Did Ford make a mistake killing its sedans?
The recent decision could hurt Ford's sales this weekend, according to new data.
Labor Day weekend is traditionally one of the biggest sales periods for autos – due in no small part to the fact that car manufacturers will start rolling out 2021 models. However, a recent decision by the Ford Motor Co. could hurt its sales this weekend, according to new data.
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On July 31, Ford officially completed its move to pull all midsize sedans from its lineup in North America by 2020 after ending production of the Ford Fusion at the company's plant in Hermosillo, Mexico.
The company attributed the decision to "declining consumer demand and product profitability" in its earnings report for the first quarter of 2018 and said it would be focusing on the development of the Ford Mustang and Focus Active crossover going forward in order to boost its profit margins 8% by 2020.
“We are committed to taking the appropriate actions to drive profitable growth and maximize the returns of our business over the long term,” said president and CEO Jim Hackett at the time, "If appropriate returns are not on the horizon, we will shift that capital to where we can play and win.”
However, new data from Cars.com suggests the company may have to reconsider its decision.
Some 41% of Labor Day car shoppers said they are in the market for sedans, more than any other body style, compared to 39% looking for SUVs and crossovers.
Meanwhile, searches for sedans on Cars.com have increased 14 percentage points, higher than the growth in overall search activity from April to June of 2020.
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Ford, however, doesn't seem to regret its decision.
"In 2019, SUVs outsold sedans two to one and this trend continues to grow," a Ford spokesperson told FOX Business in a statement. "For comparison, cars were approximately 50% of all auto sales in the U.S. in 2012. This has now declined to approximately 25% of all sales."
In 2019, Toyota's Camry was the country's best selling sedan with 336,978 cars purchased, according to Carprousa.com.
In Ford's second-quarter earnings call, CEO Hackett noted the company's total share increased 20 basis points to 14.5%. Within that number, the company's retail share was up 120 basis points to 13.3% as the company's F-Series vehicles gained 250 basis points of segment share to 33.3%.
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Hackett also touted the success of the new Ford Bronco unveiled in July, which he said "surpassed even our most optimistic initial projections."
"When I see these products come to life, I feel better and better about our decision to reallocate capital spending from sedans to trucks and commercial vehicles and SUVs," Hackett said. "And we have even more new products in the pipeline in areas where Ford is strong today and in these white spaces where we can earn stronger returns and grow share."
According to Ford, consumers have demonstrated strong enthusiasm for the new SUV, with reservations for more than 165,000 two- and four-door Broncos to date.
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Despite the impact of the coronavirus pandemic, Ford reported a $1.1 billion profit in the second quarter, or 28 cents a share, compared with a profit of $100 million, or 4 cents a share, a year earlier. Excluding items, Ford posted a second-quarter operating loss of $1.9 billion, or 35 cents a share.
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