Ford is gearing up for the future with a new strategic plan, and that means massive overall spending cuts and, on top of that, redistributing development funds from cars to much more profitable trucks and SUVs. That means, basically, that some Ford car nameplates will go away – expect some educated speculation on that soon. But first, the numbers and a quick dive into the details of Ford’s announcement.
The overall reduction in spending is about $14 billion – $4 billion of which will be product engineering cuts, and $10 billion of which will be materials savings. That’s because Ford has decided its 6-percent margins aren’t enough to sustain itself. It wants at least 8-percent margins, and also to invest properly in autonomy and electrification (including the EV-focused Team Edison group, of which there are few details at the moment). In addition, Ford will yank $7 billion from car development to fund truck and SUV development, including the 2018 Ranger and 2020 Bronco and three other trucks to be determined later. One of which, Ford claims, will be an EV SUV.
In addition, Ford will reduce the buildable configurations of possible cars; check out the slide from Ford’s presentation today above. Did you have any idea the Fusion had this many configurations? Neither did we. What this means is more popular options group bundling, and a lot fewer standalone options, in all likelihood. That’s great for manufacturing efficiency but perhaps less good for consumer choice.
The quick analysis here is that it seems like Ford may be hedging that the automotive business, overall, won’t grow much beyond today’s size. That’s the peak auto theory many have been bandying about. But it’s telling that Ford thinks the way forward isn’t to increase volume, but to simplify its lineup and reduce the number of nameplates it sells.