Ford's Folly in Betting Solely on SUVs

Jim Motavalli

Jim Motavalli | May 14, 2018

Not a lot shocks me, but the news that the Ford brand was going to stop selling all but two of its cars (leaving only the Mustang and next year's Focus Active crossover) sent me for a loop. I know SUVs are popular, and still growing in market share, but this seemed then—and still does now—like a very short-sighted move.Yes, financially troubled Ford could cite billions saved by not preparing new North American car models, and the stock jumped, but in the long run it diminishes the company big time.

The 2013 Ford Fusion at the 2012 Detroit Auto Show: Marching forward on fuel economy? (Wikipedia photo)

Fiat Chrysler has been making many of the same moves, including eliminating its Chrysler 200 small car line. Have these companies looked at gas prices lately?

The not-so-popular Chrysler 200 was unceremoniously dumped. (FCA photo)

I’ve been at this long enough to remember the launch of both the Taurus and the newly green Fusion. The first one, with its streamlined jellybean shape, catapulted Ford into the first rank of innovative automakers--and became a five-year bestseller in the 1990s. The latter was a huge, gala event at the Detroit Auto Show in 2012. It felt like the future, since the car now came in both hybrid and plug-in hybrid versions, and had auto start-stop. Plus, it was cool looking. I called the Fusion “the hit of the show.” Now both these icons are gone, as is the Fiesta small car and the C-Max (which was only available as a hybrid or a plug-in hybrid Energi).

Rear seating in the 2015 Ford Mustang: not exactly family friendly. (Ford photo)

It’s hard to see the Mustang—a landmark vehicle, certainly, but with a vestigial back seat hardly a family hauler—as able to carry the Ford car brand into battle. It has a global following, but the Mustang still sold only 125,000 total units in 2017. Meanwhile, Toyota sold 387,081 Camrys (admittedly, down from 429,355 in 2015).

The 2018 Camry. Sales are down, but Toyota isn't throwing in the towel on sedans. (Toyota photo)

Now about those gas prices. This week, oil prices hit $70 a barrel for the first time since 2014. And that was the result of worrying about the U.S. pulling out of the Iran nuclear deal. Now it’s actually happening. It matters because if sanctions come back, Iran’s oil production could be cut as much as a million barrels per day, pushing prices up further.

You couldn't give away Hummer H2s. Will those days come back? (GM photo)

 When gas went to $4 a gallon in 2008, Americans abandoned their SUVs as fast as they could trade them in. Full-sized Yukons and Expeditions (not to mention Excursions and Hummers) were suddenly worth a pittance. I talked to one poor sap who was trying to sell his H2 Arnoldmobile with no takers. “If no one calls, I’ll just keep it,” he said. The U.S. automakers were caught flat-footed, with few small cars to sell. And it takes time to retool an auto plant. Once it starts making SUVs, it's going to be making them for a while.

Will history repeat itself? Not in the same way. Michelle Krebs, a wise counsel and executive analyst at Autotrader, points out that because carmakers have been building their SUVs mostly on car rather than truck platforms, the fuel economy advantage of the great American sedan has shrunk. There isn’t much reason to trade in a 2018 Honda CR-V (28/34 mpg) for a 2018 Taurus (18/27 mpg).

Honda's CR-V offers small car-like fuel economy, even if it is a SUV. (Honda photo)

“Ford won’t forget how to make cars,” Krebs adds. “They made this decision because of poor sales of the Fusion and small cars in the U.S., but they’ll still be making them abroad.” She also says that those people who sold their big SUVs in ’08 were right back buying them as soon as fuel prices eased a bit. They want to go big.

Cox Automotive Chief Economist Jonathan Smoke agrees with that. “Despite recent gas price increases, we do not anticipate a shift in consumer behavior away from utility vehicles,” he says. “Thanks to improvements in fuel efficiency, the annual fuel premium for driving a compact SUV over a compact car at today’s higher gas prices is about $34 a year—or less than $3 a month. We don’t think consumers will suddenly abandon the desirable ride height and great utility for the cost of a cup of coffee.”

I get all this. A whole lot of increasingly influential women buyers “like to sit up high.” And men raised on action movies want something macho, with pickup trucks hitting the right buttons.

The Ram 1500 with the V-8 and AWD delivers 14 mpg. (FCA photo)

But it’s playing havoc with what seemed a fairly orderly plan to reducing greenhouse gas emissions from transportation. The Obama administration put in place, with automakers’ agreement—a timetable to get autos to a fleet average of 54.5 mpg by 2025. Cars like the Fusion, especially in its hybrid variants, were helping us get there—aided by a slow but steady stream of battery electrics.

It’s not the CR-Vs and RAV4s of this world that are the problem, but the popular big pickups and SUVs, which still guzzle gas. For instance, order your eight-cylinder 2018 Dodge Ram 1500 with all-wheel drive, and you’re looking at 14 mpg combined (13 city/18 highway).

 That’s why we’re in a fairly agonizing battle over the 2025 standards. California, which has the unique ability among the states to set its own tailpipe standards, wants to keep them in place, but Scott Pruitt’s EPA wants to roll them back.

Automakers don’t know which way to jump, because the last thing they want is for California (and the states that follow its rules) to go one way while the rest of the country goes another. That would mean making two different versions of many popular cars and trucks.

So how are we faring on saving the planet? Since fuel economy is a direct correlation to greenhouse emissions, that’s what we’re really talking about. The good news is that U.S. carbon dioxide emissions fell by 12.4 percent on an absolute basis between 2005 and 2017, and were down 19.9 percent on a per capita basis. But before you pat yourself on the back, consider that most of the gain was due to switching from coal and fuel oil to cleaner-burning natural gas. And that happened mostly for economic reasons.

Transportation was 27 percent of U.S. emissions in 2015, electricity generation 29 percent. But in terms of carbon dioxide production, transportation (1.9 billion tons annually) just surpassed electric power (1.8 billion tons). Expect those disparities to get worse, unless we either go electric or suddenly discover a love for mass transit.  

This EnGadget video argues that millennials' embrace of car and ride-sharing is one reason car sales are down, including at Ford. But even if Ford does end up supplying sharing services instead of selling cars to consumers, it's going to need full model lines. Which Ford are you going to miss most? For me, it's the scrappy C-Max:

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