Ford is going to get rid of most of their sedans in the US in the near future. They will focus on a just a few cars, trucks and SUV's in the US.
Trucks and SUV's are well-known as really profitable vehicles in the auto business. They always sell well in an up economy when people can afford higher gas prices. But, inevitably the economy will turn down and those "desired" vehicles will lose their luster with the car buying population. This will clearly leave Ford in an even worse position. If you can't sell the high profit vehicles, you got to have an alternative for your buyers. This will create even more volatility in their sales into the future.
Many people are also very specific to their car branding. What about all the folks who have been lifetime buyers of the sedans/Fords they are cutting? They are going to move on to another brand and will not be there when the next downturn occurs to support sales. Those buyers will be likely gone for good. Even if Ford changes direction in the future, the long-lead time to retool to get back into sedans will also be a huge tail wind.
Like a good portfolio manager, you have to have some diversification in your holdings. Some stocks will be out of favor at times, but others will be in. Diversification reduces volatility. The car business is no different.
Ford is trying to re-establish their identity and profitability, but this is not a good move. Someone is drinking the wrong Kool-Aid. Let's hope it isn't Jim Jones’ purple juice!
