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Ford Takes the Exit Ramp from the Car Business

Ford Takes the Exit Ramp from the Car Business

Ford Takes the Exit Ramp from the Car Business

Sam Abuelsamid

Ford F150 Hybrid

In many respects, the company that Henry Ford built more than a century ago moved America from the cart to the car (this October will mark the 110th anniversary of the Model T). Today, Ford is undergoing another transformation as the transportation market continues to morph. During its 1Q 2018 financial results, Ford confirmed that its North American vehicle lineup will include only two cars from 2020, the iconic Mustang and the new Focus Active—and even the Focus is morphing into a crossover-style vehicle.

More than 90% of Ford sales in the next decade will be pickup trucks, utilities, and commercial vehicles. Despite the change in the shape of the average Ford vehicle, the company is committed to improving energy efficiency in addition to operational efficiency. In part, that means adding electrified propulsion options to just about every vehicle it builds—from the Mustang to the F-150 and every new SUV.

Until now, Ford has just taken token stabs at the battery EV (BEV) market with vehicles like the defunct Transit Connect Electric and slow-selling Focus Electric. Even its hybrid systems, which are second in sales only behind Toyota, are only available on three nameplates: the soon to be discontinued C-Max and the midsize Fusion and Lincoln MKZ sedans.

Changing with the Times

However, that’s all about to change. At the New York International Auto Show in March, Lincoln revealed a concept version of its upcoming Aviator SUV with a plug-in hybrid drivetrain. That vehicle is expected to share its hardware with the next generation of one of Ford’s best-selling vehicles, the Explorer. The upcoming Bronco, Escape, and other models will also be available as hybrids.

In addition, Ford is committing to BEVs with a new dedicated platform rather than just conversions like the current Focus. This will enable much improved packaging and performance and a better cost basis. Starting with a performance crossover BEV in 2020 to be built in the Mexican plant that currently builds the Fiesta, Ford plans to launch 15 more BEVs globally in 3 years. While six of the BEVs will be available in North America, many of rest will likely be optimized for the Asian market, where Ford has formed partnerships with Zotye in China and Mahindra Group in India. Some of them may even be cars.

These vehicles will likely represent the bulk of Ford’s business for many years to come. But Ford is also working to build its mobility service business into something that is commercially viable and profitable as soon as possible.

Surviving Today’s Crises

The first three generations of Fords to run their eponymous company, Henry, Edsel, and Henry II, surely wouldn’t recognize this new enterprise as the one they built up over more than 7 decades. But during their tenures, Ford also faced several existential crises and survived—albeit without quite the radical product changes today’s business is facing.

It seems that almost everyone running a car company today is cursed to “live in interesting times.” Today’s company leaders, including the founder’s great grandson Bill Ford and CEO Jim Hackett, will have their work cut out for them to rebuild Ford for a new generation and move travelers from the car to whatever comes next.

However, there is precedent for a company to make similarly shocking moves while transforming into more of a services company. IBM exited the PC business in 2004 that it helped to found to focus on supercomputers, software, and services. And that paid off: within a few years, the company was generating even higher revenue and profits.

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By Sam Abuelsamid

Ford F150 Hybrid

In many respects, the company that Henry Ford built more than a century ago moved America from the cart to the car (this October will mark the 110th anniversary of the Model T). Today, Ford is undergoing another transformation as the transportation market continues to morph. During its 1Q 2018 financial results, Ford confirmed that its North American vehicle lineup will include only two cars from 2020, the iconic Mustang and the new Focus Active—and even the Focus is morphing into a crossover-style vehicle.

More than 90% of Ford sales in the next decade will be pickup trucks, utilities, and commercial vehicles. Despite the change in the shape of the average Ford vehicle, the company is committed to improving energy efficiency in addition to operational efficiency. In part, that means adding electrified propulsion options to just about every vehicle it builds—from the Mustang to the F-150 and every new SUV.

Until now, Ford has just taken token stabs at the battery EV (BEV) market with vehicles like the defunct Transit Connect Electric and slow-selling Focus Electric. Even its hybrid systems, which are second in sales only behind Toyota, are only available on three nameplates: the soon to be discontinued C-Max and the midsize Fusion and Lincoln MKZ sedans.

Changing with the Times

However, that’s all about to change. At the New York International Auto Show in March, Lincoln revealed a concept version of its upcoming Aviator SUV with a plug-in hybrid drivetrain. That vehicle is expected to share its hardware with the next generation of one of Ford’s best-selling vehicles, the Explorer. The upcoming Bronco, Escape, and other models will also be available as hybrids.

In addition, Ford is committing to BEVs with a new dedicated platform rather than just conversions like the current Focus. This will enable much improved packaging and performance and a better cost basis. Starting with a performance crossover BEV in 2020 to be built in the Mexican plant that currently builds the Fiesta, Ford plans to launch 15 more BEVs globally in 3 years. While six of the BEVs will be available in North America, many of rest will likely be optimized for the Asian market, where Ford has formed partnerships with Zotye in China and Mahindra Group in India. Some of them may even be cars.

These vehicles will likely represent the bulk of Ford’s business for many years to come. But Ford is also working to build its mobility service business into something that is commercially viable and profitable as soon as possible.

Surviving Today’s Crises

The first three generations of Fords to run their eponymous company, Henry, Edsel, and Henry II, surely wouldn’t recognize this new enterprise as the one they built up over more than 7 decades. But during their tenures, Ford also faced several existential crises and survived—albeit without quite the radical product changes today’s business is facing.

It seems that almost everyone running a car company today is cursed to “live in interesting times.” Today’s company leaders, including the founder’s great grandson Bill Ford and CEO Jim Hackett, will have their work cut out for them to rebuild Ford for a new generation and move travelers from the car to whatever comes next.

However, there is precedent for a company to make similarly shocking moves while transforming into more of a services company. IBM exited the PC business in 2004 that it helped to found to focus on supercomputers, software, and services. And that paid off: within a few years, the company was generating even higher revenue and profits.

Published at Wed, 02 May 2018 14:27:00 +0000

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