Howes: Death of the great American car draws nearer

Daniel Howes
The Detroit News

Mark your calendars: ol’ Sergio Marchionne is being proven right again.

He’s the heretical CEO who shocked the industry when Fiat Chrysler Automobiles NV said it would stop producing cars in its U.S. plants. It would convert them to building higher-margin SUVs because that’s what Americans want in more shapes and sizes.

The latest evidence of his vindication comes from year-end sales, out Wednesday, and rival Ford Motor Co. Bowing to reality, the Blue Oval appears to be steadily transferring production of its most recognizable cars to China from plants in Mexico and leaving their long-term U.S. future in doubt.

First the Focus compact, and now the next-generation Fusion, will be assembled in the world’s largest market for sale there and in other foreign markets — if not, as Ford has confirmed to several news outlets, for export to the United States itself. And Ford recently launched a new Taurus sedan in China, leaving its future (and that of the subcompact Fiesta) back home murky.

The Dearborn automaker is deep in the process of re-evaluating its entire North American car line-up, a necessity punctuated yet again by booming sales of pickups and SUVs as traditional car segments continue an inexorable slide that cannot be ignored.

Plans to produce a redesigned Fusion sedan in Mexico for North America have been killed, as The Detroit News reported this week, even as the automaker still weighs options for the nameplate. They include extending production of the North American Fusion beyond 2020, according to a source familiar with the situation, or redeploying the model name on a reimagined product intended to capitalize on consumers’ infatuation with SUVs and crossovers.

The trends are unmistakable. American hunger for profit-rich trucks and SUVs is forcing automakers to place bets where the money is. That’s not in the traditional mass-market car segments where Detroit brands long have trailed Asian rivals in sales and profitability, if not in quality.

The second trend: Ford CEO Jim Hackett is doing what his predecessor apparently wouldn’t, making radical calls that previous Ford CEOs would never consider, much less do. The automotive world is changing, and Detroit’s Three are pushing to keep up or be left behind.

Add the emerging capital demands for mobility, autonomy and electrification, and it’s undeniable that companies as large as Ford and General Motors Co., Toyota Motor Corp. and Volkswagen AG, are making hard choices on where to invest scarce capital promising the most lucrative returns.

Traditional car segments, particularly for mass-market volume brands, don’t rank high. And year-end sales numbers won’t help. Ford-brand cars closed last year down 14.9 percent, reports Autodata Corp. GM’s Buick car sales slumped 51 percent on the year; Chevrolet car dropped 16.1 percent; Toyota’s namesake car brand dropped nearly 10 percent, and its posh Lexus car lineup surrendered 23.3 percent last year.

Yet in December, Ford sold nearly twice as many F-Series pickups (89,385) as it did cars across its entire U.S. lineup (44,871) — evidence that Ford is coming late to a game its previous management team, under ousted CEO Mark Fields, mostly chose not to play.

For the year, light trucks accounted for 63.2 percent of the U.S. market, up 4.3 percent from a year earlier. Passenger cars slumped nearly 11 percent to 36.8 percent of total U.S. sales last year.

Somewhere (possibly 40,000 feet over the Atlantic) Marchionne is smiling. The reckoning implicit in his cars-to-trucks prediction is unspooling, and his group is mostly ahead of the curve as others scramble to catch up.

The good news for many automakers is that every truck or SUV sale that replaces a lost car sale generally delivers fatter per-unit profits to the bottom line. The bad news is that an entire industry could be caught out should an unforeseen catastrophic global event tank consumer confidence or cause oil prices to spike far higher than their expected trend line.

A growing number of automakers are betting more heavily on the former and less on the latter. That’s because they need a properly geared core business to generate the cash they need to navigate an electrified, self-driving future that is coming.

How and when it will arrives remains to be seen, but it will. And those unprepared to play will be left behind.

(313) 222-2106

Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.