html

 

 

Edited November 16, 2019 by rperez817

[2005Explorer]

Focusing only on premium SUVs and trucks is great if the economy remains strong. I remember a time not that long ago you couldn't give away a midsized or larger SUV and even full-sized pickup sales cratered for several years. We all know it isn't if, but when this will happen again. Ford has platforms and models in place globally to react to an economic downturn in the US, but as we've seen in the past they are painfully slow to react. Without a solid and quick to react plan B in place the next recession could take them out.

[akirby]

58 minutes ago, 2005Explorer said:

Focusing only on premium SUVs and trucks is great if the economy remains strong. I remember a time not that long ago you couldn't give away a midsized or larger SUV and even full-sized pickup sales cratered for several years. We all know it isn't if, but when this will happen again. Ford has platforms and models in place globally to react to an economic downturn in the US, but as we've seen in the past they are painfully slow to react. Without a solid and quick to react plan B in place the next recession could take them out.

That’s because people stopped buying new vehicles altogether and those older SUVs and trucks got terrible fuel economy in the midst of $4/gal gas.  Fuel economy has improved so much and with Ford going hybrids and phevs that’s no longer a concern.  It’s a different world.

[snooter]

16 hours ago, rperez817 said:

 

The Ford brand won the IHS Markit award for "highest overall loyalty to make" for 2018. I wouldn't be surprised if Ford wins that award again for 2019. There are a lot of Ford owners who won't hesitate to buy another Ford, even if their car or truck had reliability issues. https://ihsmarkit.com/awards/customer-recognition-awards-automotive-loyalty-2018.html

 

 

Ok great..but consumer trash report ranks F series fords most unreliable vehicle and eco sport (which is built outside usa -romania, russia, india, thailand) fords most reliable (lexus, mazda, toyota top 3)...these type of awards are generally useless...what matters is wall street...and right now there is little faith in ford

[Assimilator]

Blah Blah...not all sales are profitable...blah blah...Ford is selling the same number of cars more profitably....blah blah...these segments are only loyal to price...blah blah...Ford is adding more models than they are giving up.  

 

I feel like a broken record at this point.  

 

People are so desperate to believe Ford and GM are making a mistake on cars that it's obnoxious when this pops up.  The truth is far far more interesting...and everything will be okay.  Change or die, and man Ford is changing.  The companies that rely on loss-leaders don't have Ford's enormous product diversity to fall back on.  Ford doesn't need that volume. 

 

Edited November 16, 2019 by Assimilator

[jpd80]

 

5 hours ago, akirby said:

That’s because people stopped buying new vehicles altogether and those older SUVs and trucks got terrible fuel economy in the midst of $4/gal gas.  Fuel economy has improved so much and with Ford going hybrids and phevs that’s no longer a concern.  It’s a different world.

 

Absolutely, Ford is preparing for a down turn whether or not that actually happens is anyone's guess.

What we saw in the past was that people just held onto their existing leases while the economy corrected itself

I don't see any good reason for finance companies to destroy the level of lending currently being enjoyed.

 

 

 

 

 

 

 

 

[jpd80]

Quote

 

GM Design Boss Says Sedans Could Make A Comeback
Autoblog
By Brad Anderson
November 15, 2019

 

General Motors design chief Michael Simcoe has suggested that sedans could make a comeback down the road.

In recent years, consumer preferences, particularly in the United States, have shifted and buyers are now demanding more crossovers, SUVs, and trucks that ever before. With this change in consumer sentiment, the sedan has started to slowly die out.

“I think what you’re seeing is a shift to SUV cues or more formal SUV cues being applied to lower seating positions in vehicles…” he said. “The trouble is, the market is mixing both appearance and content so hard these days, it’s very hard to tell what is a true SUV, versus what is a CUV or generally a crossover vehicle. When hatches and sedans stopped selling, CUVs took their place but I think there will be a cycle [back to sedans] in the industry. And again, then we go back to electrification, which will make people think differently,” he said.

“They want to park something in their driveway that their neighbors admire. So the reason for purchase is the same as it’s always been. I think we’ll cycle back down to lower vehicles and essentially everything will be on the road.”

 

 

Keep in mind that Mike Simcoe (ex-Holden) and Mark Reuss were strong car proponents for Cadillac

and absolutely detested the idea of their car platforms being used that way... which is why Cadillac

had to use  FWD based corporate platforms for its sub-Escalade utilities.

 

Cars may come back but that seems a long way off now, GM just closed three or four plants

so is in no rush to bring new cars to market.

Edited November 16, 2019 by jpd80