Consumer shift to small cars to drop Ford’s margins in North America

Article by Anita Panait, on November 19, 2012

Ford Motor Co.’s record profit margins in North America are dwindling as consumer downsize from trucks to small cars. Mark Fields, president of The Americas for Ford, remarked that they continue customer trading down to smaller vehicles. Speaking at the Barclays Capital 2012 Global Automotive Conference in New York, Fields noted that small cars have smaller margins compared to trucks.

Fields said that the consumer shift will shrink Ford’s North American margins from 12 percent in the third quarter of 2012, to between 8 and 10 percent over time. Fields said that Ford’s profit margin have increased as it introduced new models like the 2013 Escape sports utility vehicle, which costs $4,200 higher than the old model. He added that the redesigned 2013 Fusion is selling on an average for $3,700 more than the 2012 model.

Ford posted $6.47 billion in earnings before taxes in North America in the first nine months of 2012, more than its total in the region in full year 2011. North America had an operating profit margin of 11.2 percent in the first nine months of 2012, in an industry where a 5-percent margin is already considered respectable. Fields, however, warned that in the fourth quarter of 2012, Ford’s profit margins would not be as strong.

In October, Ford’s board of directors named Fields as Chief Operating Officer effective Dec. 1, 2012, making him as the heir apparent to Ford chief executive Alan Mulally.

Fields was responsible for transforming Ford’s North American operations from record losses four years ago to record profits in 2012. Mullaly is expected to remain as the president and CEO at Ford until at least 2014. Fields expects that the carmaker’s results in South America will worsen in the near-term in South America, where Ford posted $68 million in pretax profits and 1-percent operating margin in the first nine months of 2012.

Ford Fusion breaks ground as the latest generation of more responsive vehicles built by Ford. It is the only sedan with an available hybrid, plug-in hybrid and gasoline variants, with each model capable of providing superior fuel efficiency and an exceptional driving experience.

Highlighting its fresh design and classy framework, the brand new Fusion is among Ford’s most advanced vehicles after the 2011 Fiesta and the 2012 Focus. These cars are manufactured to bring customer satisfaction with its topnotch fuel efficiency, cutting-edge technologies and unique looks.

According to Derrick Kuzak, Ford’s vice-president in Global Product Development, the company’s aim for Fusion was to offer only the best of Ford. The company’s leading teams have collaborated and worked on a blank slate to design and build a medium-sized vehicle with exceptional fuel economy and a revolutionary design. The resulting car would feature advanced technologies that contribute to efficient and safe driving.

The Ford Fusion was launched in the North American market in three varieties – the Titanium, SE and S series – and signals the upcoming international debut of the Ford Mondeo.

Superior fuel efficiency in three crowns

The all-new Ford Fusion is set to provide topnotch fuel efficiency in its hybrid, plug-in hybrid and gasoline models. Every new model launched is reflective of Ford’s strong commitment in becoming the leader in fuel economy.

Topics: ford, north america

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