When President Trump was inaugurated, he was quick to follow up on his campaign message of bringing jobs back to America. At that time he lauded Ford for cancelling plans to move production to Mexico from Michigan, even though the decision was made long before Trump’s election victory.
In June of last year, Ford announced that it would move the production of the Focus model to China instead of Mexico – as part of some cost trimming. The company already builds the vehicle at a plant in the country and they were expecting bigger cost savings by doing this. The idea – at the time – was to export the China built cars back to the US which was not really helping to bring jobs back to the America!
Next up was the announcement that an electric SUV that was to be built in Michigan was now moving to Mexico, presumably to fill the capacity of a factory that should have been building the Focus. This vehicle is expected to start production in two years time, again removing jobs from the mainland. The idea was that the homeland factories would concentrate on highly profitable petrol/diesel SUVs and an autonomous vehicle based on a petrol hybrid power system. This vehicle has been designed for ride sharing and delivery companies with a usage range of 20 hours per day. Ford already has tie ups with Uber and Pizza Hut testing the vehicle.
In October of last year, Ford announced that it would transition away from passenger vehicles to more SUVs, electric vehicles and the autonomous delivery vehicle. Last month it confirmed that it would bin most of the passenger vehicles that are sold in the US over the next two years. The Fusion, Fiesta, Focus, C-Max and Taurus will be discontinued from the home market, whilst some of these models will continue in international markets. The halo car, being the Mustang, will survive – it would be suicidal for Ford to touch their most famous brand. I suspect that the profit margin on a Mustang is closer to an SUV than the run-of-the-mill passenger cars which has helped save it.
Ford is pinning its US future on two paths: the first is the bigger SUV/Mustang business and the other is based on smaller hybrid or electric SUVs and new cross-overs such as the anticipated Focus Active, with the autonomous vehicle added in as well. I can see the first path will pay for the second although I wonder how many jobs in the US will be safe – oil prices are rising thanks in part to unrest in the Middle East and some non-OPEC countries limiting their output. This will put pressure on the bigger SUVs and higher fuel usage vehicles. Would it be possible for Ford to maintain sales if the vehicles drink too much?
If the sales of SUVs drop, will Ford have to import more smaller cars from countries where import tariffs may be higher and therefore the profit margins are reduced. If that happens, the money to develop new models will be reduced as well. I’m also interested in the decision to build fully autonomous delivery vehicles. I would have thought that this was a very finite market and these vehicles could well be seen as energy wasters. There have been reports that many Uber cars spend more time driving with no passengers using fuel for no benefit. Ford’s delivery vehicles could be used the same way. Once you remove the humans from the delivery process, there will be less of them that can afford to buy products that the vehicles can deliver!
There is also speculation that the Lincoln brand will be trimmed – clearly if the Ford models that are used as a basis of a related Lincoln are to be dropped, then it doesn’t; bode well for the sister brand. It might also mean that only the Continental will be saved and this would be due in part to the historical brand surrounding it – like the Mustang. The other option is that badge engineering kicks in and all new Lincolns are simply rebadged SUVs.
Ford have said that all the surviving vehicles will be offered with hybrid-electric and pure electric power sources. The next question is whether Ford’s core buyers will continue to buy or will they switch to competing (and maybe cheaper) models from Japan or China. The next decade is going to be interesting and as I have said in earlier articles, the industry is ready for a shake-up with some of the older brands losing out to new, more nimble brands from Asia.