Ford Takes the High Road on Margin

Ford at LA Auto Show 2015

LA Auto Show 2015

January 24 2018 - Over a century ago the upstart automaker led by Henry Ford changed the history of the world with his process of selling sedans to the masses. Life has since revolved around the mobility enabled by the mass distribution of motorcars. Coming and going, automakers do their best to create a slate of vehicles to suit the broad market and target buyer lifestyles with their products.

2018 Ford Mustang GT Premium Fastback

2018 Ford Mustang GT Premium Fastback at LA Auto Show 2017

A century on, global competition and free market excess often results in significant overproduction. Automotive trends change quickly these days – it's easier to manufacture the product than find the right buyer for it. Witness all the aerial photos with giant parking lots full of unsold cars. Does America really need to add 10 million cars and trucks to the 253 million we already have for 252 million potential drivers?  

2018 Ford F-150 Raptor

2018 Ford F-150 Raptor at LA Auto Show 2017

Getting sales projections wrong means end of year discounts and price slashing. If you see a Cash Rebate offer of $15,000 on a new truck, that means everyone that already purchased that kind of truck has effectively taken an additional dose of forced depreciation. Nobody wins if everybody loses money. 

2018 Ford GT '67 Heritage Edition

 2018 Ford GT '67 Heritage Edition at LA Auto Show 2017

Ford Motor Co.'s remodeled focus on high margin cars is a smart, market leading philosophy. Why not build fewer cars for more comparative profit? The concept may seem obvious to any small business owner, but this is a 114 year old global behemoth that could be expected to have the twitch response turning radius of a crude oil tanker. 

Ford EV Cars

LA Auto Show 2015

We wish another automaker would find great profit in building very basic cars for the masses. Not everyone really needs 8 cup holders, backup cameras, 17 speakers, billet wheels, low profile tires, power anything, ceramic brakes, mood lighting or 365 HP. Make it a cheap, safe and reliable stepping stone to a more refined Ford and everybody wins, eventually. 

1908 Ford Model R Runabout

1908 Ford Model R Runabout sold $45,100 at Auctions America 2014

1966 Ford Bronco U13 Roadster

1966 Ford Bronco U13 Roadster sold $33,000 at Mecum Monterey 2016

Read: Bloomberg Article on Ford Profit Shift 

The company responsible for launching the modern carmaking era with Henry Ford’s assembly line will pivot away from being a full-line automaker, shrinking its passenger-car lineup and shifting only to low-volume, high-margin models. The reason? Years of coming up short on a long-held profit-margin target. 

www.bloomberg.com/news/articles/2018-01-16/ford-warns-profit-to-drop-on-...

by Randy Berg

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