Ford eliminating passenger cars is paying off

Ford is selling a lot of
pickups.
Ford

• Ford posted
  
  US sales gains in August even as the overall market has
  flattened or declined.
• Ford pickup
  trucks and SUVs drove the gains.
• Ford made a strategic decision to all but eliminate
  passenger cars from its portfolio in coming years.

Ford reported August US sales on Tuesday, and although the market
has been weakening compared with 2017, the automaker’s tally was
up about 4% versus a year ago.

The story was all about pickup trucks and SUVs, vindicating a
decision that Ford, under CEO Jim Hackett, made earlier this year
to reduce its future passenger-car offerings in the US to
essentially one vehicle: the iconic Mustang. 

Hackett’s goal: to improve Ford’s competitive fitness and give
Wall Street a reasons to get excited about the automaker’s stock,
which has lagged behind peers’.

In a statement, Mark LaNeve, Ford’s VP of US marketing, sales and
service, cited 16 months of gains for the F-Series line of pickup
trucks, along with a 21% improvement in sales of SUVs, as August
highlights.

“Sales of our all-new Expedition were up a strong 95 percent,” he
added. “Right now, the hottest vehicle in America is our all-new
Lincoln Navigator, which saw sales expand by more than 100
percent in August.”

A strategic move away from passenger cars

The new Lincoln
Navigator.
Hollis Johnson/Business
Insider

In an interview with Business Insider, LaNeve commented on Ford’s
strategic move away from passenger cars, which for decades have
been at the core of the US market but have been displaced in the
past few years as new sales records have been set.

“We’ve been seeing the trends coming on for a while,” LaNeve
said. “But it’s been accelerating in 2018 over 2016 and 2017.”

He indicated that Ford is starting to see the benefits of it move
away from cars, whose future has been much-debated in the
industry amid consumer buying patterns that suggest a structural
shift is underway and that Americans may never revise the
four-door sedan.

“We’re focusing our marketing resources,” LaNeve said. “We’re not
spending money advertising passenger cars.”

Ford has been in a similar position before. Prior to the
financial crisis, it was easy to think of the company as a maker
of Mustangs and pickups. Former CEO Alan Mullaly sought to bring
more fuel-efficient vehicles into the mix, but for several years
now, consumers have voted against those products with their
wallets.

Back to the future — but a different future

The
Mustang.
Ford

“It’s back to the future for Ford,” Autotrader analyst Michelle
Krebs said in a email. “Ford is back to being largely a truck
company. Its
August sales performance
demonstrated its strength in trucks.”

LaNeve, however, pointed out that Ford’s new future is different
from its old one. Buyers no longer have to compromise when buying
an SUV or pickup as they did in the past, when these vehicles
delivered poor fuel economy relative to sedans. Technological
advancement has greatly improved engine efficiency, putting many
SUVs and crossovers on par with with their sedan stablemates.

“It’s a generational shift,” LaNeve said, adding that passengers
cars aren’t coming back. He recalled his time at Cadillac in the
early 1980s, when the entire luxury market in the US was made up
of big sedans and two-door coupés. “In the course of my career,
the entire market has shifted.”

And the onetime complaint against Ford has also changed.

“We’re probably a truck and Mustang company,” he said. But he
said it with pride — and not without noting that Ford is also
aggressively pursuing electrification of its vehicles, as well as
autonomous mobility. 

It certainly helps that Ford’s pickups and SUVs are highly
profitable, funding a potentially costly restructuring outlined
by Hackett.

“You’ve got to pick the places where you want to compete,” LaNeve
said. “As the market shrinks, there’s less demand, and the demand
that’s left is less profitable.”

Ford also has a bit of a secret weapon outside of passenger cars:
commercial vehicles. Its Transit van saw a 25% sales boost in
August. 

“Commercial is number one by a wider margin than retail trucks,”
LaNeve said. “Our team really knows that business.”