Before Ford (F) CEO Jim Farley was in the position he is in now, his predecessor made a ballsy move that still dictates the direction of the automaker today.
In 2018, the Blue Oval discontinued passenger cars for the United States market, save for the iconic Mustang pony car. Citing declining profits and plunging demand, the move saw the Ford lineup transform from a diverse selection of small hatchbacks, compacts, sedans, crossovers, SUVs, and pickup trucks to a selection consisting of just pickup trucks, SUVs, crossovers, and the Mustang.
“We’re going to feed the healthy parts of our business and deal decisively with the areas that destroy value,” former Ford CEO James P. Hackett said during the company's Q1 2018 earnings call. “We’re starting to understand what we need to do and making clear decisions there.”
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Farley, who was also on the call as Ford's then Executive Vice President and President of Global Markets, gave a preview of what to expect to UBS Analyst Colin Langan.
"We'll have more authentic off-roaders, building our Built Ford Tough background like Bronco and other new nameplates we don't sell today. We will refresh our entire lineup of traditional crossovers and SUVs that everyone knows, like Explorer and Escape," Farley said. "We're going to be introducing and taking capital and redeploying it for also new silhouettes, products that give customers the utility benefits without the penalty of fuel economy. And they will be performance and active executed, so they'll be very emotional."
Six years on and with Farley at the helm, Ford's Blue Division — the division encompassing Ford's gas-powered vehicles, is as profitable as ever. Ford's Q2 2024 data shows that despite mounting warranty claims, it still managed to pull in EBIT nearing $1.2 billion.
Though Ford is making major changes to improve profitability in its EV program, Ford is still making gas-powered passenger cars in markets outside the United States — but it might not be for long.
The "boring-car" business.
In a recent interview with British automotive authority CAR magazine, Farley expressed the new Ford strategy of making cars that remind them of their "great ones" to reignite the curiosity and passion in its potential and legacy customers.
"We’re getting out of the boring-car business and into the iconic-vehicle business," Farley told the magazine.
The "boring cars" in question are the Mondeo, an Accord and Camry-sized family sedan that was previously sold in the States as the Fusion until 2018; the Focus, a compact hatchback and sedan that ceased U.S. production in 2018; and the subcompact Fiesta, which ceased sales in the US in 2019.
Farley says that the cars were "loved by a lot of customers, but they could never justify more capital allocation — unlike commercial vehicles."
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The CEO also feels development costs are much better spent on fast cars and off-road-oriented vehicles like the Mustang and Bronco, respectively, which are popular among gearheads and enthusiasts.
"We’re naturally good at fast Fords and Broncos and authentic off-roaders," he told the magazine.
"Take [the F-150] Raptor: it came from desert racing in Mexico and we made it global and mainstream. The Raptor story is a great example of where I think our passenger cars should go."
Specifically for Mustang; Farley has high ambitions for Dearborn's pony car.
"We can take on Porsche with Mustang – it’s the best-selling sports coupe in the world. We’re going to invest in that brand and get stronger and stronger."
Farley explained that for Ford, sports cars and other enthusiast cars used to be a "side business" and that with added attention to its Mustang, Raptor cars and the Bronco, they are able to make them mainstream.
The Dilemma
Ford's replacement for the Mondeo, Focus, and Fiesta are two EVs that use Volkswagen's MEB platform: the Explorer and the Capri crossovers, which are European-exclusive models.
Ford's pivot to SUVs may work in the United States, but it is a different story over in Europe. According to the latest data from JATO Dynamics, only three crossover SUVS and zero traditional SUVs are among the top ten bestsellers in the continent.
Their tastes lean toward smaller compact cars like the Volkswagen Golf—cars that Ford's European division has been conveniently canning. The similar-sized Focus will cease production in 2025. In 2023, the Ford Fiesta ceased production, and the Mondeo sedan left the Ford lineup the year before.
These actions have consequences. The latest data from the European Automobile Manufacturers' Association (ACEA) shows that Ford sales are struggling in Europe, as it reported that the Blue Oval had a 4% percent market share in June 2023 to just 2.9% in June 2024.
Ford Motor Company, which trades under the symbol F on the New York Stock Exchange, is up 0.94% today, trading at $10.78 at the time of writing.
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