The opening quarter of 2018 has been an eventful one for the auto industry. First, continued concerns about Tesla factories and worker hardships flooded the web, along with newer issues related to its (literally) driverless cars. In March, the horrific accident involving Uber’s self-driving vehicle showed us that perhaps autonomy isn’t where we all thought it was. Then there were a few scary weekends in which U.S. auto stocks fell after talks of tariffs and a global recession.

Such stories dwarfed normally important industry news, pushing otherwise front-page headlines onto the third page, such as GM’s switch to quarterly reporting and a wave of subscription and rental services offered to dealers.

Now that those viral-friendly pieces have seemingly come and gone, it’s time to focus on what we feel is the biggest automotive story of the year: Ford’s aggressive plans for the future, including the elimination of nearly every sedan in its lineup.

Breaking Ford News

“What?! Did I Miss Something?”

If you haven’t yet heard about Ford’s five-yearish plan, then yes, you’ve missed something. Announced within the official Ford 1Q Financial Statement, the automaker’s strategic framework is as follows:

  • By 2020, Ford will cut ties with all sedans and cars not named “Mustang” or “Focus.”
  • The new Focus Active crossover will be the only holdover.
  • Approximately 90% of the Ford portfolio will be made from pickups, SUVs, and commercial vehicles.
  • By 2022, Ford will produce 16 electric-hybrid models, including the F-150, Escape, and upcoming Bronco.
  • Ford will focus extensively on developing a so-called “viable autonomous technology business” to offer ride-hailing and the delivery of goods.
  • The company will also scale its Transportation Mobility Cloud product and Ford Credit program.

Bold Strategy

Of course, the biggest news there is Ford’s proposed shift from being an all-encompassing auto manufacturer to one that specializes in larger or niche vehicles like the Mustang. A bold strategy, for sure, but hasn’t the writing been written on the wall for quite a while?

Why Ditching Cars Could Make Sense for Ford

A decade ago, in 2008, Ford took a firm stance on the car-versus-truck dilemma. Some projections at the time made it appear like car technology—primarily the emergence of more effective EV batteries and alternative fuels—would make trucks and SUVs obsolete. Ford’s plan for sustainability was to then focus equal attention on building both fuel-efficient sedans and heavy-duty trucks, almost like betting an equal amount on red and black.

Cars vs Trucks vs SUVs

Boy, was that thinking egregious. As of 2018, U.S. car sales are down nearly 11% YoY, while trucks and SUVs are up almost 10% and 14%, respectively. Whoops. But the reasons why Ford’s recent change of heart makes sense are nuanced and as varied as the possible landing spots on a roulette table:

  • For one, driverless cars—even after a rocky start to 2018—are still very much the autonomous vehicles of the future. Doing away with the standard sedan fare now provides engineers ample time to invest in, test, and draft the next lineup of self-driving Ford cars, not develop “refreshed” versions of models that will be obsolete in a decade.
  • Similarly, North American Ford plants can dedicate the entirety of their manufacturing resources to current and prospective vehicles, the latter of which will also produce modern training opportunities for Ford employees.
  • It’s becoming increasingly more expensive to redesign single models every few years, especially when considering the huge slump in sales of new sedans. While Ford netted north of $1.5B in Q1, a 23% dip in car sales really affected their bottom line—analysts estimate that Ford loses approximately $800 million annually by staying in the sedan game—as well as dealers’ overhead costs.
  • SUVs and crossovers are finally as efficient as sedans from a decade ago. The ’08 Fusion, for instance, returned 29 mpg on the highway; the 2018 Ford Escape’s rating is 30 mpg. Consumers have spoken, and they’re saying they’d rather have added versatility over a few more miles to the gallon.
  • Ford can always revert to a traditional lineup if buying trends and fuel prices diverge from their current projection lines. Their announcement of a “holy grail” C2 unibody platform puts Ford in the perfect position to pivot from trucks and SUVs to sedans and hatchbacks, should the need arise.
  • In bigger cities, where compact cars and hatchbacks were suspected to thrive, public transportation and ride-hailing services have instead taken over. Uber has even announced new product updates and services that will undoubtedly cut into car sales in cities like NYC and Seattle.
  • Specializing in a niche market can do a world of good for some brands. Nissan, for instance, seems to be living large on Commercial Ave, having garnered a 48% increase in fleet deliveries last month. If Ford can make their new SUV and truck selection sing, they could be in a similar and equally ideal position to corner a market.

While critics may be skeptical of Ford’s new strategy, the jury will remain out until at least 2020.

How This Affects Dealers Directly

Unfortunately, some Ford dealers may feel left in a lurch after this new announcement—and it wouldn’t be the first time. Just a decade ago, when the Ford-Mercury experiment came to a bitter end, dealers voiced their concern over losing past Mercury consumers.

“They’ll find their way to the Taurus and Fusion.” Ford’s optimistic response was more narrow-sighted than dealers had deserved, and it left them to singlehandedly suture customer-dealer gashes created by the dropping of venerable models like the Sable. And, as we now know, the Taurus and Fusion didn’t cut it in the eyes of Ford’s decisionmakers.

The news from Detroit is sure to impact Ford dealers, particularly those in markets where cars are still valued and sold. Consumers in such areas will forego visits to the local Ford dealership, instead opting to head to a competitor to buy a car. If Ford’s crossover lineup can’t sway those car-loving customers, dealers may suffer substantial losses in traffic, both in their showroom and on their VDPs.

In preparation for this change, it’s imperative that Ford dealers start considering how they can eliminate sedan overhead while also staying ahead of the curve. (Oh, you want some tips? Check out our few freebies below.)

  • Offer the best customer service known to man. A missed email here, a wonky voicemail there—they add up. If you need help evaluating your capabilities to make a sale, consider asking us about our Customer Engagement Analysis product.
  • If your dealership reviews aren’t eye-opening, you’re going to be clawing your way back up. Invest in the proper channels to manage your reputation.
  • Break down your marketing strategy. Strip it to its core. Learn where your wins and losses originate, and then focus your attention on the targeted demographics that best offer you continued success.
  • Will you be in a good position to sell used cars alongside Ford trucks and crossovers? How can you be certain? You have several options as a dealer to ensure you are bringing in car shoppers, including an enhanced dealer PPC campaign that concentrates on driving traffic through qualifying keyword phrases.
  • Consider creating a dealer-exclusive loaner, rental, and subscription service.
  • Develop a new trade-in program to procure certified Ford sedans that may hold their value post-2020.
  • Begin running digital promotions and email blasts that will incentivize customers to purchase a Ford car before they become relics of a past generation.
  • Give attention to your Ford fleet department by pushing special pricing on company sedans.
  • Train your sales team to utilize your CRM as efficiently as possible.

Have any other questions or concerns that need to be answered before Ford pulls the plug on its esteemed sedan lineup? Reach out to our OppMax team for advice. We have been working within Ford’s airspace for years, and you’ll be floored by how well our recent Ford CRM Coach Program turned out (ask!).

The Fondest of Farewells to Ford’s Finest

Since the turn of last century, Ford’s never been without a voice in the U.S. marketplace. But within the next handful of years, we’ll need to say goodbye to some of America’s favorite Ford cars. (Take it away, Sarah McLachlan.)

Here’s to you, Taurus, whose nameplate has become synonymous with dependability and reliability since the Reagan administration. To the Fusion, whose unrelenting, decade-long style has been a sight for many tired eyes come Monday mornings. To the Fiesta and C-MAX, two of the best wingmen the Ford lineup’s ever seen. You’ll never be forgotten in Ford’s lore.

 

 

Sources & Photos:

https://www.engadget.com/2018/04/27/ford-s-decision-to-kill-most-its-cars-was-inevitable/

http://www.autonews.com/article/20180403/RETAIL01/180409920/gm-sales-retail-quarterly-reports-switch

https://www.cnbc.com/2018/02/08/we-still-dont-know-how-many-model-3-cars-tesla-is-making.html

https://www.technologyreview.com/s/607901/what-its-like-to-be-a-worker-in-teslas-car-factory/

https://www.washingtonpost.com/news/innovations/wp/2018/04/26/ford-has-been-synonymous-with-cars-for-more-than-a-century-thats-about-to-change/?utm_term=.3efab22a9733

https://media.ford.com/content/dam/fordmedia/North%20America/US/2018/04/25/1q18-financials.pdf

https://imgflip.com/memegenerator/31401473/Bold-Strategy-Cotton

http://www.wsj.com/mdc/public/page/2_3022-autosales.html

https://www.autoevolution.com/news/ford-c2-platform-described-as-holy-grail-by-head-of-engineering-125031.html

https://www.theverge.com/2018/4/11/17220408/uber-jump-getaround-masabi-cities-data

https://www.usatoday.com/story/money/cars/2018/04/26/cars-arent-dead-yet-despite-ford-killing-fusion-taurus/555322002/

www.nytimes.com/2018/04/29/world/europe/uk-autopilot-driver-no-hands.html

www.investors.com/news/auto-sales-gm-ford-fiat-chrysler-report/