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Ford to allocate 90% of capital toward SUVs, trucks as part of restructuring

Ford Motor Co. executives said Jan. 16 that most of the company's capital will go toward pickup trucks and SUVs in 2019 to boost profitability. The move comes as the automaker undertakes a major restructuring plan, including potentially significant layoffs in Europe and changes in regional markets.

Jim Farley, Ford's president of global markets, speaking at the Deutsche Bank Global Auto Industry Conference in Detroit said the company is allocating 90% of its capital for trucks and SUVs, which he called the "fastest-growing, most profitable segments in our industry."

"As global segmentation continues to shift, we forecast that magical 50% change will happen this year for trucks and [SUVs]," Farley said, referring to trucks and SUVs making up 50% of the vehicle market.

"That's a big change," Farley added.

The automaker faces other major shifts on the horizon as well.

Ford unveiled a restructuring plan Jan. 10 that is expected to include planned job cuts across Europe. The automaker has not announced specific details yet, but the layoffs could hit thousands of employees in its 50,000-person European workforce.

Ford CFO Bob Shanks said during the Jan. 16 event that the company will make announcements for other regions later this year.

Farley told the audience to expect additional news about South America in 2019. It is unclear whether there will be restructuring or workforce cuts in that region.

The company reported Jan. 16 that preliminary adjusted EPS fell 27% for full year 2018 to $1.30, down from $1.78 in 2017. The new EPS figure missed the mean consensus of analyst estimates of $1.32, according to S&P Global Market Intelligence.

Ford is banking on its "transformation" plan, which includes revamping its product lineup in several markets with a focus on models, such as SUVs, that generate more profitable returns.

Ford was underrepresented in the SUV business in 2018 but plans to be overrepresented by 2021 with its new lineup, Farley said, adding: "Expect our volume to be about 40% utilities [SUVs] in the next few years."

The Detroit-based automaker also announced that it would reshape its regional businesses based on its push toward trucks and SUVs.

"We're redesigning the markets to the specifics of each region," Ford CEO Jim Hackett said during the event.

In the U.S., Ford will add seven new SUV nameplates over the next two years with a 50% refresh rate, Farley said, noting that these additions include a Lincoln brand SUV, the new Ford Bronco and a Mustang-inspired electric SUV with a planned range of approximately 300 miles.

In China, the automaker will add six new SUVs over the next couple of years, with a refresh rate of 55% compared with the previous 18% rate, Farley said. There will be a new nameplate called the Territory, and the company plans to localize the new Ford Explorer in China.

On Jan. 15, Ford announced an alliance with Volkswagen AG to work on pickup trucks and commercial vans for global markets beginning as early as 2022.