Trump tariffs kill new Ford Focus crossover set for U.S. showrooms
Ford Motor Co. is again readjusting its future product plans in the United States, this time in response to tariffs imposed on Chinese imports by President Donald Trump — and the threat of more to come.
The Blue Oval is scrapping its plan to sell the China-built Focus Active crossover in the automaker's home market, effectively axing the Focus name plate in the U.S. by the end of next year and ultimately leaving just one Ford-brand car in showrooms within the next few years: the Mustang.
The Focus-based vehicle, previously expected to arrive in the United States by late 2019, would have been built in China by Ford and shipped to the United States. Recent tariffs imposed on Chinese imports by the Trump administration — and those expected to be levied on imported vehicles — would have trimmed profits on an already low-margin vehicle.
"Given the negative financial impact of the new tariffs, we've decided not to import this vehicle from China," Kumar Galhotra, Ford president of North America, said Friday. "The significant thing that moved was the tariffs going up substantially higher. We're choosing to deploy resources elsewhere."
The decision comes as the automaker jostles with an aging portfolio deemed unfit for the SUV-and-crossover-heavy desires of consumers in America and other major markets. The Focus nameplate on the Active crossover was to be the last vestige of Ford's current sedan lineup.
"Whatever Ford gets in brand recognition from Focus might not have helped much attached to what's supposed to be a crossover or an SUV," said Karl Brauer, industry analyst for Cox Automotive.
It may have been difficult for Ford to sell Americans the Focus Active with enough volume to earn much of a profit margin, according to Brauer. In its current iteration, sales of the Focus passenger car are down 15.3 percent in U.S. sales through July with nearly 84,100 deliveries.
"With the transitory nature of the tariff situation," he said, "they may have been looking for an excuse to not sell (the Focus Active) in the U.S." And the hot politics of trade, including where vehicles are built, likely contributed to Ford's decision to drop plans to import a Chinese-built Focus into the United States.
Under CEO Jim Hackett, Ford is pushing for 10 percent profit margins in North America — 7.4 percent in the second quarter — prompting Ford leadership and managers to adopt a "Return to 10" mantra they're using to help guide decision-making on future product and business strategy.
For dealers, the loss of the Focus nameplate is bittersweet.
"The nameplate has been a little watered down in the last few years. But do we hate to lose it? Yes," said Sam Pack of Sam Pack's Five Star Ford in Texas.
Pack sees potential in the upcoming Ranger and Bronco revivals — also strong brand names for Ford — and in the change in "silhouettes" the automaker has promised in its portfolio overhaul. But having an affordable option is also crucial, which is why Pack says he supports Ford's decision on the Focus Active.
"We need products at an affordable price range, they're very important for a lot of different reasons. But if Ford had brought in the Focus Active at the price range with those tariffs, it just would not have been affordable," Pack said. "There's a strong lineup on the way, but it needs to do two things: we need to have the product that will fill the void from the cars that we're losing, and then we have to have products that go beyond that and grow our share."
Crosstown rival General Motors Co. had asked the U.S. government for an exemption from the tariffs for its China-built Buick Envision. That request is still being considered, a GM spokesman said. Galhotra said Friday that Ford did not seek an exemption for the Active.
“This is just the first of many such announcements,” said Kristin Dziczek, vice president of the Ann Arbor-based Center for Automotive Research. She predicted tariffs on Chinese imports, compounded with a possible 25-percent tariff on all imported cars and parts, would push a lot of products out of the U.S. market.
“Many models will be withdrawn from the U.S. market, and many won’t be built in the U.S. at all,” she said. “There are a whole lot of implications for the automotive industry, and for consumers in terms of choice and prices.”
Ford is in the midst of cutting $25.5 billion in operating costs to prepare for the industry's uncertain future, as well as spending $11 billion to restructure its global businesses. By 2020, it projects nearly 90 percent of its vehicles sold in North America to be trucks, SUVs or commercial vehicles.
Since becoming CEO in May 2017, Hackett has pushed for quicker decision-making among Ford's top ranks. With news of further Trump tariffs swirling again this week, the automaker made the decision Thursday to nix plans to import the China-built Active — and investors reacted, bidding shares down 2.2 percent to close at $9.48.
The Focus Active, built in Europe and China, will be sold exclusively in the European and Chinese markets. North American production of the current generation Focus ended earlier this year at Michigan Assembly Plant in Wayne when the automaker began to convert the plant to produce the 2019 Ranger and 2020 Bronco.
Ford had projected to sell fewer than 50,000 Focus Active crossover vehicles annually in the United States. The Dearborn automaker expects the impact of dropping the vehicle from the future portfolio to be "marginal," Galhotra said.
The decision slightly delays Ford's plans to transition from sedans to new crossover "silhouettes." The automaker intends to cut its passenger car lineup by more than 80 percent, eliminating the Taurus, Fiesta, Fusion, C-Max and Focus sedans within a few years.
The Focus Active was expected to fill in the space left by those sedans. Company officials had said several times the crossover design was more desirable to consumers than a sedan.
Galhotra declined to comment specifically Friday on what Ford would offer consumers displaced by the coming lack of sedans in the lineup. The automaker has stressed it will not turn away from entry-level vehicles in pursuit of greater profit margins, and will replace the sedans with similarly affordable vehicles.
In August, Hau Thai-Tang, Ford's executive vice president of product development and purchasing, said Ford's North American lineup will have grown by three vehicles by 2023 despite plans to cut sedans.
Galhotra on Friday stressed that Ford will have options for its U.S. consumers: "It didn't make sense for us to continue to invest in this program. We're looking at the entire landscape, and we're thinking through what other products we can offer customers."