By Christopher A. Sawyer
The Virtual Driver

(April 28, 2018) Ford has announced it will stop developing sedans for the U.S. market, focusing instead on more profitable trucks, SUVs and crossovers. Though only just updated, the Fusion sedan will not be replaced, nor will current Focus, Taurus or Fiesta. Only the Mustang will survive on the Ford side of the ledger.

Lincoln will keep the MKZ and Continental, both of which are built off variants of the CD4 platform created for the Fusion and its European twin the Mondeo, and build new versions off an updated edition of that platform.

The shakeout is part of a strategy to cut costs, exit unprofitable segments, and increase margins by selling more vehicles in expanding segments. Along with cost cuts and efficiency improvements, Ford believes it will help underwrite aggressive moves in both vehicle autonomy and various levels of vehicle electrification.

Analysts are quick to point to the sharp decline in car sales and concurrent rise in the market share of trucks, SUVs and crossovers. Perennial sedan favorites like the Honda Civic and Accord, and Toyota Camry are selling below historical levels, and well below projections as buyers switch to trucks. This is a continuing trend, and one that began when CAFE standards  emasculated the tradition body-on-frame cars with which buyers used to tow, and automakers used their lower fuel economy requirements to switch customers into trucks.


Ford's future product plans in a nutshell: One car, lots of trucks and SUVs

It accelerated during the late 1980s as the Reagan Administration’s deregulation of the trucking industry put more 18-wheelers on the road, and set off the boom in over-the-road shipping currently being enjoyed by companies like Amazon. This increase in truck traffic caused angst among car drivers who began to feel more vulnerable on the road.

Light trucks continue to sell for premium prices compared to their car counterparts, increasing the incentive for automakers to create more entries, and further subdivide the segment. Absent other stimuli, this should have been enough to cause over saturation of the light truck market, but the increase in the number of light trucks on the road instead led to an arms race of sorts as buyers rushed to ditch their cars.

In addition to the vehicle’s carrying capacity and utility, buyers liked the image associated with trucks and SUVs, as well as their greater perceived safety. Nowhere was this more apparent than in a Wall Street Journal article on the popularity of GM’s now defunct Hummer division. In the first paragraphs of that front-page article, a 35 year-old woman was asked why she drove a Hummer H2. Her answer (which I paraphrase) was both chilling and illustrative: “If someone hits me, I’ll be fine and they’ll be dead.” This dovetailed perfectly with the mindset of what I call “Purell moms.”

Ford Focus Active — Raising a car's ride height and adding cladding isn't evidence of a new niche, but confirmation the market shift is close to running its course

Overly concerned about safety, they hover over their children, hand sanitizer at hand, in order to ward off threats both real and imagined. As their children grew and learned to drive, they didn’t invest in advanced driver training for their child, but insisted instead that they drive a SUV.

As occurred in the 1960s and 1970s, the automakers took things to extremes. Not only did light trucks become more luxurious, expensive, powerful and profitable, they grew in size as well. This put greater pressure on cars as drivers were now surrounded by full-size pickups and SUVs, as well as high-riding crossovers,. This reduced the car driver’s perceived visibility, and made it increasingly difficult to pull out of a spot in a crowded parking lot as you couldn’t see what was coming. This added to their angst, and lured more into the profitable light truck fold.

The one light truck segment that declined and plateaued was the minivan market. As large or larger than a comparable SUV, more spacious, and with an easier to access second and third row, the minivan would seem to be the perfect answer for most families. Unfortunately, as one Nissan marketing executive told me: “It isn’t cool to be a parent these days.” No matter how good, “Mom’s taxi” wasn't the image buyers sought.

Soon to be history — The Ford Fusion

Placed in this light, this makes Ford’s decision to essentially abandon the car market look like a smart choice. And, in the short term, it is. There are, however, a few clouds on the horizon. First, Ford is by no means alone in the market. The number of crossovers and SUVs seems to expand by the day, with new competitors and new variants entering the market.

As this proliferation continues, transaction prices will come under pressure and begin to drop. Second, new vehicle sales have been at or above 17 million units in the U.S. for a number of years, and are beginning to falter. Unless there is a highly stimulative effect via tax cuts or a significant increase in wages, vehicle sales will decline and plateau until the next replacement cycle occurs. Rebates and cash-back offers will increase.

Third, tightening safety and emission standards, and the increased cost of “keeping up with the Joneses” have driven buyers to overextend themselves financially. Banks and other lending institutions are investigating 84-month loans that will keep borrowers on the hook for seven years. While this lets them buy more vehicle than they normally could afford, it also creates a demand bubble that could burst in even a gentle downturn or market correction. The high-price/high-margin light trucks and crossovers Ford is betting will sustain its product onslaught and increase its share price could disappear quite quickly.


The 2020 Bronco takes on Jeep's Wrangler, but won't be the only competitor in an increasingly crowded segment

Fourth, Ford’s insistence that it is creating new vehicle silhouettes in order to fill up the whitespace in the market is nothing new. As we said in our coverage of the 2015 Detroit auto show: “Perhaps that mortgage could be paid with the nickels and dimes you could have earned every time an executive took to the stage and declared that his company’s offering was designed to fill the whitespace in a particular segment of the market.

The overuse of a buzzword is an annual event in Detroit (and at every auto show, to be honest), but the knee-jerk use of whitespace was promiscuous at best, and a sign of a complete lack of imagination at worst.” If they insist on chasing whitespace, perhaps Ford product planners can dust off the 2003 Lincoln Navicross Concept, or license Volvo’s old S60 Cross Country.

Instead of killing its car lineup, Ford should have asked itself why people don’t buy what they offer. In addition to the reasons stated above, the major stumbling blocks that keep buyers away are a lack of image, difficult ingress and egress, and a lack of both style and form-follows-function utility. Critics of this analysis will be quick to point out that vehicles that broadly met this recipe were built by Ford — the Ford Five Hundred/Taurus, Mercury Montego/Sable and Lincoln MKS — and failed to move the needle.


2008 Mercury Sable — Failed to move the needle

However, each of those cars lacked style, purpose, both build and perceived quality, and were trumpeted at the time as having been designed for the needs of aging drivers. Perhaps they forgot Lee Iacocca’s admonition: “You can sell a young man’s car to an old man, but you can’t sell an old man’s car to a young man.” As Millennials belatedly enter the market as their employment prospects increase, they will drive the narrative.

Young marrieds will fuel crossover, minivan and SUV sales in the interim, but these buyers are looking for a new solution to their needs as they ditch the urban life for the suburbs and PTA meetings. Ride sharing and autonomous vehicle use will increase, but mostly as replacements for busses and taxis. Most Millennials, like most drivers, will flirt with autonomy only to use it, much like a backup hard drive, as a reinforcement should things go wrong.

Their concerns about privacy — a major concern with autonomous vehicles — will increase as data breaches and the commercial sale of personal information increases. Also, like all generations they will begin to turn their backs on vehicles like the ones their parents drove.

Whether this will reignite love for cars or create a new product segment is unknown, but it spells trouble for those automakers who are overly invested in building yesterday’s vehicles.

The Virtual Driver