Ford to Cease Production of Sedans as it Looks to Boost Profits

26 April, 2018, 12:45 | Author: Shannon Aguilar
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Ford Motor Co. on Wednesday announced plans to dramatically narrow its North American sedan lineup in the coming years, as trucks and SUVs continue to dominate the USA market.

This news comes as part of Ford's "fitness" plan, outlined by CEO Jim Hackett a year ago, in which he said the Blue Oval would cut its operating costs by $14 billion by 2022.

The decision, which Hackett said was due to declining demand and profitability, means Ford will no longer sell the Fusion midsize auto, Taurus large vehicle, CMax hybrid compact and Fiesta subcompact in the U.S., Canada and Mexico.

Ford Chief Financial Officer Bob Shanks told FOX Business that the automaker held tight on cost, but rising metal prices resulted in higher commodity expenses for the quarter.

In a statement, Ford said it won't invest in new generations of sedans for the North American market, eventually reducing its vehicle lineup to the Mustang and the all-new Focus Active crossover coming out next year.

Ford said by 2020 it expects 90 percent of its offering will be trucks and SUVs.

The New York Times reported that Ford's net income totaled $1.7 billion, up by $100 million from the same period a year earlier, and earnings increased to 43 cents a share, up by 3 cents.

The company is committed to increasing profit margins by focusing on more popular trucks and SUVs going forward.

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Ford's shares traded up about 2.2% in after-hours trading Wednesday at $11.35 after closing at $11.11, in a 52-week range of $10.14 to $13.48.

"We will refresh our entire lineup of traditional crossovers and SUVs that everyone knows, like Explorer and Escape", said Jim Farley, Ford's president of global markets.

President Donald Trump's announcement to impose a tariff of 25% on steel and 10% on aluminum comes at a tough time for USA automakers, which have faced flattening sales in recent months.

Ford plans to cut $11 billion in operating costs and $5 billion in capital expenditures between 2019 and 2022.

Despite the higher profit, Ford's adjusted pretax profit margin fell to 5.2 percent from 6.4 percent in the same quarter in 2017. We are determined to turn this business around right throughout the whole company.

Shanks suggested that Ford could reduce investment in certain geographic regions or exit them completely if it did not see adequate returns on the horizon.

"Everything will be on the table", Shanks said.

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