Ford's move away from sedans: Can consumers afford it?

So Ford is getting out of the sedan business in North America. Not a big surprise. All the signs have been there for months, going back to when the automaker announced it was offshoring Focus production and canceling plans to redesign the Fusion. And yet it seems strange that a Detroit Three car company would no longer sell Americans that most American of conveyances — the basic family sedan.

But Fiat Chrysler has culled its ranks. GM has heaped nearly a decade of not-so-benign neglect on the Chevy Impala and has stated repeatedly — as recently as yesterday — that sedans are no longer a priority for it, either.

Ford senior execs told the New York Times they lose money on the Fiesta, Fusion and Focus. And Ford lost one-third of its Fusion sales between 2016 and 2017 — 100,000 car sales went poof. Yet it still sold 209,000 Fusions last year, and that's not nothing: It's two-and-a-half times the number of Mustangs sold, and nobody's talking about killing the pony car. And one could argue that the beating the Fusion took was self-inflicted, since the car is at the end of its design cycle while competitors grew more refined.

Ford is apparently counting on converting more sedan buyers into SUV and truck buyers — while its plan is unclear for preventing them from becoming buyers of Camry and Corolla, Accord and Civic, Sonata and Optima, or Jetta and Passat. None of those automakers are abandoning sedans, and they seem to be preparing to grab market share.

But maybe Ford isn't exactly going to abandon sedans. Take note of this line from Ford's press release: "The company is also exploring new 'white space' vehicle silhouettes that combine the best attributes of cars and utilities, such as higher ride height, space and versatility."

In other words, the lines between traditional car and crossover could get crossed over even more. Rather than forfeit the sedan game, Ford could reshape the Fusion, which is basically a darned good car, into something perhaps a little taller, more ute-like. Such Crosstrek-ification is exactly the plan for the coming Focus Active. Maybe sedans are going nowhere except back to the drawing board for some plastic cladding.

The money picture is far different for Ford's trucks and SUVs. A couple of years back, Automotive News calculated that Ford cleared more than $13,000 on each F-150. Since then, the in-demand Raptor and the industry trend toward option-laden luxury trucks have driven the average transaction price of an F-Series well past $45,000, so by now Ford might be clearing $15,000 on every sale, and as guesses go that's probably conservative. As for SUVs, the production cost difference between a compact or midsize sedan and a big, heavily optioned unibody crossover isn't as great as their size difference — or price difference — would suggest. So more profit is baked into that segment, too. For all those reasons, the average vehicle transaction price has swelled to nearly $37,000. Sedans sure weren't driving that trend.

So: Focus on the products that make the most money and that more people want. No brainer. And use some of that money to develop hybrid and EV technology. Some consumers have asked what happens when gas shoots up to $5 a gallon again (as you may have noticed, it has been creeping up recently) and Ford doesn't have a stable of fuel-efficient smaller cars anymore. First, they aren't being dropped from the U.S. lineup overnight, though it's happening relatively soon, so you could still see this plan change. Second, Ford promises hybrid and EV crossovers and trucks that have the fuel economy of frugal sedans. This in spite of their greater heft. CEO Jim Hackett has promised "we're starting to crack that code." Isaac Newton would say good luck with that.

There's this other question for consumers: If the de facto American automobile from an American automaker is now a pickup truck or an SUV, to what degree will affordable, entry-level vehicles still be part of Ford's future lineup? Are those in the "white space" plans? We know Fiesta, Focus and Fusion are going away. The Ecosport will still be around, and the Focus Active is on the horizon. But that seems like fewer options.

It's an important question because right now, in order to grapple with the rise in new-car costs brought on by the crossover/truck craze, some auto loans are approaching 84 months, a deal for which you should get your head examined.

Profit's the American way. But at what point does it become unreasonable if not obscene? We recently learned the Cadillac Escalade brings in nearly $1 billion in annual profits for GM. Cadillac sells 23,000 Escalades per year. That math works out to $43,000 profit per.

Ford, of course, and GM and the others, have a responsibility to their shareholders to charge what the
market will bear. But those shareholders are also consumers, some of whom who are buying average-price $37,000 SUVs on a U.S. median household income of $59,000. The nation is still full of people who need good basic transportation for a whole lot less. When Fiesta (and the others) are gone, will Ford still offer a $15,000 car?

And, instead of clearing $15,000 per truck or SUV, what if you cut the price by $5,000, still profited by a tidy sum, undercut the competition, made those vehicles more affordable to more people and perhaps even sold a lot more of them in the process?

Henry Ford spoke to this: "I will build a motor car for the great multitude. It will be large enough for the family but small enough for the individual to run and care for. It will be constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise. But it will be so low in price that no man making a good salary will be unable to own one — and enjoy with his family the blessing of hours of pleasure in God's great open spaces."

In that sense of affordability, the Fiesta, Focus and Fusion are (or were) the direct descendants of the Model T. An Expedition or F-150 King Ranch, not so much.

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