The Model T, the ’32 deuce coupe, the Thunderbird, the Mustang: For much of its 115-year history, Ford has been synonymous with cars.
Now Ford, one of the great engines of 20th-century American industry, is about to do the unthinkable: abandon the American car business almost entirely.
Just two years from now, a mere 10 percent of the vehicles rolling off Ford assembly lines will be sedans and sports cars. The rest will be pickups, SUVs and commercial vehicles — more lucrative models that the company hopes will secure its future.
What would Henry Ford think?
What might seem like a radical departure for Ford has, in fact, been years in the making. The fuel-price shock that left Detroit on its knees during the Great Recession didn’t last, and American consumers have gone right back to buying sport utility vehicles and trucks like the bread-and-butter F-series.
Ford’s board ousted its CEO last year and replaced him with Jim Hackett, a cost-cutter who’s prepared to make the sort of audacious gambles that Wall Street thinks have been missing.
“The passenger car rationalization plan is just the sort of bold and decisive action we believe investors have been waiting for,” said Ryan Brinkman, an analyst at JPMorgan Chase. “It is indicative of a management team for whom there are no sacred cows.”
By not investing in any car for North America except the Mustang, Ford believes it will reach an 8 percent profit margin by 2020, two years ahead of schedule. It is part of Hackett’s plan to cut $25.5 billion in costs by 2022. That figure, announced Wednesday, is almost double what the CEO laid out in October.
“We’re going to feed the healthy part of our business and deal decisively with areas that destroy value,” Hackett said last week.
While battery-powered vehicles have been money losers thus far, Ford’s plans aren’t completely inconsistent with the global march toward electrification that’s shaking up the auto industry.
Ford will hedge against the risk of rising pump prices by spending $11 billion to bring out 40 electrified vehicles by 2022. Among those will be 16 battery-only models, including the Mach 1, a high-performance electric SUV.
“Everything will be on the table” to fix the company, Chief Financial Officer Bob Shanks said last week. “We can make different investments, we can partner, we can exit products, markets — and we will do that.”
Naughton writes for Bloomberg News.