Skip to comments.Ford is basically giving up on US car business, and GM is not far behind
Posted on 04/26/2018 2:35:14 PM PDT by Red Badger
Ford's plan to reduce its passenger car lineup to just two models, and GM's difficulty selling passenger cars in the U.S. show how much tastes are drifting toward trucks, SUVs and crossovers.
Ford will only update the Focus Active crossover and Mustang for the U.S. market, while GM called out a challenging passenger car environment. ======================================================================================================
So is it really the end of the American car on its home turf?
From the way Detroit's major executives are talking, it would seem so.
Ford said Wednesday it will only offer two new cars in North America over the coming years its iconic Mustang and the Focus Active, a rugged-looking hatchback that has already debuted in Europe, and somewhat resembles the Subaru Crosstrek or the Buick Regal TourX.
GM is moving along the same lines.
"I think we have been on this path for a number of years," GM CFO Chuck Stevens said on a call with reporters on Thursday, after the largest U.S. automaker released first-quarter earnings.
Many of Fiat-Chrysler's biggest successes have been SUVs in recent years, evidenced by the growth of its Jeep brand.
"Virtually eliminating Ford's NA car portfolio makes a lot of sense, in our view," said Adam Jonas, an analyst at Morgan Stanley. "No more Fusion. No more Focus. No more Fiesta. No more Taurus."
GM still makes quite a few cars. For now, Chevrolet alone still sells somewhere around 12 car models if you count Corvette, although there have been rumors and news it will cut or end production of at least some of those. Buick has some sedans and a crossover that looks a lot like a wagon, and Cadillac has so many sedans industry observers and dealers say it missed the crossover trend.
And despite the fact that American companies are reshaping their lineups, sedans will still form a substantial portion of the vehicles sold in the U.S. for the foreseeable future.
"Although passenger car segments have declined over the last number of years, they are still very important," GM's Stevens said Thursday. "Small cars are important internationally, and they still make up a chunk of sales in the United States."
But crossover sales were largely what drove GM's earnings beat on Thursday, and the automaker's income was down because it had spent a lot of time retooling its factories to build more trucks. Buick's best-selling model is the subcompact Encore crossover, and Cadillac's biggest debut this year has been the XT4, a model the company is making to finally catch up with rivals already in the luxury crossover segment.
Throughout the rest of 2018, GM's crossover sales should be strong enough to support margins despite costs from new truck launches, CFRA analyst Efraim Levy said in a note Thursday.
By 2022, almost 73 percent of all consumer vehicle sales in the United States are expected to be utility vehicles of some sort, and about 27 percent will be cars, according to auto industry forecasting firm LMC Automotive.
By that same time, LMC automotive expects 84 percent of GM's U.S. sales volume will be SUVs, crossover and trucks. Ford will be at 90 percent, and Chrysler at 97 percent.
So sedans and other cars are expected to still form more than a quarter of all consumer vehicle sales in the U.S., but the overall trend appears to be that American companies especially are giving up trying to sell cars to Americans.
What will they sell instead?
Detroit is already strong in pickups and large SUVs, such as the Cadillac Escalade and Lincoln Navigator, which is enjoying remarkably brisk sales after its first complete redesign in more than a decade. The Big 3 control almost 85 percent of the domestic pickup market, according to LMC Automotive, despite competitive products from foreign brands such as Toyota and Nissan.
And Ford, for example, will also double down on "authentic off-roaders," Ford President of Global Markets Jim Farley said on a conference call Wednesday, after Ford reported first-quarter earnings. This includes trucks like the Raptor, and the upcoming reintroduced Ford Bronco, and an unnamed SUV. GM and Chrysler are entering this segment, too.
The second-largest U.S. automaker also plans to refresh its current lineup of SUVs and crossovers and create new products that fill "white spaces" in the market, essentially meaning the company will try to combine or tweak various designs or combinations of features to find new segments no other company is targeting yet. This means combining various elements of both cars and SUVs in ways that distinguish Ford's vehicles from what is already out there.
"We will have a very diverse passenger car business," Farley said on the call. "It just won't be traditional silhouetted sedans that tend to be commoditized."
In ditching cars and pursuing this strategy, Ford made a difficult choice, said Kelley Blue Book analyst Rebecca Lindland.
"I think this is one of the challenges that the Big 3 has faced, that they really had a tough time finding their way on the car side," Lindland told CNBC. "They have struggled for too long to be profitable, to be a full-line manufacturer, and they have made the hard decision to start over. The problem is they are so far behind."
Farley is very smart, Lindland said, and Ford has a catalog of vehicle platforms around the world they can search through to quickly develop some products. But it will be challenging.
"Even though they are starting fresh, they have to accelerate their timeline to get their products as soon as possible," she said. "I am driving a Toyota C-HR right now, which I believe is the kind of car they are thinking about making."
RAM tough! Yeah, it is sad. Guess muscle car values are getting ready to jump.
Chrysler should come out with a new Imperial, based on a str tched and widened Hemi 300. Theyd capture the Town Car and limo business.
The vintage stuff probably.
Some of Ford’s little cars are really sharp looking, and I’m sure they provide good value for young people and others.
I suppose I am addressing some of the smaller what you’d call crossovers though.
It will be interesting exactly what these manufacturers are thinking as they plan to phase out.
It might now be quite as cut and dried as some folks think.
Fantastic opportunity for a domestic upstart car company, making sedans with fresh ground-up designs, using high-tech innovation in every aspect from doorhandles to manufacturing robotics. Would be amazing if there were one suitably situated, just starting to produce sedans in the $30-50k range, leveraging the latest drivetrain technology. A brilliant charismatic risk-taking CEO could work wonders. I wonder who might be best positioned to grab this sudden gap in American automotive innovation...
Long gone are the days when as a GM customer it showed you moving up in society as your car tastes changed. First, the Chevrolet, then the Pontiac, followed by the Oldsmobile, up to the Buick, topped off by Cadillac for the truly wealthy (or ostentatious in debt). What’s left of the five??
Ford and GM are following Chryslers lead.
Chrysler quit making cars years ago. Yeah, they still might have the 300/Charger/Challenger platform, but those ancient relics are riding on a 14 year old platform.
So then, the market for passenger cars, ordinary four door sedans, whatever the technical term for those vehicles is, that market will be filled by Nissan, Toyota, Hyundai, etc???
If Lee Iacocca was still around - you can bet he’d be all over that.
Iacocca would take a car (K Car for example) and make 15 different models out of it.
And they would all sell quite well.
What are the rental car companies going to do now? Small sedans are their staple.
Last time gas hit $4.00 plus a gallon, truck sales tanked. Place your bets gentleman.
Government regulation and unions.
Is there anything they can’t do?
There are very few cars anyone would really want to own. The government forced manufacturers to pair teeny engines with expensive computers and mount them on wheels. You don’t even get bench seats for summer nights by the lake!
The Lincoln line of cars were beautiful sedans but now look like any other box on wheels, only wearing mom jeans.
EVs. That’s where it is going.
They can’t make a buck off the sedans.
Toyota, Nissan, Honda, Mazda.......................
My 2003 Lincoln Town Car runs nice.....................
Build cars people can afford..................
I HATE SUV's. And STAY IN YOUR LANE, B*TCHES.
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