Ford Says Goodbye To The Focus, Taurus And Others In North America: 'This Was Expected'

Ford Motor Company F announced Wednesday it will pare its North American car portfolio to just two vehicles.

The Mustang and Focus Active crossover will survive the transition, which eliminates investment in next-generation models of the Fusion, Focus, Taurus and Fiesta.

“We are committed to taking the appropriate actions to drive profitable growth and maximize the returns of our business over the long term,” President and CEO Jim Hackett said in a press release. “Where we can raise the returns of underperforming parts of our business by making them more fit, we will. If appropriate returns are not on the horizon, we will shift that capital to where we can play and win.”

The stock was trading up about 2.4 percent at $11.38 in reaction to the company's Q1 earnings beat.

‘This Was Expected’

Michelle Krebs, a senior analyst at AutoTrader, said the “virtual abandonment” of the traditional car market comes as no surprise.

“U.S. sales of traditional cars have plummeted to about a third of the market and remain in freefall as consumers pick utilities over cars,” Krebs told Benzinga. “Ford’s car sales have been particularly dismal. Ford’s strategy is to revamp its product line with fresher, more desirable vehicles that generate higher average transaction prices — as utilities typically do — and richer profits.”

The refocusing is “better late than never," according to Morgan Stanley.

“Virtually eliminating Ford’s NA car portfolio makes a lot of sense, in our view,” analysts Adam Jonas and Armintas Sinkevicius said in a Thursday note.

A Comparable Strategy

Ford lags a few years behind Fiat Chrysler Automobiles NV FCAU, which was the first to largely exit the U.S. car business. FCA proved the strategy “successful,” Krebs said.

General Motors Company GM claims it’s also been on a similar path.

“We’ve already signaled there’s going to be significantly lower investment on passenger cars on a go-forward basis,” GM CFO Chuck Stevens said during a Thursday earnings call. “We’ve taken tough actions in a number of passenger car markets around the world.”

Stevens referenced GM’s pullback in passenger cars through its cuts of Opel Vauxhall and Chevrolet Europe and its restructuring in India, South Africa and South America.

“We’ve been on this path for a number of years and we’ll continue to be on this path where we’re going to invest in segments and countries where we can earn a sustainable long-term return,” Stevens said.

Krebs said she anticipates additional announcements around other automakers' car portfolios.

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Photo by Carsale via Wikimedia.