To truly excite the passions of the American automotive media, you need news that strikes close to home. International news, no matter how significant, is generally met with indifference among many U.S. auto writers. General Motors Chairman and CEO Mary Barra and the GM board of directors opt out of the European, Indian, and South African new-vehicle markets—yawn. The Chinese government mandates that 12 percent of new vehicles retailed in China (the world’s largest new-car market) must be pure electric by 2020—whatever.
However, Ford’s recent announcement that the company plans to phase out North American sedan models has been met with such shock, fury, and unhinged contempt you’d believe the company had just rolled out a Justin Bieber Edition F-150 powered by baby harp-seal blood.
Ford’s announcement came by way of a financial statement first seen on April 25, 2018. One of the bullet-point paragraphs found in the document included this inflammatory sentence: “Given declining consumer demand and product profitability, the company will not invest in next generations of traditional Ford sedans for North America.”
Once word spread that Ford’s aging fleet of sedans, including the nearly unsellable Taurus, was on the chopping block, pundits and auto-industry armchair quarterbacks exploded in a media and social-media frenzy. One particular article, written by Pulitzer-Prize-winning journalist Dan Neil and appearing in The Wall Street Journal, went so far as to suggest that Ford’s move to rid its lineup of slow-selling product was in part a plot to legally maneuver around EPA fuel-economy mandates—a contention I find unlikely. You can read Neil’s article here.
But Dan Neil isn’t alone. A general summation of the buzz surrounding Ford’s announcement is that the company is shooting itself in the foot. I suggest otherwise. Let’s examine some of the more heated rhetoric being tossed around in the aftermath of Ford’s announcement:
Americans are being conned into buying huge SUVs
Dan Neil suggests that with the demise of the sedan, American new-vehicle shoppers are being unwittingly herded into big, heavy crossovers. This is a strangely dated bit of rhetoric that hearkens back to the Ford Explorer’s explosive popularity in the Nineties.
Back then, Ford loyalists were trading in their Taurus sedans for Explorers at an incredible rate, and taking a fuel-economy hit of about five mpg in the process, according to EPA estimates. The sedan-to-crossover migration today tends to be from midsize sedan to compact crossover, a trip that involves little or no loss in fuel economy. Indeed, the midsize crossover market is largely stagnant, while compact crossovers such as the Honda CR-V, Nissan Rogue, and Toyota RAV4 have been tearing up the sales charts.
Today, consumers trading in a Ford Fusion powered by a 1.5-liter turbocharged 4-cylinder engine for a Ford Escape powered by the same engine give up just one mpg in the process—a significantly less dire hit than the one Taurus-to-Explorer shoppers took back in the Nineties or early 2000s.
Additionally, most of the new crossovers that have been introduced in the past couple of years (or are due to be introduced soon) fall into the compact or subcompact categories. So, they are generally as efficient or more efficient than the vehicles that will be traded in for them. See the chart below:
The sedan is dead
Per the Ford’s announcement, “(T)he company will not invest in next generations of Ford sedans for North America.” This statement is intentionally ambiguous, and doesn’t begin to suggest when these vehicles will ultimately be dropped from the lineup.
As Ford has a history of performing high-impact mid-cycle updates on its products (these are usually significant revisions that approximate complete vehicle redesigns), it’s possible that the Fusion at least will linger in showrooms as long as a decade—assuming the volume at Ford’s assembly plant in Hermosillo, Mexico, isn’t allocated for something more profitable.
The slow-selling Taurus and unloved Lincoln MKZ and Continental will be the first to go, as sales of these three cars combined often fail to reach 5000 units per month.
Rumors of GM’s similar plans to thin its sedan lineup suggest that before long, the Detroit Three will be largely out of the sedan game. But what about Toyota and Honda?
With domestic competition out of the picture, I would expect to see the Honda Accord and Civic, as well as the Toyota Camry and Corolla, available well into the 2030s. Sales volumes may be reduced, but the sedan isn’t dead—it has just been marginalized.
Ford will no longer be a full-line manufacturer
To address this contention, we need to define “full line.” Does full line mean positioning a product in every product category, or just in every profitable category?
Respected auto journalist and Cars.com Detroit Bureau Chief Aaron Bragman declared in a recent Facebook post that, “Two years from now, Ford will intentionally no longer be a full-line automaker.”
Two follow-up questions to Aaron’s post: First, is that a bad thing? And, what does it mean to be a “full-line” automaker?
Did Ford cease to be a full-line manufacturer in 2007, when it dropped the Windstar minivan? What about in 1991, when the brand sold its last full-size station wagon? What about in 1937, when the Blue Oval crew chose to axe the phaeton body style?
As it stands today, Toyota is the only brand in the U.S. that offers both a full-size truck and a minivan in its lineup. Does that make the Toyota America’s only full-line retailer, or have we come to grips with the declining value of clawing for a stake in the shrinking minivan segment?
It’s worth noting that it has been two years now since FCA produced its last Chrysler 200 midsize sedan or Dodge Dart compact sedan, and almost no one today is suggesting that company would be better off had the company remained in those segments.
Dan Neil’s article served two purposes, only one of which was likely intentional.
First, Dan, like so many industry pundits, made clear his indignation that a company so entrenched in tradition would ever consider abandoning a once-core segment. To that I’d like to add that I am as amazed as everyone else at the accelerated pace that the consumer migration to crossovers has reached.
But Dan did something else. Dan told readers of The Wall Street Journal that Ford has found a way to sell more high-profit vehicles while legally skirting federal regulations. While most news consumers might find such actions cynical and typical of “big business,” many WSJ readers likely didn’t read it that way.
Recall that Ford recently fired its former CEO Mark Fields largely because stockholders didn’t perceive him as steering the company quickly enough into the autonomous age. It’s safe to assume, then, that neatly packaging the sedan-killing news in a tidy paragraph found in an investor-focus document was meant to appease shareholders, not to inform enthusiast pundits.
Dan Neil’s angry but measured response to the announcement primarily served to inform WSJ readers that Ford’s actions are, indeed, both bold and proactive, giving the company credibility with normally skeptical investors.
Of course, it’s always difficult to ascribe stock-market actions to particular events or pieces of information, but it’s worth noting that Ford stock has risen a dollar (about seven percent) since the news broke that the company planned to trim its lineup. Dan’s article, intentionally or not, helped spread the word that Ford isn’t going to be sentimental if it means cutting into revenue, and his indignation helps validate that plan.
In short, the crossover movement of the early 21st century is not a repeat of the SUV madness of the Nineties. The heavy, body-on-frame trucks scorned by environmentalists have given way to practical machines that offer consumers more cabin and cargo space per square foot of committed garage space than do sedans, along with elevated seat heights and available all-wheel drive.
To whatever extent Ford is gaming the EPA, the company’s real motive is to be where the customers are. And based on how poorly sedans are faring sales-wise this year, customers have clearly chosen crossovers.
I think it likely that five years hence we will regard Ford’s move to phase out the sedan as visionary—even if we can’t yet wrap our heads around a product lineup nearly free of cars with trunks.