USA: Ford drops the classic sedan
Last month Jim Hackett, CEO of Ford, surprised the automotive world by announcing that America’s number 2 car manufacturer is withdrawing from the sedan market segment in the US. Is this a dying segment in North-America?
“We will not invest in future generations of the classic sedan in North-America anymore”, declared Hackett. “Between now and 2020 90% of our model portfolio will be trucks, SUVs and commercial vehicles.”
This means the extinction of models like the Fusion or the (American) Focus. The emblematic Mustang stays and a crossover called ‘Focus Active’ is in the pipeline, but regarding more classic lined vehicles, that’s it.
Ford is not the only car manufacturer with a similar strategy: in 2017 Fiat/Chrysler (FCA) decided to stop selling the Chrysler 200 and Dodge Dart, two recently launched sedans that weren’t successful.
Hackett was also commenting his decision. The first reason is the downward spiral in demand for this sort of vehicles: between 2008 and 2017 the market grew considerably, but demand for sedans regressed from a 37% market share in 2009 to 27% last year, as indicates car consultant Jato. During the year 2017 the sales of Ford’s Fusion sedan dropped by 21%.
Who is benefiting then? Between 2009 and 2017 the market share of SUVs rose from 25 to 41%, a phenomenon that we see worldwide. The fact that today SUVs are smaller and/or less thirsty, is helping too.
Jim Hackett is also talking profitability here. Ford isn’t making much money on its sedans in North-America. That’s something that is true for every manufacturer but even more so for the two biggest American manufacturers. Apparently their know-how for making smaller vehicles is still not on a European or Asian level.
The Japanese manufacturers, since long at the top of the sedan market in the US, are not inclined to abandon ship. Also in Europe, where the sedan only represents 5% of the market, manufacturers keep on building them, Peugeot is even launching a new one, the 508 successor.
But Ford claims that the car will be used otherwise in the future and that clients need different cars. The future car will be hybrid or electric, will drive autonomously, etc. Even the biggest manufacturers can’t invest in everything, they have to choose. That’s what Hackett does: “Our efforts allow us to save 5 billion dollar in capital spending during our current business plan”, says Hackett with satisfaction.
In fact, Hackett does what practically every other CEO is trying to do. Tavares did the same when he came to PSA in 2014, but his choice was not entirely the same. Nevertheless, Peugeot is now making money because of its… SUVs.