Ford says good bye to American Sedans except Mustang to push profitability

The Model T, the ’32 deuce coupe, the Thunderbird, the Mustang: For much of its 115-year history, Ford Motor Co. has been synonymous with cars.

But 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 and into North American showrooms will be sedans and sports cars like the Taurus or Mustang. The rest will be pickups, SUVs and commercial vehicles -- more lucrative models that the company hopes will secure its future as change tears through the global auto industry.

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 big trucks like the bread-and-butter F-Series.

Ford’s board ousted its chief executive officer 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,” Ryan Brinkman, an auto analyst at JPMorgan Chase & Co. wrote in a report Thursday. “It is indicative of a management team for whom there are no sacred cows and which seems increasingly likely to pull other such levers to aggressively improve earnings and shareholder value.”,p>Ford shares rose as much as 3.8 percent, the biggest intraday gain in six weeks, and were up 3.3 percent to $11.48 as of 3:16 p.m. in New York.

Hackett, 63, is choosing a route similar to the one Fiat Chrysler Automobiles NV used to pass Ford in North American profitability. Sergio Marchionne, CEO of the Italian-American automaker, killed off the Dodge Dart and Chrysler 200 sedans and retooled the factories that had been assembling them. They now build Jeep SUVs and Ram pickups instead. Marchionne aims to surpass General Motors Co.’s margins in North America before his retirement in 2019.

While scrapping several sedans paid off for Fiat Chrysler -- the company almost halved net industrial debt in the first quarter -- the move wasn’t devoid of risk and won’t be for Ford, either. Both may have to count on fuel staying cheap and supporting demand for Ford Expeditions and Jeep Wrangler SUVs, plus the F-Series and Ram truck lines.

Ford is confident its new lineup will be able withstand rising gasoline prices, Jim Farley, president of global markets, said in an interview.

“We feel comfortable this new lineup will offer customers world-class fuel economy,” he said. “In the past, the fuel economy gap -- the penalty people paid for that utility body style -- was pretty high. Now it’s very modest.”

In the long-term, abandoning car segments may turn out to have been the wrong move if the Trump administration’s plans for weaker mileage standards don’t last long after his presidency. And Japanese automakers also are likely to welcome less competition for some of their best-sellers, including the Toyota Camry and Honda Civic.

“For Ford, doubling down on trucks and SUVs could be just what the brand needs,” Jessica Caldwell, an analyst for Edmunds.com, said in an email. “But this move isn’t without risk: Ford is willingly alienating its car owners and conceding market share.”