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Ford Nearly Completes Car Purge

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In Georgia the local police are going to Explorers.  But the State Troopers are sticking with the Dodge sedans, I wonder if that is in part due to their more highway oriented duties and thus desire for high speed pursuit vs. room for various pieces of equipment. 

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On 11/30/2019 at 1:26 PM, akirby said:


It’s not really cheap labor.  The Koreans are willing to take a tiny profit margin in the US.  Combine that with a saturated market compared to 20 years ago and the popularity of crossovers and you’re left with price wars and razor thin margins even for the top rated contenders.

 And they have used these small cars to establish their names and a customer base which they used to move into SUVs/CUVs and now are going in to upscale/larger ones. 

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9 minutes ago, Fordowner said:

In Georgia the local police are going to Explorers.  But the State Troopers are sticking with the Dodge sedans, I wonder if that is in part due to their more highway oriented duties and thus desire for high speed pursuit vs. room for various pieces of equipment. 

 

I would say it is money.  The new Explorer PIU (Ecoboost)  tested faster than the Charger (Hemi V8) on both the road course and track. They will cost several thousand dollars more than the Dodge. Dodge is selling them dirt cheap!

Edited by danglin

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48 minutes ago, RichardJensen said:

 

In the wake of Ford's decision to once again abandon the US passenger car market because it was 'too hard', I came up with this theory:

 

You get like 20 or maybe 30 years of your life where people pay attention to you, professionally. Say from your mid 30s to your mid 50s, give or take.

 

Before that you're too young, and after that you're too old.

 

So stupidity tends to run on a 20-30 year cycle (i.e. the S&L crisis ---> mortgage crisis).

 

During your 20-30 years of influence, you can pretty much keep people from doing really stupid stuff that happened when you were getting started in your professional career.

 

But by the time you get close to retirement age, you've got younger employees coming along that don't really remember the stupidity of the past, and they have all sorts of reasons why this time it's different (but it never really is).

 

At least this time around, as akirby points out, Ford has global architectures, so it'll be easier for them to undo this particular bit of stupidity once it bites them in the ass.


I don’t disagree with that theory - I think it’s spot on.  However....

 

I don’t see Ford just cancelling cars to save money.  It appears they are simply moving their R&D resources to other new vehicles which they believe will yield a much higher operating profit margin of 8%+.  And they believe the sedan market will continue to shrink and yield extremely low profit margins.

 

Some of those new projects are Bronco and new Ranger, Baby Bronco, an ecosport small cuv replacement with a trucklet and hybrids, phevs and BEVs. There are probably a few we don’t know about yet.  
 

Whether these new projects will deliver the anticipated profit margins remains to be seen, but to me the strategy seems sound if a bit risky.  The insiders have said the new stuff we haven’t seen is amazing. The biggest risk to me is that they don’t execute on these new projects and end up with marginal products.  I don’t think that will happen.  Mach-E looks solid and everything we’re hearing about Bronco seems to be the same.  Aviator was a complete effort.   Explorer and Escape had a little cost cutting on the interior but that seems to be it.  I’m cautiously optimistic.

 

 

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30 minutes ago, Fordowner said:

 And they have used these small cars to establish their names and a customer base which they used to move into SUVs/CUVs and now are going in to upscale/larger ones. 


There is some truth to that but I don’t think brand loyalty is as strong as it used to be especially with folks buying mainly on price.  Don’t forget Ford still has entry level vehicles so wouldn’t the same apply to Ecosport, Escape and a Ranger XL buyers?

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56 minutes ago, akirby said:


There is some truth to that but I don’t think brand loyalty is as strong as it used to be especially with folks buying mainly on price.  Don’t forget Ford still has entry level vehicles so wouldn’t the same apply to Ecosport, Escape and a Ranger XL buyers?

True, though  from a pricing point of view the Ecosport seems like the only replacement to the Fiesta and Focus and that is sort of a placeholder - so hopefully as mentioned above the soon to arrive small or lower priced white space vehicles Ford is working will offer the creativity that the Escort and then Focus represented when they first came out .     Aside from the transmission issues many had, the Focus and Fiesta were good looking cars that handled well and were well made. 

 

Edited by Fordowner

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On 12/1/2019 at 10:42 AM, brucelinc said:

I don't hate SUVs or CUVs.   I just have no use for a vehicle that attempts to combine sport, utility, comfort, style and other things into one package.   From my perspective, SUVs or CUVs do not do any of those things particularly well.    I prefer having a sporty car for fun and style, an upscale and well-equipped sedan for comfortable travel and a 4X4 pick-up for hauling stuff and driving when the roads are snowy or icy.   For me, those are the right tools for each job.     I have never been one to follow the trends when it comes to buying vehicles so having an SUV just because they are so popular at the moment doesn't tempt me at all.     

 

Most people can't afford to have multiple vehicles tailored to specific circumstances, so they buy one that does everything decently.

 

On 12/1/2019 at 10:48 AM, Harley Lover said:

 

 

Still waiting for the quote, Spock. It's obvious you can't produce it.

 

It's a pretty logical extrapolation of what was said.

 

On 12/1/2019 at 2:17 PM, 351cid said:

In the "old days", when you were backing out of a parking spot (shopping center), you could ease back far enough to get past the roof line of the car next to you to see what was coming. Now, you damn near have to back out blind because of all the SUV's. I think that's a safety issue.

When you are making a left turn & there is an SUV in the opposite turn lane, you cannot see past them either. Again, less than safe.

 

Just back in the spot ;)

 

If you were in a sedan, you wouldn't be able to see around a sedan in the opposite late either.

 

5 hours ago, akirby said:

Back to the original topic.....

 

Ford is still building the C2 Focus and they're designing a C2 based Mondeo replacement.   If the market shifts (not likely) they still have vehicles that could easily be brought here once Mexico is converted to C2 (Louisville is already converted).   Sounds like OAP will also be C2 with the new Edge and FRAP is available.

 

It's not like they're killing them and would have to start over from scratch.

 

It seems like there's going to be a lot of low volume plants coming up (Hermosillo, Cuautitlan, Oakville) - I wouldn't be surprised if we see Focus/Fusion replacement re-appear in one of those plants.

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1 hour ago, danglin said:

 

I would say it is money.  The new Explorer PIU (Ecoboost)  tested faster than the Charger (Hemi V8) on both the road course and track. They will cost several thousand dollars more than the Dodge. Dodge is selling them dirt cheap!

Its far more than that....

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9 minutes ago, rmc523 said:

 

Just back in the spot ;)

 

If you were in a sedan, you wouldn't be able to see around a sedan in the opposite late either.

 

 

If you "just back in", now you're pulling your nose out into the lane to get past the rear if the SUV to have a site line...doesn't resolve the issue.

 

Sedans sit lower...your chances of seeing past them are a lot greater :)

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1 hour ago, akirby said:


I don’t see Ford just cancelling cars to save money.  It appears they are simply moving their R&D resources to other new vehicles which they believe will yield a much higher operating profit margin of 8%+.  And they believe the sedan market will continue to shrink and yield extremely low profit margins.

 

 

The problem is, that's a one-size-fits-all approach to business.

 

A local grocery store chain decided that they weren't making enough money from their eat-in deli section, so they converted their eat-in delis into full service pub-style restaurants. Think Applebee's, but much more generic and attached to a grocery store.

 

It didn't work out, and now they're revamping these restaurants into a food-court setup that is basically a tweaked version of what they had in the first place.

 

This goofy decision was made because someone took a look at their deli's profit per square foot and comped it with the profit per square foot of a restaurant (and you get some sense of how low the margin is on groceries when you realize they're looking to up their profit margin by adding a restaurant). 

 

If you don't know beans about a business, you can always say, 'hey, let's raise our margins.'

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Ford has frequently struggled in these small/midsize volume segments, even when it was booming they couldn't keep their attention focused on them because they were constantly reorganizing to make the business case work. The final nail in the coffin was trying to make a one-size-fits-all showroom for the entire world and that didn't work which stalled their ability to continue refining products.  Ford has long struggled with brand loyalty in these segments because of this wishy-washy experiment, which means they had to spend more to earn less in order to keep customers coming.  And every time they lost the market, they had to win them back at great expense with little stability.  These segments are spoken for, they lost them long ago and it's too expensive to get them back now that the market is in decline and galvanized around the few who are still loyal to Toyota, Honda, and the bargain bin.  If the trade Gods were in our favor, ideally we could have still received a Focus Active to keep their foot in the door, but that didn't happen.  We still have more vehicles coming in new segments so it's really a matter of just letting Ford fill its factories with things they can grow that are bought by worthwhile customers.  Not to mention the automobile is rapidly changing right now, going back is rarely the solution if you can innovate. 

Edited by Assimilator

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32 minutes ago, RichardJensen said:

 

The problem is, that's a one-size-fits-all approach to business.

 

A local grocery store chain decided that they weren't making enough money from their eat-in deli section, so they converted their eat-in delis into full service pub-style restaurants. Think Applebee's, but much more generic and attached to a grocery store.

 

It didn't work out, and now they're revamping these restaurants into a food-court setup that is basically a tweaked version of what they had in the first place.

 

This goofy decision was made because someone took a look at their deli's profit per square foot and comped it with the profit per square foot of a restaurant (and you get some sense of how low the margin is on groceries when you realize they're looking to up their profit margin by adding a restaurant). 

 

If you don't know beans about a business, you can always say, 'hey, let's raise our margins.'

 

The difference here is Ford HAS experience with everything except for Autonomous Vehicles.  I'll cover those in a minute.

 

They're adding utilities and trucks and vans and performance vehicles, some of which are electrified.   They know how to engineer and build those and they know how to sell them.   They understand the profit margins and they've always been competitive in those markets if not the market leader.

 

The strategy is pretty simple - instead of boring vehicles like a Bolt looking compliance BEV they made Mustang Mach-E.  Instead of a boring Everest they're doing a real Bronco.  Instead of a boring Ecosport/Escape type short C crossover they're doing Baby Bronco.   Why?  Because vehicles like that are more desirable and can command higher ATPs and higher profit margins and they face a lot less competition.   At the end of the day these are still Ford trucks and utilities so not sure I get the analogy.  It's not like they're suddenly building houses.

 

As for AVs I think the original business plan is still solid - targeted at commercial delivery and people movers in smaller controlled areas like factories, neighborhoods (food delivery e.g.) and cities (package delivery).   But that's a relatively small market and I don't think it's a huge investment for them right now.

 

 

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Ford still has 1 huge advantage over the foreign guys and that is there dealers in small town...its roughly an 80 mile trip round trip for the small town north of me to get to the nissan or kia dealer which are closet foreign brands...the real issue is people in those towns cannot buy a 40k plus lectric car....they dont have the coin....dealers know there local market better than anybody...if those small town dealers close its going to cruch local economies...

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13 minutes ago, akirby said:

They know how to engineer and build those and they know how to sell them.   They understand the profit margins and they've always been competitive in those markets if not the market leader.

 

Statements that also apply, more or less, to sedans.

 

I mean, here's where I'm at with this: Ford's sedans, theoretically, should have been paying their way. They might have only been returning $.03 on the dollar, but I don't think Ford was having to rob trucks & utilities to fund the sedans. I mean, to the extent that there are shared systems between the sedans & utes, sedans actually help amortize the development cost of new utes.

 

So, it's not like Ford had to make a choice between guns and butter. They apparently decided to get out of the sedan business because they figured they could trade, say, two Escape sales for every four Focus sales, with the Escape being more than 2x as profitable as the Focus (effectively upping their margin). Problem is, I don't think the current sales mix is sustainable, I don't think they can grow the utility business enough to recapture all the revenue (amortization volume) and profits they're giving up, and when the sales mix shifts again, as it always does, Ford's going to have to sell people on the notion of Ford sedans all over again.

 

I tend to agree with Borg somewhat in the notion that Ford's wishy-washy approach to sedans (or, going back to 1970 or so, the less profitable section of the market, whatever it may be) is a drag on their long-term profitability. Over the increasingly long ownership cycle (isn't it close to 10 years now for purchases?), their customer acquisition costs have got to be higher if they keep shifting their strategy every five years or so.

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I think the part that folks are missing here is that Ford has fixed resources (to a certain degree).   You can't keep doing everything you've been doing and then add all these new vehicles and technologies without mortgaging your future and/or increasing your fixed costs dramatically.

 

Ford can absolutely make money on cars but when you take all the viable projects (including normal product lifecycles on existing vehicles) and put them in order of future importance and you draw the line where you run out of money or people resources, sedans fall below the line.  And trust me that is how corporate budgeting works.  There are always more projects than funding and some good projects simply don't make the cut.

 

Or to look at it another way, in order to keep cars they'd have to kill or delay some of the future products which presumably have better margin potential.   The encouraging thing for me is that Hackett seems to understand that you need unique and/or best in class products to maintain higher margins.  Judging by what we've heard about Bronco that seems to be carrying through to product execution.

 

If they start cutting corners and half-assing some of these new products then it will be a disaster but so far I don't see that happening.

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6 minutes ago, akirby said:

But that's a relatively small market and I don't think it's a huge investment for them right now.

 

Its a huge investment in the sense that there's still a lot of work to be done to make AVs feasible for the real world. Engineers are expensive. 

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17 minutes ago, RichardJensen said:

I tend to agree with Borg somewhat in the notion that Ford's wishy-washy approach to sedans (or, going back to 1970 or so, the less profitable section of the market, whatever it may be) is a drag on their long-term profitability. Over the increasingly long ownership cycle (isn't it close to 10 years now for purchases?), their customer acquisition costs have got to be higher if they keep shifting their strategy every five years or so.

 

I agree.  I thought that was over with when the 2013 Fusion came out.  AWD, HEVs and PHEVs, standout styling, Titanium models.   A great way to build on the momentum from the 1st gen Fusion and we saw that for the first few years.   Accord and Camry didn't make it to 400K sales overnight - it took decades of repeat buyers in addition to new buyers and you build that up over time.   Then I think 3 things happened.   1 - Kia and Hyundai got serious and Nissan started fleet dumping.   2 -  buyers started migrating to utilities (especially Titanium buyers).   3 - No significant updates.    All that turned into price wars and suddenly the only Fusions that were selling were SEs with $4K on the hood.  There goes your profit.

 

A significant 2017 visual refresh would have helped a lot.   Who wants to trade in their 2014 leased Fusion for a 2017 that looks exactly the same?  Not many people.  That's where Accord and Camry have excelled with visual refreshes every 3-4 years.   So from that standpoint it is frustrating to see Ford throw it away and start over.   But if the market is permanently shifting to utilities (and no reason to think it won't given hevs and phevs and BEVs and improved ICE fuel economy) it's probably better in the long run.

 

One side effect of Hackett's strategy is it makes a low volume CD6 high performance sedan more viable (higher ATPs, bigger profit margin) but that has to compete with other things like BEVs which probably have a better ROI and are more strategic.

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5 minutes ago, fuzzymoomoo said:

 

Its a huge investment in the sense that there's still a lot of work to be done to make AVs feasible for the real world. Engineers are expensive. 

 

Agreed but as a percentage of the overall R&D I'm thinking it's relatively small.   What does Ford spend on R&D - $7B/yr?  A team of 20 people would only be $2-$3M/yr.

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5 hours ago, rperez817 said:

 

You're thinking about cars and light trucks in a rational manner Roland sir. That's good. But automotive retailing doesn't work that way. It is a fashion oriented industry. Automakers and dealerships constantly figure out ways to get people to buy stuff that they don't need. Or in many cases, stuff they didn't even want at first. Just the nature of the business.

 

Absolutely.  But this is also why people are foolish to think that the CUV trend won't reverse because they're not as vulnerable to fuel price increases as the full sized SUVs were.  Wagons became unfashionable.  Minivans became unfashionable.  It will happen again because CUVs are just pointy mom vans.     The response I see that Ford will be able to respond quickly this time because they have world platforms is laughable.  That's what they say ever time.   The Ranger took forever and it's nearly indistinguishable from what already existed.  The Bronco is taking forever.  Ford is still glacially slow even when they have an existing platform. 

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30 minutes ago, akirby said:

 

I agree.  I thought that was over with when the 2013 Fusion came out.  AWD, HEVs and PHEVs, standout styling, Titanium models.   A great way to build on the momentum from the 1st gen Fusion and we saw that for the first few years.   Accord and Camry didn't make it to 400K sales overnight - it took decades of repeat buyers in addition to new buyers and you build that up over time.   Then I think 3 things happened.   1 - Kia and Hyundai got serious and Nissan started fleet dumping.   2 -  buyers started migrating to utilities (especially Titanium buyers).   3 - No significant updates.    All that turned into price wars and suddenly the only Fusions that were selling were SEs with $4K on the hood.  There goes your profit.

 

A significant 2017 visual refresh would have helped a lot.   Who wants to trade in their 2014 leased Fusion for a 2017 that looks exactly the same?  Not many people.  That's where Accord and Camry have excelled with visual refreshes every 3-4 years.   So from that standpoint it is frustrating to see Ford throw it away and start over.   But if the market is permanently shifting to utilities (and no reason to think it won't given hevs and phevs and BEVs and improved ICE fuel economy) it's probably better in the long run.

 

One side effect of Hackett's strategy is it makes a low volume CD6 high performance sedan more viable (higher ATPs, bigger profit margin) but that has to compete with other things like BEVs which probably have a better ROI and are more strategic.

 

It's my understanding that the CD6 cars (Continental and Mustang) were cancelled before Hackett was here and it's one of the contentious issues that caused problems for Fields who had pushed for the platform and justified funding by promising more products than it ultimately got.  The problems came up relatively early in development so they ended up not wasting a ton of money to make the platform flexible for other products, although it came at the expense of volume.  Ford ultimately moved to sharing the architecture's parts rather than the platform itself.  It's a little tragic, but Fields was passionate about getting this product off the ground after what seemed like decades of defeated RWD dreams. 

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33 minutes ago, Roland said:

 

Absolutely.  But this is also why people are foolish to think that the CUV trend won't reverse because they're not as vulnerable to fuel price increases as the full sized SUVs were.  Wagons became unfashionable.  Minivans became unfashionable.  It will happen again because CUVs are just pointy mom vans.     The response I see that Ford will be able to respond quickly this time because they have world platforms is laughable.  That's what they say ever time.   The Ranger took forever and it's nearly indistinguishable from what already existed.  The Bronco is taking forever.  Ford is still glacially slow even when they have an existing platform. 

 

The BIG difference is that a Wagon and Minivan are very rigid product templates, an SUV or Crossover are very loosely defined categories.  They can be virtually anything with a hatchback.  Any size, shape, style, or price.  It's the only product category that essentially describes a general form factor rather than a specific defined segment.  I'm definitely of the opinion that the form factor of the automobile has changed.  Ford describes it by "Profile", which I think is a very good way of looking at it.  The profile of a vehicle has evolved to enhance all the things most car buyers want, utility, value, flexibility, style, comfort, luxury, safety, etc.  Sedans, especially volume sedans, are just obsolete to most consumers, especially now that Crossoers can be had in such a variety that it's impossible not to finding something that fits your needs and price.  I notice that the only people who are mad at utilities simply have never owned one and are vocal about being forced to accept one.  I was basically forced into one back in 2007 when Lincoln stopped making the LS, and man I never looked back!  Since then they've only gotten much better.  I will say that Crossovers still have a long way to go to adopt more sedan friendly form factors, but until that transition happens people still want their Crossovers to look distinctly like utilities and not like sedan which is still in the anonymous commodities stage of the marketplace.  The first car that sort of bridges that gap is really the Mach E, but that's a weird experimental vehicle to classify.  And it's also not a volume product.    

 

I think it's possible the sedan market as we understand it will stabilize, but it will never return or grow in ways that are worthwhile.  We have never seen a permanent swing back to any previous volume segment once it's been replaced, especially now that the market has more variety than ever.  

 

 

Edited by Assimilator

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1 hour ago, akirby said:

 

Agreed but as a percentage of the overall R&D I'm thinking it's relatively small.   What does Ford spend on R&D - $7B/yr?  A team of 20 people would only be $2-$3M/yr.

 

But for how long? And then after that what’s the break even point and can Ford even reach it? Obviously they think so but that's still a big unknown in my mind. 

Edited by fuzzymoomoo

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5 hours ago, akirby said:

Manufacturers aren't pushing anything on consumers - they're responding to what consumers want to buy.   Edge gets 24 mpg while Fusion gets 27.  Not a big difference.

 

I don't understand why some people just can't comprehend that some of us like crossovers just because we like them, not because we're brainwashed or trying to impress someone.

 

No, sorry.  I don't buy that Ford is just writing off half a million passenger car buyers a year and not trying to move them into something that they're still making.  And I don't believe that all of those buyers - or even a substantial portion - are just waiting for the opportunity to move into a CUV.

 

People may think that they're not trying to impress anyone but consumers are conscious of what they think their buying choices say about them.  A wagon might fit their needs and be more efficient but wagons are unfashionable.  A minivan might fit their needs and be more practical and more efficient, but minivans are unfashionable. 

 

I'm not even saying that it's Ford's responsibility to convince these people that there are better options.   I'm saying that Ford makes this same mistake over and over.   This is a fashion trend.  They can't run from entire segments because they can't compete economically and think that those same economics aren't going to catch up with them across the board.   And every time they go through this cycle, they come out with a lower market share.   I expect that will be the outcome again.

 

 

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28 minutes ago, Roland said:

 

No, sorry.  I don't buy that Ford is just writing off half a million passenger car buyers a year and not trying to move them into something that they're still making.  And I don't believe that all of those buyers - or even a substantial portion - are just waiting for the opportunity to move into a CUV.

 

People may think that they're not trying to impress anyone but consumers are conscious of what they think their buying choices say about them.  A wagon might fit their needs and be more efficient but wagons are unfashionable.  A minivan might fit their needs and be more practical and more efficient, but minivans are unfashionable. 

 

I'm not even saying that it's Ford's responsibility to convince these people that there are better options.   I'm saying that Ford makes this same mistake over and over.   This is a fashion trend.  They can't run from entire segments because they can't compete economically and think that those same economics aren't going to catch up with them across the board.   And every time they go through this cycle, they come out with a lower market share.   I expect that will be the outcome again.

 

 

Its 1973 all over again....line for gas 2 blocks long yet ford still is building guzzlers cause they know best (bought new mazda in 72)...that aside i have zilch against suv's...but my wife does not like them...couple that with evasive manuvering due to deer in road and they (suv's) roll right over....gas mileage is still pathetic on them regardless of what is printed on this forum...if it was good then why did ford put a pony on a lectric car....we wont be forced into a suv by ford...cars going forth will be mazda....

Edited by snooter

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There is zero evidence that consumers will switch from CUVs to cars.  Today’s teens and twenty somethings grew up in SUVs and crossovers.  It’s what they like and it has nothing to do with image.  There is no image in an escape or edge or Ecosport.  As folks like me get older they have trouble getting in and out of cars.  And fuel economy is a non starter with full sized trucks and SUVs in the low to mid 20s, mid sizers in the mid to upper 20s and smaller ones and hybrids in the 30s.   It’s not happening just because you want it to happen.

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