INTERNATIONAL - Ford Motor Co. is about to face an unfortunate reality as it shifts to SUVs from cars: Its share of a lucrative and fast-growing market it helped pioneer has been steadily shrinking.
As America’s demand for mainstream sport utility vehicles has soared more than 50 percent over the last five years, Ford hasn’t kept pace with some of its rivals. The company’s share of this market may fall to about 12.7 percent this year, from 16.2 percent in 2013, according to researcher LMC Automotive.
Ford’s share slip has been driven by costly lapses between redesigns of key models like the compact Escape. It’s also been tardy to the subcompact segment with the EcoSport and is taking years to bring back the rugged Bronco. Chief Executive Officer Jim Hackett and his senior executive team are expected to give plans Thursday to close any remaining gaps in its lineup and shrink its offerings of slow-selling sedans.
“They need to focus on getting their vehicles out faster, getting in front of trends,” said Jeff Schuster, senior vice president of forecasting for LMC. “If they’re constantly playing catch-up, that’s not a position that bodes well for the health of the company.”
Ford’s stock -- which has lagged both its peers and the broader market -- got a bump Wednesday from Morgan Stanley analyst Adam Jonas upgrading his rating on the shares to the equivalent of a buy, after years of recommending that investors sell. The stock rose 2.2 percent, paring its loss for the year to 12 percent.
“The company has made significant changes to senior management but investors lack confidence in Ford’s ability to address chronically loss-making businesses and its potential to pivot into areas of growth,” Jonas wrote. “We believe the skew of negative sentiment has taken valuation to attractive levels.”
Ford’s Explorer ushered in the first SUV era a generation ago. The company has been outmaneuvered more recently by rivals including Toyota Motor Corp. and Fiat Chrysler Automobiles NV’s Jeep brand. Hackett, seeking to revive profits that he’s warned will decline this year, has said Ford will be renewing its focus on high-margin models by shifting $7 billion in funding away from cars and into SUVs.
“We are about to catch a big wave when it comes to SUV growth,” Mike Levine, a Ford spokesman, said in an email. “We are strengthening and expanding our lineup very quickly.”
The F-Series pickup remains Ford’s strongest model line. Morgan Stanley’s Jonas estimates the franchise could be worth more than 150 percent of the company’s enterprise value. The truck will account for more than 26 percent of the U.S. large pickup segment this year, LMC projects.
But that franchise player is coming under attack this year from redesigned competitors: the Chevrolet Silverado, GMC Sierra and Ram pickup.
“F-Series is going to be under fire now,” Schuster said. “That’s been paying the bills, so that puts an additional load of pressure on the rest of the lineup and on Ford in general.”
With the EcoSport and a new Expedition just hitting U.S. showrooms, Ford is expected to field redesigned versions of the Escape and Explorer next during the upcoming two years, and it’ll revive the Bronco in 2020. But its updates are taking too long, said Michelle Krebs, a senior analyst with researcher Autotrader.
“They need a cool, fresh crossover SUV right now,” Krebs said. “They’re not staying fresh.”
The Escape, once among the top-selling SUVs in America, is one of the models that’s been languishing of late. It’ll probably make up just 11 percent of the compact utility segment in 2018, LMC estimates. That would be down more than five percentage points in as many years, as the top-selling Toyota RAV4 and Nissan Rogue have surged ahead.
Ford needs to candidly address that lack of freshness and show that it has a new plan for its SUV franchise, Schuster said. Thursday’s media event near Detroit -- where executives will show several products coming from Ford over the next two years -- may be a good start.
“They need to give me some indication that they’re changing their ways,” Schuster said. “I hear a lot of commitments to fitness and we need to get healthy and all that. But I’m hoping to see more actions.”