Ford CEO Touts Wisdom of Shedding Cars

The good news: sales of profitable pickups, utility vehicles and commercial vans are buying Ford time as it restructures its business. Consumers can take heart in a rash of new product coming next year including the Ranger pickup, Mustang Shelby GT500 and next-generation Explorer and Escape.

The success of the Lincoln Navigator and Ford Expedition contributed to strong profits in North America, said Ford CEO Jim Hackett in reporting third-quarter earnings.

Hackett stands by the decision to phase out sedans in North America. “These traditional sedans destroy value,” he said of plans to reduce the current car lineup to the Mustang as Ford explores replacement vehicles that are shaped more like crossovers. Capital that would have been used for Fiesta, Focus, Fusion and Taurus will fund new entries in trucks and utilities, he promises, with even more nameplates in the future.

The bad news: investors and analysts wanting more detail and perhaps a speedier overhaul under Hackett ended yet another earnings call with little to go on beyond an explanation that his team knows what needs to be done, and how to do it, but such an undertaking will take another five years or more.

“What I remind everybody of is we first have to find the areas that need the attention,” Hackett said. “We’re through that. We then have to design the solutions for them. We’re through a lot of that but not all of it. And then we have to put them in place and perform. If you read hesitancy from me, it’s not that we don’t know where we’re going or don’t know how to do it, it’s that there’s a massive undertaking that we have to have very thoughtfully orchestrated. Because my experience in doing this, the worst thing we could do is disrupt our business and we aren’t going to do that.”

The explanations come as Ford reported a 37-percent drop in third-quarter earnings to net income of $1 billion. The automaker had losses in Europe, South America and Asia Pacific, including China where sales, share, and revenue all fell. Hackett said he is particularly disappointed in China and the company now plans to make China a standalone business unit with a new CEO, Anning Chen.

The automaker has also said it no longer expects to meet its goal of achieving a global profit margin of 8 percent by 2020. Stock has languished below $9 and closed Wednesday at $8.18.

Part of the restructuring includes more partnerships, like the ones announced with Mahindra and Volkswagen. Projects with VW will include commercial vehicles but other areas being explored are VW making cars for Ford in Europe and Ford making a Ranger-based pickup for VW. What is not on the table is any kind of merger or equity swap.

Ford sent its full leadership to the national dealers meeting in Las Vegas this month to tell its retail front line that much work is being done behind the scenes to give them the freshest lineup in the business in the next few years. Beyond the Explorer, Escape, Ranger, and GT500, dealers look forward to the return of the Bronco, a smaller off-roader, and a Mustang-inspired electric utility vehicle coming in 2020. Lincoln has an Explorer-sized Aviator coming as well as a new compact crossover and four new nameplates coming—not to mention a lot of electrification. At least one Lincoln model will be made in China. Currently all are imported.

 

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