Ford is feeling the heat. Not from global warming and rising fuel prices, but its investors. Ford already fired one CEO last summer, and the new CEO, Jim Hackett, hasn’t lifted the stock price at all in the year he’s been in charge. Part of Ford’s solution is to essentially remove sedans from the US lineup over the next several years.
At the same time, Ford is adding five new SUVs and a pickup. Ford’s goal: Nine of 10 Fords sold by 2020 will be a truck, SUV/crossover, or commercial vehicle. Ford says it’s adding energy-efficient drivetrains, so it’s not ignoring the environment.
The sedans Ford plans to drop accounted for almost a fifth of Ford’s sales last year.
Critics say Ford’s move to drop sedans is part of the incremental creep toward bigger, less fuel-efficient SUVs. It comes against the backdrop of automaker enthusiasm for President Trump’s rollback of near-term (2025) fuel-efficiency standards, while at the same time supporting increased fuel efficiency longer-term — effectively postponing the day of reckoning. At Ford’s annual shareholder minute, it was criticized for getting out of the sedan business and, some said, stepping back from promises to be nice to the environment.
Meanwhile, executives from 10 major automakers and industry groups met Trump today (May 11) in Washington on fuel efficiency standards. Not surprisingly, Trump used the meeting to push other car-related topics, particularly building more cars in the United States. Trump said that he wants “more cars to be made in the United States. … millions of more cars.” He added, “Right now, [Sergio Marchionne] is my favorite person in the room,” referring to the chairman of Fiat Chrysler Automobiles, which plans to expand production in Detroit. Much of that will be pickup and SUV production, since the Dodge/Chrysler part is effectively out of the sedan business. It killed the Dodge Dart (a mercy killing) and the unloved Chrysler 200 in 2016, leaving only the Chrysler 300 and the similar Dodge Demon/Challenger/Charger.
Ford Focus (above) and Ford Fusion are Ford’s top-selling sedans. Only a Focus hatchback version will survive.
More EVs, More Efficient Powertrains
Ford is not happy with being characterized as a bad actor. Executive chairman Bill Ford Jr. is a staunch supporter of the environment and told shareholders Thursday, “We’ve been listening to our customers and watching shifts in the marketplace. We’re placing bets where we believe we can get you, the shareholders, very good returns.”
Ford (the company) points to an $11 billion investment to bring out 40 new electrified vehicles by 2022, 16 of them fully electric vehicles. Most of the crossovers in Ford’s line are getting better fuel economy with each new model or midlife refresh. Ford also says it has to follow customer demands, and they’re looking for bigger vehicles.
At the same time, Ford is helping stoke demand for bigger models. The Ford Explorer sells more than a quarter-million vehicles a year. The Explorer currently on the market is five inches longer than the Explorer of a decade ago. The fifth generation of Ford’s biggest SUV, the Expedition, was upsized four inches to to 210 inches. Its 2017 sales were down (table above) because of the model changeover, but were up for the first four months of 2018. Ford, like all automakers, benefited from a 2011 change — Obama-era change — in how the EPA calculated its Corporate Average Fuel Economy (CAFE) standards. Basically, fuel efficiency was still calculated in mpg, but for corporate fleet efficiency, it was rated on a sliding scale relative to the vehicle’s footprint, or the area bound by the four wheels. Effectively, automakers got a break on bigger cars. This affects all automakers, not just Ford.
Fuel Prices Creeping Up
There’s nothing like a gasoline shortage to get buyers thinking about more fuel-efficient cars. Right now, fuel prices are creeping up, but they’re not yet close to record US territory, let alone what Europeans pay for fuel.
According to AAA, the national average price of regular unleaded gasoline this week is $2.86 per gallon. A month ago it was $2.66 a gallon and a year ago it was $2.34 (or 22 percent higher than in 2017). If that’s causing pain, it’s nothing like the all-time high, $4.11 in July 2008 and 44 percent more than current fuel prices.
If fuel prices get well over $3 a gallon, say $3.50, that could change buyer behavior back toward sedans, hybrids, and plug-in hybrids. At the same time, many buyers find they’re about as happy and comfortable in a compact SUV as they are in a midsize sedan. And if that’s the case, then Ford is on the right track.