Is Ford Motor Company Falling a Step Behind Rival General Motors?
Expect the EcoSport to start selling in the U.S. at some point, even if it's late to the game. Image source: Ford Motor Company.
There are a lot of developments that suggest Ford Motor Company (NYSE: F) has had the drop on rival General Motors (NYSE: GM) for years. You can start with the fact that Ford survived the Great Recession on its own dime. You can note that Ford Credit is generating the kind of business GM Financial hopes to achieve years down the road. You can definitely point out that Ford reinstated its dividend roughly two years before its rival did.
Ford has definitely beaten GM to the punch many times in recent years, but here are two product decisions that show Ford is lagging behind.
Where art thou, subcompact crossover?
Ford management has mentioned many times that it believes there's a double opportunitycoming in terms of demand for its SUVs and crossovers: Millennials are entering their child-rearing years, and many aging empty-nest baby boomers simply prefer this vehicle category. So why is it, then, that Ford has yet to fill its SUV/crossover offering with a subcompact crossover in the U.S., something smaller than the Escape?
Looking at U.S. sales through August, Fiat Chrysler's Jeep Renegade has soared to the top of the segment, with sales topping 70,000, while General Motors owns two of the top five spots with the Buick Encore and Chevrolet Trax, generating 49,187 and 45,598 units, respectively. You can even expect the Trax to jump up in the rankings next year when sales of the refreshed 2017 model hit full speed.
While Ford can't simply snap its fingers and magically produce a subcompact crossover in the States, it's not as if the company doesn't produce one elsewhere. You may have heard of Ford's EcoSport, which is currently offered in Europe, China, India, and Brazil. It's a crossover based on the Fiesta's architecture, and would fit with Ford's global vehicle-lineup ambitions.
Even Ford's luxury Lincoln lineup could use a new SUV offering smaller than the MKC, which could be built on the same architecture if the EcoSport were indeed produced in the States. Moreover, it's not difficult to imagine a small crossover like the EcoSport being turned into a plug-in hybrid as part of Ford's plan to invest $4.5 billion in 13 electrified models by 2020.
A subcompact crossover makes perfect sense for Ford's lineup in the U.S., and it could very likely be introduced here sooner rather than later. But with Jeep's Renegade atop the segment and two of GM's offerings not far behind, Ford has been uncharacteristically slow in making this a reality.
Hate to say "I told you so"...
Ford's Ranger remains globally popular. Image source: Ford Motor Company.
We had some good debates here at The Motley Fool, between a couple of us colleagues, about whether it was a good idea to bring Ford's Ranger backto the U.S. market. Originally (this was before General Motors announced it would bring back the Chevy Colorado and GMC Canyon), I was wondering why,if Detroit automakers had done so well shutting Japanese autos out of the full-size-truck market, were they giving Japanese rivals entry-level-truck consumers by leaving the midsize-truck market entirely.
We know truck buyers are fiercely loyal, so giving away the entry-level midsize-truck segment seemed to me like a very poor decision.My argument was that it was a mistake that would end up costing Detroit autos loyal truck buyers in the long run, while others argued the midsize trucks would cannibalize sales from the bread-and-butter full-size trucks, which carry higher price tags. Both arguments are likely true to some degree, but one debate that's settled is whether General Motors could bring the midsize trucks back with instant success.
With a full quarter to go in 2016, sales of Chevy's Colorado are only a couple of weeks' worth of sales behind 2015's total of 84,430. Just last month the Colorado set its best monthly sales result since it was reintroduced in the states, and its year-to-date sales are 26% higher than last year's. That puts the Colorado on pace for its best full-year result in a decade.
It's been rumored, and is essentially all but confirmed by Ford, that as the automaker moves production of small cars to Mexico over the next couple of years, it will shift toproducing more higher-margin vehicles -- most likely a new Bronco and Ranger. While you might not agree with the decision to bring back midsize trucks, if we assume the Ranger does end up selling in the U.S. again, it will certainly be a step behind GM's two midsize trucks.
For the folks at the Blue Oval, who have generally been a step ahead of their Detroit competition over the past decade, these two decisions were uncharacteristically a step too slow. Now let's see if Ford can make up lost time.
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Daniel Miller owns shares of Ford and General Motors. The Motley Fool owns shares of and recommends Ford. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.