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Ford Going Fast

Ford estimates that SUV sales could be half of all retail sales in the U.S. by 2020.
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Last month Ford announced that it is in the process of making big changes in its lineup. It is undertaking moves to replace some 75 percent of its current showroom by 2020, adding four new trucks and SUVs.

The trucks cannot be overlooked. As you probably recall—whether you read AD&P or virtually anything even remotely automotive-related, you heard about this—in 2014 Ford launched the F-150 with the “high-strength, military-grade, aluminum-alloy body.” And that has turned out well for Ford. It has gained 1.3 percent of share of the full-size pickup segment, which is an absolutely huge segment, dwarfing cars. The average transaction prices for the F-Series trucks—as in the average price that is actually paid—are up $6,700 per vehicle since that aluminum-associated launch. Think about that: people are paying $6,700 more per truck. The margins that Ford make on that probably require a fleet of F-150s to drive the money to the bank.

Adding more trucks has to have an enormous upside for Ford.

And then there are the SUVs. Ford estimates that SUV sales could be half of all retail sales in the U.S. by 2020. Two years from now. Half.

While some people might refer to Ford (and GM and Toyota and FCA and. . .) as a “car company,” Ford is taking $7-billion from the budget for developing cars (remember back in 1985 when Ford came out with the Taurus, the car that essentially saved the company?) and moving it down the hall to the folks who are developing SUVs.

By 2020—with new things like the Bronco and a small off-road ute, as well as putting in electrified powertrains into models (hybrids and fully electric)—Ford will have eight SUVs on offer. You will be able to use a single hand to count the number of traditional car models that will be on the dealership lot.

Although Ford has been working hard to improve the fuel efficiency of its powertrains such that those opting for a crossover aren’t taking a huge hit from the standpoint of fuel efficiency (i.e., an Escape has an EPA-estimated 21 city/29 highway mpg rating and the Fusion comes in at 21/32 mpg), going forward the company is focusing on electrification in a big way.

That is, there is hybridization coming to the F-150, the Mustang (!), Explorer, Escape, and Bronco. And in 2020 the new full battery electric vehicles begin rolling out, with six expected to appear by 2022.

An extensive array of new products just doesn’t suddenly appear out of nowhere; there is extensive product development involved. Ford is addressing this, as well. The company is working to improve its engineering efficiencies to the tune of $4-billion.

I had the opportunity to recently speak on background with Ford’s Hau Thai-Tang, executive vice president of Product Development and Purchasing, and I can assure you that he is confident that there can be product development improvements of this magnitude, and he has a plan as to how Ford will get there, through such things as commonality and modularization, basing vehicles on one of five flexible vehicle architectures (body-on-frame, front-wheel-drive unibody, rear-wheel-drive unibody, commercial van unibody, and battery electric vehicle). Once based on a given architecture, they will then provide distinctiveness and character to a vehicle. So, while the basic architecture for a several vehicles will be the same—which means about 70 percent of the engineering costs are shared—there will be model-specific elements, which will account for 30 percent of the cost. A much more efficient spend and one that will also help get vehicles to market faster. And there are other things that Ford is doing to leverage technology, both its own as well as that of its suppliers.

As the old phrase has it, “time will tell.” But what’s interesting to note that in Ford’s plan, time is being accelerated at a much faster pace than is often the norm in the industry. And then there is the whole automation of the vehicle that it is working on, as well (and not just of vehicles: Ford is looking at connecting vehicles to entire smart cities).

The automotive world is changing. Ford isn’t just going along with the change. It is helping drive it.