On March 15th the Ford Motor Company raised a flare that big changes were looming via a Medium blog post by Jim Farley, president of global markets: “We’re transforming our North American lineup by 2020, going all-in on hybrids, adding more SUVs and even more standard cutting-edge tech.”
We’re transforming our North American lineup by 2020, going all-in on hybrids, adding more SUVs and even more standard cutting-edge tech. Learn more about what’s ahead: https://t.co/z9qOri2CZ3
— Ford Motor Company (@Ford) March 15, 2018
On Wednesday, the extent of the transformation and how much “all in” entails became clearer—it’s bringing more focus to its portfolio but losing all but two of its small passenger car models as it revamps its entire line-up of vehicles.
The automaker (#33 on Interbrand’s Best Global Brands list) is scaling back its small car line-up and phasing out the Fiesta, Taurus, Fusion and regular Focus passenger cars in the United States and Canada. As it moves to double down on trucks, SUVs and crossovers, it will continue to invest in electric and autonomous vehicles and smart mobility solutions to address changes in urban living and transportation. And restructuring is looming as it’s changing its regional manufacturing model to be more agile and responsive to market and customer demands.
After the markets closed on Wednesday, Ford announced as part of its first quarter earnings release that it’s refocusing its production and marketing strategy, dropping all but two models of cars in North America. The only passenger car models that will survive the cull will be the Mustang (celebrated with National Mustang Day last week) and the Ford Focus Active, a crossover-style hatchback that’s not even on the market yet, and is slated to debut next year.
The changes mark the biggest transformation in the company’s history, and reflect changing consumer tastes and the massive pressures on the auto industry as a whole due to “declining consumer demand and product profitability,” not to mention declining car ownership and the rise of the sharing economy.
“How we think about our lineup in North America, especially, is that we are developing incremental nameplates we don’t have today and shifting the allocation of the capital portfolio to utility body styles, and there will be a variety, a growing variety, of those products,” said Farley on Wednesday’s earnings call.
Select comments from Ford CEO Jim Hackett on the quarterly earnings call with analysts shed more light on the global overhaul, with more details still to come. Hackett walked Wall Street analysts through the new strategy (and the 1st quarter earnings deck), including the three-pronged insights that led to the company’s restructuring:
• One, through our fitness and strategy work, we have gained clarity on where we need to focus. This includes answering questions on what do we do with the businesses not earning their cost of capital and identifying which underlying processes need to be modernized.
• Two, we have also gained clarity on our vehicle portfolio and where we want to play. And in parallel, we’ll leverage a suite of propulsion systems. Think of these as the internal combustion system, hybrids and battery electric vehicles, to give customers what they want regardless of fuel prices.
• And three, I’m also pleased to share that our work to support our vision for smart vehicles in a smart world is starting to gel and showing the potential to create long-term value.
Now we’ll share more today on this emergent work. Following the work of the past 11 months, we can now give you a more clear view of how we plan to improve our returns. We believe this reflects a profound refocus of our business.
There are some good examples of where this will come from. In marketing and sales, we’ve identified three key areas. On the fixed marketing side, we can better improve our digital capabilities and improve our return on investment on media. In addition, via regionalization and personalization, we can better optimize our yield management in our incentives program.
We’re using to drive a more competitive, higher return and resilient business. Our industry is undergoing a complete redesign of what we think of as the historic transportation system and the role of automakers and everyone else in that system.
This redesign will reshape how our customers live, work, and move, how business is transacted, how cities are managed, how urban congestion and pollution are controlled. At Ford, we want to do more than compete in this new world. We intend to lead its design.
Enabling human progress through freedom of movement has always been central to our mission, and it’s the reason we have been successful for 115 years. We’ll remain true to our heritage as we transform our business model to capitalize on the trends: by making smart choices; by building smart vehicles that integrate the best technology; and by providing customers with the most trusted mobility platform and services in the industry.
We are on an incredibly exciting journey to redefine the automotive industry. And as we said, it starts with making these smart choices. We will focus on products and markets where we know we can win.
Given declining customer demand and product profitability, we will not invest in next generations of traditional Ford sedans for North America. Over the next few years, our Ford car portfolio in North America will transition to two vehicles: our best-selling Mustang and an exciting all-new Focus Active crossover coming out next year.
A second choice is a full commitment to new propulsion, including adding hybrid electrics to high-volume profitable vehicles like the F-150, the Mustang, the Explorer and the new Bronco. Our battery electric vehicle rollout starts in 2020 with a performance utility, and we will have 16 battery electric vehicles by 2022. In our endeavor to make electric vehicles more desirable, we’ll deliver vehicles with the capability, performance and interior design that customers need and want, without the traditional fuel economy penalty they used to see.
Our third choice is autonomous technology. We’re going to develop a profitable autonomous vehicle service that offers the most trusted and human-centered ride-hailing and goods delivery experience. Our partners at Argo AI have assembled an incredible collection of talent and expertise… and we’re working hand in hand with them to build a great AV business model.
Our final choice is the mobility experience. This is about creating and scaling our mobility platform and services that will drive a new what we’re calling sticky revenue and profit streams for us. We see ourselves not just as a provider of mobile solutions, but also as an orchestrator of digital connections, from vehicle to street to business to home. That’s going to be an exciting proposition.
We’re committed to taking the appropriate actions to drive profitable growth and maximize the returns of our business over the long term. We do have a bias towards urgent action. We aren’t just exploring partnerships. We’ve now done them. We aren’t just talking about ideas, but we’ve made decisions.
As we’re updating our thinking about One Ford, we realize that the parallel interest and emphasis that I’m bringing about user-centered insights is that we can add to these platforms in regions region-specific characteristics of vehicles. And just that little nuance can make a big difference in the way you achieve scale
We’re one of the very few companies that actually have the autonomous team and the vehicles teams working in tandem. There are a lot of suppliers for autonomy out there and there are a lot of OEMs, but we’re only one of a handful of companies that are actually doing the work together, which we think’s going to be an advantage.
A very important part of our new strategy is to offer a catalog of modules for each of the regions to pick from for their vehicles, but still take advantage of the five core architectures that we’ll use globally. So we can get the advantage of the engineering skill, the platform level, and take advantage of the local scale from the supply base and the country-specific attributes in the region.
All of our China products will be connected. It’s a very important part of our strategy as a company, and there’s no place more important than China. We also are working with Alibaba on connectivity and in-car experience
And finally, we have a great team. I’m really happy. They’re energized. They’re acting with this sense of urgency and commitment. We’re working really well together. And just to state it simply, we’re excited about the future here at Ford Motor Company.