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Ford Has A “Better” Idea

Ford Has A “Better” Idea

Ford Has A “Better” Idea

You could write a book filled with all the things someone might reasonably think, say, or splutter about Ford’s recent decision to largely abandon the North American passenger car market. In late April, Ford’s new CEO, Jim Hackett, informed the financial community that, come 2020, almost 90 percent of Ford’s North American portfolio will consist of trucks and utility and commercial vehicles. There is room here to touch on only a few concerns this development rains down upon us. Farewell Fusion, Focus, Fiesta, and Taurus; hello things taller, wider, and most likely heavier.

How did this happen, and why? Cheap gas is the obvious culprit—like magic, it made thirsty vehicles plausible again, and for many carmakers, this makes America great again. They can get back to selling bigger trucks, SUVs, and crossovers, which are more profitable endeavors. But we know how this roller-coaster ride winds up.

Congress would have been wise to tax gasoline more heavily when gas was cheap—to lock in the national move toward more fuel-efficient vehicles that was picking up steam as America came out of recession. But Congress didn’t consider it for a minute, and automakers preferred selling SUVs as they had for decades before briefly renouncing them. Then, as now, they charged more for SUVs and crossovers, which cost them very little if any more to make than ordinary cars.

Hard to recall, but gas mileage improvements were happening in this country. Then, after years of cheap gas, national fuel economy stopped improving in 2017. This is what government and industry and much of the citizenry said we weren’t going to do again. Think back to 2008-09 and how different the mood was when federal bailouts for GM and FCA and a $5.9 billion loan to Ford from the U.S. Department of Energy spawned a generation of more fuel-efficient powertrains. Ford and others apologized for their environmental profligacy, acknowledging their own roles in their financial troubles and the lack of fuel-efficient vehicles they had to offer in times of high gas prices. They testified there was nothing they wanted to do more than get away from over-reliance on SUV profits, to build a new generation of sedans and passenger vehicles while getting a big leg up on this electric car thing.

Today we understand this position as an aberration or bout of temporary insanity, a momentary detour from their long-term stra-tegy for America, which is to make more money short-term selling as many of the biggest cars as they can get away with. The prospect of an imminent autonomous, ride-sharing, sales-collapse future has them running scared today, convinced they need to bank cash while they can. Like the rest of us, Detroit wonders how soon the gravy train is going to dry up. Ford President of Global Markets Jim Farley burnished Hackett’s 90-percent not-cars promise to investors by allowing that the company was also eager to build more “authentic off-roaders.” This despite almost no one ever going off-road.

Cheap gas is the obvious culprit—like magic, it made thirsty vehicles plausible again, and for many carmakers, this makes America great again.

This brings us to the question of the deeply psychological place high-riding SUVs, trucks, and crossovers occupy in the human psyche. Many people like them. But it isn’t like auto-makers haven’t been trying their hardest to sell them, either, marketing and talking up the jacked-up lifestyle to the cumulative tune of tens of billions. When the industry says the customer decides where the market goes, that’s not the whole truth.

In addition, there was another element to Ford’s decision to administer euthanasia to its family sedan lines in its 115th year.

Just two years ago, Ford boasted it had been named Interbrand’s best global green brand. But something happened on the way to the love-in: Ford and the rest of the industry bumped into President Donald Trump, who created a safe space for the bigly regulated to get back in touch with their biggest, baddest selves. Along with other manufacturers, Ford lobbied the newly receptive government of a rule-burner-in-chief to overturn the upgraded (but still imperfect) Obama-era CAFE and emissions standards for 2025, which they gleefully did. The industry, which had agreed to the rules under much humbled circumstances, went back on its word. Although it was on target to meet tougher standards, it saw junkie daylight and a path back to its old, dangerous habits. Like many an addict before it, it went right back in.

Today Ford promises to take further advantage of a situation it was already taking liberal advantage of by selling even more trucks and crossovers with big footprints, which entitle them, under the rules (thanks, Obama!), to get lousier fuel economy and emit more than smaller vehicles. This was the poison pill planted in the 2009 regulations. Ford is not alone. GM sold Opel, its most convincing center of small car excellence, last year. So too FCA, which shuttered the Dart and Chrysler 200 production lines. Trucks and crossovers are set to take these almost-brand-new cars’ place, with the company’s compact and midsize passenger car lines forever cast into space.

Bailing on cars and failing to allocate adequate development money to carry these machines through their life cycles with dignity, all three of America’s heritage carmakers have walked away from what had once been their lifeblood and—even in their darkest days—a big part of who they were.

Instead, we have Ford’s new boss telling analysts, “We’re going to feed the healthy parts of our business and deal decisively with the parts that destroy value.” Imagine that: the great American family sedan now a value destroyer in the eyes of America’s oldest car company. Ousted Ford CEO Mark Fields was making all the modern noises and many of the newfangled investments the market indicated it wanted in the face of the futurescape that excites it so much. But it made no difference to Ford’s share prices. Last May, Fields was canned, and Hackett was in. But Hackett’s big idea—big spending cuts, including savings from the passenger car trapdoor, totaling $25 billion—hasn’t moved the market, either. Nor has a planned $11 billion spend on electric cars.

Meanwhile, it’s as if Ford convinced itself it couldn’t make money off sedans, hatchbacks, or wagons. This is the fight Ford lost in the ’70s, came back to in the ’80s with the Taurus, gave up again in the ’90s, then came back to fight harder once more with fine cars like the Fusion and Focus. But now Ford is quitting cars entirely (except for the Mustang and a rugged Focus variant). The We Can Do Everything swagger the American car industry personified for a century is truly gone. In its place, the fat man who can’t be bothered to bend over to pick up a dollar bill from the sidewalk because he’s worried about his health.

Published at Sat, 02 Jun 2018 12:06:15 +0000

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