DETROIT — Ford Motor Co.'s decision to phase out every non-luxury sedan from its North American lineup boils down to the simple fact that those vehicles are losing money.
Ford is projecting that light trucks will soon account for nearly 90 percent of its North American sales.
The Fusion, Ford's most serious effort to challenge Toyota's and Honda's longtime dominance in midsize family cars, is a goner.
Also out: the Fiesta, Ford's recession-era attempt to woo young buyers, and the Taurus, a venerable nameplate that then Ford-CEO Alan Mulally rescued from the scrap heap in 2008 after arriving in 2006 to save the company from collapse.
The iconic Mustang will survive, as will the Focus, but only as a wagon imported from China in much lower volumes.
"We're going to feed the healthy part of our business," CEO Jim Hackett said, "and deal decisively with the parts that destroy value."
Pickups, SUVs and crossovers are at the center of the healthy part, Ford concluded as it pored over its operations to find $25.5 billion in cost savings it has promised to unlock by 2022. (That's nearly double the $14 billion it had identified as of October, an indication of how deeply Mr. Hackett has ordered the company to search for ways to improve its "fitness," as he calls it.)
Cars, "most Lincoln products" and chunks of Ford's overseas business are among the value destroyers — for which all options are being considered, CFO Bob Shanks said. And with demand for cars deteriorating every month, Ford made the boldest move yet under Mr. Hackett, who was brought in 11 months ago to make the company act more decisively.
"You can think about unlimited subscription opportunities or somebody who says, 'I just want unlimited SUVs,' or 'I just want it for two weeks out of a month because I travel all the time.'"
UBS analyst Colin Langan estimates that Ford loses $800 million a year selling small cars in North America.
In contrast, Ford indicated that it made more than $3 billion in the first quarter alone on the "high performing" parts of its business, which Mr. Shanks described as "trucks and most utilities."
Shanks: Looking at all options
It's not just Ford.
FCA U.S. L.L.C. already has stopped building the Chrysler 200 and Dodge Dart sedans, and General Motors Co. is planning eliminate a production shift at its Chevrolet Cruze plant in Ohio, while adding jobs in Tennessee to build more crossovers.
Light trucks accounted for 68 percent of U.S. sales in the first quarter of the year. LMC Automotive expects that number to be nearly 73 percent by 2022 — with trucks making up 84 percent of GM's U.S. volume, 92 percent of Ford's and 97 percent of FCA's.
Consumer demand for many cars might be even weaker than recent sales numbers suggest. Polk registration data obtained by Automotive News show that a third of the Fusions sold in 2017 went to fleet buyers, with 19 percent ending up on rental-car lots.
Despite that trend, losing the Fusion and other sedans will be tough for dealers to stomach, said Chris Lemley, owner of Sentry Auto Group near Boston. Lemley called the decision "a short-sighted overreaction to a shift in the market" that "will become a self-inflicted wound that wastes decades of hard work."
He said such a reaction a decade ago would have meant gutting Ford's lineup of pickups and SUVs, which weren't selling amid projections that gasoline could soon be $6 a gallon or more.
"But Ford's leadership demonstrated the good judgment to hedge its bets," he said in an email, "recognizing that not all predictions of the future will come true."
Jim Farley, Ford's head of global markets, asserted that Ford isn't simply turning its back on cars and, more importantly, car buyers.
"We intend to expand our passenger car lineup in the U.S.," Farley told Automotive News. "We also intend to serve similar, affordable price points to today. What's changed here is just the format of the vehicle. Our dealers will have just as much opportunity to grow, just with a different portfolio."
Mr. Mulally plotted Ford's pivot toward small cars after gasoline prices spiked and Ford's pursuit of fat profits during the SUV boom of the 1990s and early 2000s resulted in losses that compounded as the economy worsened.
Farley insists that Ford is not repeating the mistakes that ultimately plunged two of the Detroit 3 into bankruptcy and took the Blue Oval right to the brink. He said the industry has "fundamentally changed" since then, in a way that makes traditional cars a bad bet.
"Customer view and experimentation on the utility side is so much more broad," Mr. Farley said. "Utilities are the preferred body style. This wasn't the case before the downturn."
Another difference, Mr. Farley noted, is how much the fuel-economy gap between sedans and crossovers has closed, due to technology such as Ford's turbocharged EcoBoost engines. The 2018 Fusion has a combined EPA rating of 27 mpg, compared to 26 mpg for the Escape, which has considerably more cargo space and versatility.
But he also conceded that getting out of some segments that still represent high volumes — auto makers sold 1.8 million midsize cars in 2017 — carries some risk for the company and its dealers, especially among entry-level buyers.
"We think we can tempt some of those customers with an image upgrade," Mr. Farley said. "Where Ford does best is where we play to our strength of emotional products."
GM said it's not planning to follow Ford's lead, though it reportedly is studying whether to eliminate some slow sellers, such as the Chevrolet Sonic and Impala.
A GM spokesman said Ford's abandonment of mass-market sedans "gives us an incredible opportunity to further narrow our gap to Ford in the profitable commercial vehicle segment. It will also make us and the remaining competitors much stronger by weeding out weaker competitors."
Mr. Lemley, the Massachusetts Ford dealer, said he's experienced other vehicle lines being killed and is skeptical that customers will remain as loyal as management seems to expect.
"Eight years ago, Ford announced it was killing Mercury," he said. "It assured us not to worry, because there would be no problem taking care of Mercury customers at Ford dealerships — those customers would just buy Tauruses and Fusions."
Nick Bunkley is a reporter with Automotive News, a Detroit-based sister publication of Tire Business. He can reached at [email protected]