Ford to Cut Car Options, Shift Product Mix as Profits Slip

Ford Motor Co. says it will drop some car models, increase its SUV/crossover offerings and simplify trim options as part of a plan to improve its “operational fitness.”

The company expects to earn an adjusted $1.45-$1.70 per share this year compared with an estimated $1.78 per share in 2017. The guidance reflects expected higher commodity costs and unfavorable exchange rates in 2018.

The company estimates its net income for 2017 was about $7.8 billion, up from $4.6 billion in 2016, when results were hit by a $3 billion pension adjustment. Pretax profit last year fell an estimated 19% to $8.4 million.

Ford says its product mix in North America in the next few years will grow 10% for SUVs and shrink 10% for cars, reflecting a shift in the same directions for the overall U.S. passenger vehicle market. The company also will slash the number of orderable trim combinations for its popular Escape small SUV, Fusion midsize sedan and EcoSport mini-crossover from thousands to no more than 20 per nameplate.

The changes will “dramatically” improve efficiency by lowering production costs, shrinking inventories and lowering logistics expenses, according to the company. It envisions an adjusted lineup that delivers stronger growth, less risk and better returns.

Underlying Ford’s move is a desire to reallocate capital to higher-return options. The company also says it will double spending on electrified powertrains to $11 billion worldwide by 2022, in spite of lackluster consumer interest in such technologies. Ford expects the spending will lower this year’s pretax earnings by about $300 million.