Remember when Cramer was insisting China was a fountain of loot for USian companies to harvest?
Posted some time ago, about Ford’s small, and rapidly shrinking, market share, now down to only 1%. (VW, Chinese market leader, also reported a 14% drop in y/y volume, and Jeep has withdrawn from China entirely)
So, Ford’s great new strategy is to use China as a source for cheaply built models for export (the next gen Lincoln Nautilus will be imported to the US from China). Meanwhile, the company will increase it’s efforts to obscure Chinese results by removing detail from sales reports and no longer breaking out Chinese earnings separately.
No matter how much Ford tries to hide it’s failure in China, the company honchos will know how much it is dragging on the bottom line, and hurting their bonuses. This is starting to smell like GM’s position in India, which went from building for the Indian market, to building cheaply in India for export only, to abandoning India entirely.
Similar to what you wrote about GM, Ford has gradually reduced operations in various regions, then stopped those operations, then essentially stopping sales there altogether. Now well through the process of abandoning market segments and quickly realizing they can’t just waltz into making money with EVs.
I think they will survive for quite a while, but expect more dramatic reductions in both served geographic markets (except probably for token exports) and market segments.
25 years ago or so, they sold 4 million vehicles a year. Now… 1/2 that. I can see another halving over the next decade, assuming they don’t reach a crisis with their automotive debt and debt from their credit arm… and assuming they don’t kill themselves with the EV transition.
I’m not taking bets…
Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.
Ford has already bailed out of all of South America, (except for token exports from North America). The company floated a plan to sell it’s Indian assets to Mahindra, then paste blue ovals on Mahindra products. Seems that Mahindra realized there was no value in the deal for them and pulled out of the deal, so Ford followed GM in abandoning India.
All has the stink of Welchism: withdrawing from the highest growth potential markets, in the countries with the most population, because competition and market conditions will not let them gouge customers like they do in the US. I have watched several Indian market comparison tests of the Jeep Compass with other SUVs. The testers all say the same thing “the Jeep is a nice car, but WOW is it expensive for what it is”.
They are leaving markets where they lose money (that’s not gouging customers) and leaving markets where the profits they DO make are insufficient (gotta make more than a penny on a dollar of sales when it takes billions to keep things competitive!) to justify the ongoing investments required to stay competitive (again, that’s not gouging customers).
Currently, Ford does pretty well in the US by… yes… gouging… their truck customers. Huge truck profits keep the company afloat and it’s some sort of shared “industry thing” to charge enormous margins on the highest priced products. Not just the US industry but the likes of BMW and Mercedes as well. And select Japanese companies.
Why are other companies able to do well in overseas markets and Ford doesn’t? That’s a very complex subject, but it has nothing to do with gouging. It has to do with competitive decisions and how the company chooses to operate.
When I was with Ford, I remember working on a project to figure out how to make our standard Ford products competitive in India… by leaving off things that weren’t required for competitive reasons, like rubber seals around the hood. The project or directive was in itself flawed, indicating that management had no understanding of how to approach the problem.
Bottom line, the project failed, Ford was unsuccessful in India and upper management continued to draw large bonuses for meeting the short sighted objectives set for them by the board.
Ford’s problem, like that in many companies, is management hubris and incompetence. They don’t see it that way of course, because they were wooed to their positions by others with minimal stakes in success, given the wrong objectives and then paid very well… leading to general agreement with “Hey, I’m pretty special!”.
How to fix Ford’s problem? Do like Tesla did… start from scratch and try to minimize input from automotive “experts” who figure they know how to do things. I was very much an “out of the box” thinker/doer at Ford, but I would never have succeeded at Tesla because:
I’m not sure how much my particular expertise would be needed. Well, yes, needed, but they don’t need many people at Tesla to do it. (Vehicle architecture).
I was never willing to make large personal sacrifices on behalf of the company. My family was/is my focus, not the almighty company. I remember a day when one of my peers said “I just love coming in on Sunday and spending the day at the test track.” My thought was “Wow! We have completely different world views.” Which I knew, but didn’t realize just how different.
Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.
Jack Welch has been quoted as saying words to the effect he did not want GE to be in any business where they were not already #1 or #2. That, itself, is a pretty clear statement of not being interested in competing and growing the company.
As that article says, in 2016 Ford sold some 900,000 cars in China, with a 4% market share. Now they move 250,000, with a 1% market share. In 2017, Jeep sold 202,755 cars in China, good for a 0.84% share. By 21, Jeep sales fell to 20,357 and a 0.1% share, and the company exited the country. Chevy sales peaked out at 767,001 and a 4% share in 2014. By 21, Chevy sales fell to 269,818 and a 1.28% share. VW, the market leader in China: sales are off too, falling from a 13% share in 17 to 10% in 21.
What do all these companies have in common? Bloviating by management that it’s all about ATP and GP, they don’t care about volume. Guess what. When volume goes down, the amortization charge per unit increases, driving price up, making the product more uncompetitive.
As you said in your first comment, Ford is shrinking. So is GM and the North American operations of Stellatis. Like Welch, they cull the lowest performer, which makes something else the lowest performer. So that lowest performer is cut, making something else the lowest performer. Continue the process until there is nothing left. The honchos pay themselves a tidy bonus, and walk away.
Partly. It was also US people trying to decide what folks in India wanted. Plus, the various systems were designed for US markets, not Indian markets. Not optimized. Overall, you need more of a clean sheet approach to emerging markets and it needs to be done in a way that minimizes required investment. Potentially, maybe that emerging market design is best for adapting to advanced markets instead of trying to do the opposiite.
Dunno for sure. But I know that pulling parts off an expensive car isn’t going to result in the savings you need.
Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.
I don’t recall the lineage of everything Ford offered in India. None of it was US product line based. iirc, the Ecosport was first designed in Brazil, which has been the forth largest auto market in the world, for some time. Then they introduced it in India. They tried selling the Indian built Ecosports in the EU, but customers rejected it. So Ford started building the Ecosport in it’s plant in Romania, where they could tap into the better quality EU supply chain. The US got the cheap, Indian built, version.
I remember when Mulally was CEO of Ford. iirc, it was he who introduced the “One Ford” concept, where everything, everywhere, would share common platforms, to save cost. Of course, now, the US market’s obsession with gigantism, has divorced it from the EU, and most of South America and Asia. Seems that only in China do huge SUVs sell like they do in the US, but Ford is being hammered in China. The only thing that Ford sells in all three markets: US, EU, and China is the Escape, known as the Kuga everywhere else. The other lines don’t get any development cost amortization help from North America, because Ford NA has walked away from those segments, and, of course, the huge trucks and SUVs Ford sells here get no amortization help from the EU, because vehicles that large are irrelevant in the EU.
