MOTOR MOUTH
The numbers behind Ford’s shocking decision
It’s the biggest automotive story since Volkswagen (diesel) gassed monkeys. Bigger than the merger of Renault/Nissan with Mitsubishi to create the world’s most prolific automaker. More explosive even than the runaway popularity of Tesla’s Model 3. Ford, the company that popularized the passenger car, the automaker that fairly invented mass production and whose Model T is widely recognized as the vehicle that put America on the road, will produce no more.
Cars, that is.
In a truly shocking announcement, Dearborn said on April 25 that it was, by and large, getting out of the passenger cars business. Citing dwindling sales of traditional sedans, the Blue Oval announced that the only passenger cars that would henceforth be sold in its dealerships would be the ever-popular Mustang (the U.S. will have access to something called the Focus Active, but it’s just a jacked five-door hatchback, half a crossover vehicle itself ). In other words, starting in 2020, if you want to shop something other than a truck or an SUV in a Ford dealership, your only choice will be, well, a muscle car. Fiesta, Focus, Fusion and Taurus will be no more.
Alarms are being triggered around the industry. The media is asking wondering whether this is the longpredicted death of the traditional sedan. Investors are worried this contagion will spread to other automakers. Why would Ford, seemingly still successful and with a storied history of producing great cars, do this and, most importantly, will other automakers be following suit?
In an attempt to render some sense to this entire affair, Motor Mouth decided to take an unsentimental look at the numbers behind Ford’s decision to see if this really is the beginning of the end for the traditional threebox sedan.
THE UPSIDE FOR FORD
In the short term, Ford’s decision looks both rational and well-planned. Passenger cars account for not even a fifth of Ford’s total volume in the U.S. Making matters worse, as analysts have been reporting for quite some time, is that the profit margins traditional sedans generate is significantly less than what Ford gets from a truck or SUV sale. Indeed, this lack of profit per car is probably just as important a reason for the cancellation of production as the decreasing volume (the Mustang being kept around, for instance, is simply because the in-demand pony car still commands a hefty profit premium).
In Canada, the numbers are even worse, with cars accounting for barely 12 per cent of Ford of Canada’s total volume (which may explain why we’re not even getting the Focus Active). Add it all up and, for Ford’s chief financial officer Bob Shanks, the US$11.5 billion it would spend developing all-new platforms for cars is simply not worth the paltry profits they would generate.
THE DOWNSIDE IN DUMPING CARS
This one is a bit of a nobrainer. Truck and SUV sales have skyrocketed in recent years, mainly thanks to cheap oil. Though we have become used to (relatively) inexpensive gasoline, there’s no guarantee that the world will remain awash in cheap crude. Although there will always remain a core constituency, truck and SUV sales will no doubt diminish if — or is that when? — the price hike hits.
Unlike many who predict that Ford’s car-free position could become tenuous even with modest increases in pump prices, Motor Mouth sees little erosion to the popularity of light trucks as a result of recent price escalations. However, a war in Iran — to name but one possible instigator of a future oil crisis — could result in a 25-cent-plus a litre spike that could send truck sales into a tailspin.
Though Ford will continue producing more fuelefficient cars in other parts of the world, there would, of course, be a delay in reacting to such a shift in the North American market.
A DEEPER DIVE INTO THE NUMBERS
What everyone has reported in covering this story has been, as mentioned, the declining share for passenger cars. For 2017, that number was 31.4 per cent of Canada’s total sales — yes, less than a third of the record 2,038,798 vehicles sold in Canada were cars. Worse yet, according to auto sales analyst, Timothy Cain, that number has already dipped below 29 per cent in the first quarter of 2018.
But — and this is truly the King Kong of “buts” — if you factor the Detroit Three out of the equation, passenger cars actually account for 45 per cent of the marketplace. Indeed, this swooning of the sedan is truly a domestic problem: barely seven per cent of Fiat Chrysler Canada’s sales are passenger cars and Ford’s numbers — 12.2 per cent — are not much better. Only General Motors, with 22 per cent, comes even remotely close to the industry average.
The question we should be asking, then, isn’t whether the sedan is dead, but rather whether Detroit can make a passenger car that resonates with the public. The passing of Chrysler’s 200 was hardly lamented, mainly because it never was a very good car. And while Ford’s Fiesta, Focus and Fusion were decent (but not outstanding) products, it’s been at least a decade since the Taurus was anything remotely as groundbreaking as the original.
So let’s answer the question of whether this is the end of the road for the threebox sedan thusly: Toyota is not cancelling its Corolla, Nissan is not ceasing production of its Altima and Mercedes-Benz is certainly not dumping its C-Class.