Is Ford in trouble?

[Trader 10]

You may be right akirby, but the ancient Fusion still outsells the Edge.

[fordmantpw]

It doesn't make sense in 2014 and the SUV craze hasn't demolished the sedan market yet. They complained nobody was buying them when you could get something similarly (if not better) equipped AND with more room for the same monthly payment.

 

What if I told you he wanted a truck but she has it in her head that the back seat of a full size (SuperCrew) pickup is tiny.

 

And I would say that's a woman trying to find an excuse to keep him from a truck. Or maybe she's just uneducated.

 

Seriously, and F150 SuperCrew's backseat is HUGE!

[fordmantpw]

You may be right akirby, but the ancient Fusion still outsells the Edge.

 

Who was number one in sales when GM went bankrupt?

 

For the 10 billionth time, it's not the total number of sales, it's the profit per sale.

[Trader 10]

Read the posts, I was referring to akirbys comment that 99% of drivers would buy the Edge over the Fusion.

[Fgts]

You dont really understand how profit works, do you?

Just like you don't understand supply and demand?, can't force something on someone what they don't want, they'll go elsewhere and it's back to square-one with needing new buyers.

A $25K car can be very profitable if it can be sold for $25K. But when the market is so crowded that the competition is putting $4K incentives on the hood and you have to match it to sell anything, there goes your profit.

 

The same formula can be added to truck/SUVs also, surely the majority of the F-Series don't leave lots without an incentive deal.

If buyers only want cheap SEs and you only sell Titaniums now your volume has dropped so much you cant make any money even with higher ATPs.

Its like you think every vehicle sold is profitable regardless of price or volume. Ridiculous.

Just as ridiculous as "everyone wants a truck/SUV at top price". Ford should kill the Mustang and not do any sport cars if it was only about high ATPs only. You keep thinking "Fusion", I'm saying replace Fusion/Focus/Taurus with one sedan that's shared with the Explorer and company, yes it will be lower sales but in-return higher ATPs and Ford would not lose that many sedan customers, Ford still can't make money off that they need to fire their accountants (or CEO).

[jpd80]

Go back a few years and Ford was swearing up and down that there was no call for a Ranger, now we have one.

Just like that example, maybe cars need a reset so that there's a clearer perspective of what's needed.

[silvrsvt]

You would think they would try to steer some of those buyers to a similarly sized Edge but they aren't. A friend of mine just got one last week and there are NO deals to be had on those, even with Z-plan. They're paying more for theirs per month than I am for my Fusion and my Fusion is better equipped. AND the 19s are out so the fire sale should be on by now.

So the problem is this and you answered your own question-

 

An Escape starts at $23k, almost 6k more then the Focus

 

The Edge starts at $29k, almost 7k more then a Fusion.

 

Going by monthly payment alone-people will go for the Escape instead and also demonstrates why CUVs are more profitable-you can still offer an inventive on them and still make more money on them. Outside of the AWD system, there really isnt much difference in price in raw materials/labor to build them.

 

Car profits are partly depressed/limited due to competition. Unless other makers want to cut into profit and undercut other makers for market share by making CUVs cheaper-all they be doing is shooting themselves in the foot.

[silvrsvt]

Go back a few years and Ford was swearing up and down that there was no call for a Ranger, now we have one.

Just like that example, maybe cars need a reset so that there's a clearer perspective of what's needed.

That makes some sense, but the real issue is the demand is weak and profits low because people are shopping for vaule when it comes to a car.

[twintornados]

https://www.bloomberg.com/news/articles/2018-10-24/ford-starts-showing-positive-results-from-exiting-sedan-market

 

 

Ford Motor Co. is already showing results from its controversial decision to exit the sedan business in America and make a bet on bigger vehicles. The automaker surprised Wall Street with better-than-expected earnings due mainly to selling more high-priced trucks and sport-utility vehicles.

North American pretax profit rose to $2 billion, even though Ford sold fewer vehicles, because buyers sought more richly appointed SUVs and F-Series pickups at higher average prices. That helped produce adjusted earnings of 29 cents a share, just beating analysts’ estimates, and Ford shares rose 5.9 percent in after-hours trading.

[coupe3w]

https://www.bloomberg.com/news/articles/2018-10-24/ford-starts-showing-positive-results-from-exiting-sedan-market

 

Can't go by one month. Let's see if it continues for a couple of quarters shell we.

[akirby]

You may be right akirby, but the ancient Fusion still outsells the Edge.

 

The context was based on driving dynamics alone. I'm saying that only 1 out of 100 people care enough about handling to purchase the Fusion over the Edge based on that alone.

 

Local dealer has 2 Fusions - $25K and $27K. They have 8 Edges from $25K to $43K. Cheaper cars always outsell more expensive cars all else being equal.

[akirby]

Just like you don't understand supply and demand?, can't force something on someone what they don't want, they'll go elsewhere and it's back to square-one with needing new buyers.

The same formula can be added to truck/SUVs also, surely the majority of the F-Series don't leave lots without an incentive deal.

 

Sedans are in big supply/lower demand mode right now. Sales have fallen significantly FOR EVERY MFR including Honda. As a result, prices have also fallen and along with that profits.

 

Utility demand is on the rise and as a result, prices and profits are up because they don't have to discount them to sell them. And there is a lot more profit in a $40K utility than a $25K Fusion even without factoring in the big Fusion incentives.

 

So you're absolutely correct that supply and demand are at work here, but it actually backs up Ford's decision. You're right that sedan buyers will go elsewhere but they'll be replaced with utility and truck buyers. So they'll sell the same or almost the same number of vehicles but make a lot more profit. Is that really so hard to understand?

 

As for incentives on trucks, this is where you don't seem to understand profit margins. Conservatively, Ford probably makes $15K on a $60K F150. On a $25K Fusion it's probably at most $4K and most likely even less. Put a $4K incentive on each vehicle and now the F150 still gives you $11K profit while you break even on Fusion. Again - why is that so hard to understand?

 

 

 

Just as ridiculous as "everyone wants a truck/SUV at top price". Ford should kill the Mustang and not do any sport cars if it was only about high ATPs only. You keep thinking "Fusion", I'm saying replace Fusion/Focus/Taurus with one sedan that's shared with the Explorer and company, yes it will be lower sales but in-return higher ATPs and Ford would not lose that many sedan customers, Ford still can't make money off that they need to fire their accountants (or CEO).

 

I already said it could work but sales volume will be low and you have to ask whether it's worth it just to keep a few sedan buyers happy? It might be if it can be done cheaply and use existing factory space.

 

It's not whether such a vehicle would make money. I'm sure it would. But again in order to do that you have to cut something else in the pipeline. You can't just add a new vehicle to the mix without cutting something else. It's always a zero sum game. Every year you get $X capital and Y people and you have to decide what you're going to do and what doesn't make the cut. So if they need those resources to do AVs, TaaS, BEVs, hybrid utilities, Bronco, etc. then it won't make the cut.

 

I think that's the part that many don't understand. In a corporation you line up all the projects in order of importance and list what they cost. Then you go down the list until you run out of resources and you draw the line. Anything below the line doesn't get funded this year even though all probably have positive ROIs. And if you want to move something above the line then something else above the line gets moved down. That's just the way it works and that's what Ford is facing here. They've chosen to put other things above the line and move Focus and Fusion below the line. For now. Once these other projects have been developed they could easily change that. I expect to see Focus back in NA for sure at some point - it's just a matter of timing.

[twintornados]

Can't go by one month. Let's see if it continues for a couple of quarters shell we.

.

It's a quarterly report.

[rmc523]

No, there'll buy Civics now, the Tesla point is there's many people that don't wanna truck and still pay money for one.

 

How's a car starting at $25k not be profitable on a shared platform?, if that's the case they need to rethink the Escape also.

 

But there're primarily Ford sedans underneath.

 

 

Since Ford don't have to push SEs anymore push out "Platinum" and "Titanium" as the lower-priced sedan.

 

Huh?

 

Go back a few years and Ford was swearing up and down that there was no call for a Ranger, now we have one.

Just like that example, maybe cars need a reset so that there's a clearer perspective of what's needed.

 

I agree - I fully expect Ford to re-enter the "sedan" market with non-sedans.

 

https://www.bloomberg.com/news/articles/2018-10-24/ford-starts-showing-positive-results-from-exiting-sedan-market

 

 

I'd think it's a bit early to credit this toward dropping sedans.

[akirby]

I'd think it's a bit early to credit this toward dropping sedans.

 

Not credit it towards dropping sedans. Just reinforcing that selling more trucks and utilities are better for the bottom line.

[rmc523]

 

Not credit it towards dropping sedans. Just reinforcing that selling more trucks and utilities are better for the bottom line.

 

Well, duh.

[akirby]

Well, duh.

Some people still think Ford is “in trouble” because they’re dropping sedans.

[Fgts]

 

Huh?

 

 

 

Read slower, the ideal is since Ford won't do anything in the $15-$20k region anymore just start with a decently loaded sedan (minus optional larger engines) for $25k and go from there.

[Joe771476]

Ford let the Germans (Daimler) STEAL the newly redesigned L-series class 8/7 back around 1997 ending class 8 and it dominoed into killing class 7, two classes where Ford was a leading if not THE leading producer in sales for decades. Daimler, after having bought Freightliner, knew they had to get rid of Ford if the Freightliner purchase was going to pay off! Now another German company (VW) wants to compromise another segment that Ford leads in, the full-size van where Transit leads! Daimler, mfr. of Sprinter, put VW up to that! Daimler is ripping mad over Ford's Transit lead! Make no mistake about it!

[akirby]

Read slower, the ideal is since Ford won't do anything in the $15-$20k region anymore just start with a decently loaded sedan (minus optional larger engines) for $25k and go from there.

That doesn’t free up factory space in Hermosillo or eliminate all the R&D costs and resource drain.

[Fgts]

 

Sedans are in big supply/lower demand mode right now. Sales have fallen significantly FOR EVERY MFR including Honda. As a result, prices have also fallen and along with that profits.

 

Utility demand is on the rise and as a result, prices and profits are up because they don't have to discount them to sell them. And there is a lot more profit in a $40K utility than a $25K Fusion even without factoring in the big Fusion incentives.

 

So you're absolutely correct that supply and demand are at work here, but it actually backs up Ford's decision. You're right that sedan buyers will go elsewhere but they'll be replaced with utility and truck buyers. So they'll sell the same or almost the same number of vehicles but make a lot more profit. Is that really so hard to understand?

 

Not hard to understand if VW, Toyota, Daimler, GM can still offer a comprehensive a line-up with thier trucks and Ford gives-up. That's fine if Ford made money on truck/SUVs only but it always nice if an manufacturer make extra money is added because of a sedan line. No argument about ROI and so if customers won't be back..

 

As for incentives on trucks, this is where you don't seem to understand profit margins. Conservatively, Ford probably makes $15K on a $60K F150. On a $25K Fusion it's probably at most $4K and most likely even less. Put a $4K incentive on each vehicle and now the F150 still gives you $11K profit while you break even on Fusion. Again - why is that so hard to understand?

 

Well you don't have a financial consultant firm nor work for Ford finances so that make your opinion about my opinion just as void too, understand?.

 

I already said it could work but sales volume will be low and you have to ask whether it's worth it just to keep a few sedan buyers happy? It might be if it can be done cheaply and use existing factory space.

 

It's not whether such a vehicle would make money. I'm sure it would. But again in order to do that you have to cut something else in the pipeline. You can't just add a new vehicle to the mix without cutting something else. It's always a zero sum game. Every year you get $X capital and Y people and you have to decide what you're going to do and what doesn't make the cut. So if they need those resources to do AVs, TaaS, BEVs, hybrid utilities, Bronco, etc. then it won't make the cut.

 

I think that's the part that many don't understand. In a corporation you line up all the projects in order of importance and list what they cost. Then you go down the list until you run out of resources and you draw the line. Anything below the line doesn't get funded this year even though all probably have positive ROIs. And if you want to move something above the line then something else above the line gets moved down. That's just the way it works and that's what Ford is facing here. They've chosen to put other things above the line and move Focus and Fusion below the line. For now. Once these other projects have been developed they could easily change that. I expect to see Focus back in NA for sure at some point - it's just a matter of timing.

And as Ford being manufacturer experts I won't make excuses for how and what was supposed to come online if other domestic and foreign makes can pull-off miracles or look stupid.

[akirby]

F-series profit margins have been widely reported for decades. And if you can’t understand the difference between profits on a $60K truck with a $1250 rebate, a $40K CUV with a $1000 rebate and a $25K sedan with a $4K rebate then I’m done trying to explain anything to you.

[rperez817]

Not credit it towards dropping sedans. Just reinforcing that selling more trucks and utilities are better for the bottom line.

 

Well said akirby sir. Ford wisely put more emphasis on the vehicles that they do best (trucks, SUVs, Mustangs), less on what they don't do as well (sedans and hatchbacks). This strategy paid off nicely for Ford's earnings last quarter.

 

Now Ford is in a better position to improve the products that their customers want now and in the future (trucks, SUVs, Mustangs, electrified vehicles, autonomous vehicles).

[theoldwizard]

Go back a few years and Ford was swearing up and down that there was no call for a Ranger, now we have one.

Just like that example, maybe cars need a reset so that there's a clearer perspective of what's needed.

 

What never really came out in public at the time was cost. Ford thought that the cost of a Global Ranger made to US standards would be too close to the cost of the F150.

 

Three things have happened. The F150 got more expensive to build (and still continued to sell well) and careful reuse of major components (10R80, 2.3L EcoBoost, etc) plus sharing many components with the upcoming Explorer and Bronco (so higher volume) has helped reduce the cost of the NA Ranger. Last, the design costs to upgrade the Ranger to meet NA safety standards was rolled up into the redesign of the Global Ranger.

 

Cost is still an issue for Ranger. The high volume the old Ranger enjoyed at the end of its life was due in large part to it low cost. The new one will cost a LOT more. There is a lot of demand at the moment, but it will be interesting to see how sales are a year from now and if F150 has lost any sales.

[fuzzymoomoo]

At the end of the life of the old Ranger the engineering and tooling costs were LONG paid for so really the only thing they had to worry about was material and labor costs. They could afford to keep it really cheap. There isn't much in the ford lineup today that has that same luxury.