Founded by Henry Ford in 1903, Ford Motor Company has a longstanding reputation as a multinational automaker that produces American-made cars, trucks, and SUVs. During the early 20th century, Ford revolutionized the process of large-scale car manufacturing by introducing the technique of using assembly lines to make the vehicle production process exponentially more efficient.
More than one hundred years later, Ford is still not afraid to change the game. Beginning in 2018, Ford has cut down its sedan lineup to only two of its existing models: the Mustang sports car and the Focus crossover vehicle. This lineup excludes many of the sedan models Ford previously mass-produced, including the C-Max hybrid compact car, the Fiesta subcompact car, the Fusion sedan, and the Taurus sedan. The U.S., Canada, and Mexico are affected by these cuts. Ford’s decision to cut down its sedan lineup to only two models in North America demonstrates its goals to increase profitability and cost-efficiency in a changing competitive market and its commitment to meeting the demands and desires of modern consumers as they continually evolve.
Striving For a More Cost-Efficient Business Model
Ford’s main focus in the last year has been cutting down its costs. Since assuming the position of CEO of Ford Motor Co. in May of 2017, Jim Hackett has made major changes in the company’s business model. Hackett’s primary goal is to increase the cost-efficiency of Ford. One of his most notable strategies to cut the costs and increase the profits of the multinational automaker is paring down Ford’s sedan selection in North America to just two car models. While this shift is the most obvious change from the perspective of consumers, it is only one component of Jim Hackett’s turnaround plan to maximize Ford’s cost-efficiency and profitability.
Hackett’s decision to cease the mass production of several Ford sedan models at once is not unfounded. His choice stems from the sharp decrease in the demand and profitability of these models that was quickly transforming their production from a significant source of profit into a drain on the company’s resources. Ford plans to cut its costs by approximately $5 billion by 2022. A large portion of this dramatic decrease in spending is expected due to Ford cutting down its sedan lineup in North America. Jim Hackett’s business model is proving to be effective for the company’s cost-efficiency and profitability, as Ford’s revenue has increased by 7% in 2018.
Focusing More Heavily on Trucks and SUVs
Ford has faith in its portfolio without the models it has chosen to stop producing in North America. The company has always been known better for its trucks and SUVs than for its selection of traditional sedans, and Ford aims to focus more heavily on these vehicles after pulling most of its existing sedan models from the market.
As the consumer demand for Ford’s sedans has decreased, the demand for its trucks and SUVs has spiked. Ford strives to capitalize on this surge by devoting more of its resources to redesigning and improving its lineup of trucks and SUVs. After freeing up resources it would have expended on producing its retired car models, Ford is now able to reallocate its resources without losing out on profits.
Shifting Toward Electrification
Despite paring down its sedan selection to only two models in North America, Ford does not plan to stop making progress to meet the demands of modern consumers in a world where technology reigns and continues to rapidly advance. Ford wants to stay competitive with other auto manufacturing corporations by keeping up with the cutting- edge technology that is taking over the automobile market.
The declining demand for traditional cars is a problem that is not exclusive to Ford. Fewer consumers are purchasing classic sedans in general. Technological advancements that have made hybrid and fully electric vehicles more affordable for many average consumers—not just the super-rich—have caused consumers’ vehicle preferences to shift away from traditional sedans like the models Ford has cut from its portfolio.
Thanks to the advent of hybrid and electric cars, consumers no longer have to rely on compact sedans with high fuel efficiency to help them save money on gas expenses and reduce their carbon footprint. Even though it is moving away from passenger cars to focus more heavily on its portfolio of trucks and SUVs, Ford plans to satisfy the demand of modern consumers with a wider selection of electric cars.
Ford has ambitious plans for its future in electrification. In fact, the automaker giant’s goal is to offer sixteen new electric vehicles to consumers by 2022. These vehicles will all be powered by electric batteries instead of gasoline fuel.