Ford Killing All Sedans In North America — Blue Oval Bloodbath

Alicia Cross
April 26, 2018

Ford is eliminating almost all of its auto models in North America as it reinvents itself as a utility vehicle-focused brand in an effort to improve its operating efficiency and profit margin.

Cutting its slow-selling sedans and hatchbacks will serve to free up even more capital for light truck and mobility development.

The automaker now expects to save $25.5 billion by 2022, Chief Financial Officer Bob Shanks told reporters Wednesday as Ford reported first-quarter earnings per share and revenue that beat estimates.

Ford plans to cut $11 billion in operating costs and $5 billion in capital expenditures between 2019 and 2022.

Ford announced the improved guidance as the company reported a 9 percent increase in first-quarter net income.

The decision to eliminate the entire sedan lineup in North America is drastic to say the least as even Fiat Chrysler Automobiles chose to keep the Chrysler 300 and Dodge Charger when it chose to focus on trucks and SUVs.

The all-new Bronco will be revealed next year
The all-new Bronco will be revealed next year

Amid declining consumer demand and product profitability, the company said it will not invest in next generations of traditional Ford sedans. Its global profit margin was 5.2 percent in the quarter, as higher commodity costs reduced earnings in North America. "We are driven to turn this business around".

For comparison, Ford's light truck sales rose 7.2 percent, while GM's light truck sales jumped 26.1 percent. Europe was the only region to turn a profit for Ford. He said the Lincoln brand as a whole is not in danger but noted that it lost money in China because it is in ramp-up mode there after being introduced in 2014.

Ford Motor on Wednesday outlined a plan to cut costs and boost profit margins at a faster pace than previously announced, which includes dropping traditional sedan models in North America that have become increasingly unpopular with consumers.

About $4 billion of the $11.5 billion in cuts would be accomplished in 2019 and 2020, Shanks said, with the rest occurring in the subsequent two years. He said the company used "hard work" to find more efficiencies after Hackett unveiled his plan in October. The plan was met with a tepid reaction from analysts and investors, who have been eager to hear more specifics.

"We'll restructure as necessary, and we'll be decisive", he said. I don't think they're done yet.

The automaker says it made $1.74 billion, or 43 cents per share, compared with $1.59 billion, or 40 cents per share a year ago. In 2017 the company's pretax profit fell to $8.4 billion from $10.3 billion.

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