Thursday, 16 August, 2018

Ford targets higher margins faster, to drop unpopular cars

Ford seeks to accelerate profit margins, drop less popular models Ford Motor Co (NYSE:F) Sentiment Change Report
Kenneth Drake | 26 April, 2018, 12:44

The changes include getting rid of all cars in the region during the next four years except for the Mustang sports auto and a compact Focus crossover vehicle, CEO Jim Hackett said as the company released first-quarter earnings.

Ford "will not invest in next generations of traditional Ford sedans for North America", including the midsize Fusion and full-size Taurus, the company said.

Ford shares rose 2.6 percent to $11.40 in after-hours trading on Wednesday.

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

"What we have to do is become more fit, but then on top of that have great new products", he said.

In its statement, Ford said it will rely exclusively on a two-car lineup, the new Focus Active-a raised, body-cladded version of its all-new Focus hatchback (a crossover, in other words)-and the Mustang.

Ford announced its first-quarter earnings Wednesday, revealing that its revenue was up 7 percent compared to a year ago, and its net income up 9 percent-both on-target, but not reflecting Ford's new cost-saving initiatives, Shanks said.


In the first quarter of 2018, Ford's profit margin dipped to 5.2pc from 6.4pc a year earlier, as it was squeezed by higher aluminium and steel prices.

"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. "We can make different investments, we can partner, we can exit products, markets - and we will do that". Crossovers and SUVs have quickly come to represent more than half of the total industry's US sales, while sedans and small cars have been sinking.

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.

Ford plans to cut $25.5 billion in costs by 2022, up from a total of $14 billion the company announced to investors last fall.

"Everything will be on the table" to fix Ford, Shanks told reporters in Dearborn, Michigan, where the company is headquartered. Almost half of the cuts would be in sales and marketing - through incentive optimization, reduced advertising and other actions - with the rest coming from engineering and product development, material costs, manufacturing and information technology, in that order.

Executives talked about the need to further improve operations in Europe and South America.

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