Ford Will Stop Making Cars Is this the end of the American sedan?

At the end of April, Ford released its first quarter 2018 financials and there was some good news for its shareholders:

Ford delivered increased revenue, up 7 percent year over year, and net income of $1.7 billion, up 9 percent year over year.

But further into the release was some stunning news for the rest of us: Ford will stop making sedans for the U.S. market. Only the Mustang will live on.

The announcement, while surprising to many, was foreshadowed back in January when Ford held a media-only event where it estimated that SUVs could make up as much as half the entire U.S. industry’s retail market by 2020.

In a statement, Ford CEO Jim Hackett explained the move away from sedans:

"We are committed to taking the appropriate actions to drive profitable growth and maximize the returns of our business over the long term," Hackett said. "Where we can raise the returns of underperforming parts of our business by making them more fit, we will. If appropriate returns are not on the horizon, we will shift that capital to where we can play and win."

To most of us, we heard CEO Hacket saying the following: “we aren’t really making money off of cars anymore. Trucks and SUVs are where we can make money. So, that’s what we’re focusing on.”

Ford confirmed that the current Taurus will end production in March 2019, while North American-market Fiesta production will end in May 2019. There isn't a specific timeline for the end of Fusion production.

Automobiles Industry

The Automobiles Industry is a component of the Consumer Discretionary Sector and “includes companies that produce passenger automobiles, light trucks, motorcycles, scooters, or three-wheelers. It does not include producers of heavy duty trucks classified in the Construction and Farm Machinery and Heavy Trucks industry, or producers of bicycles classified in the Leisure Products industry.”

The world’s Top 5 Automobile companies are:

Rank	Name	Country	Vehicles
1	Toyota	Japan	10,213,486
2	Volkswagen	Germany	10,126,281
3	Hyundai/Kia	South Korean	7,889,538
4	General Motors	U.S.	7,793,066
5	Ford	U.S.	6,429,485

Source: International Organization of Motor Vehicle Manufacturers

Through the end of April 2018, the Automobiles Industry has performed as follows:

	1-Year	3-Years	5-Years	10-Years
Automobiles	1.86%	-12.31%	-1.63%	3.49%
S&P 500	10.39%	26.64%	65.38%	91.11%

Source: Fidelity Investments and through April 30, 2018

Final Thoughts from a Financial Advisor

If Ford’s decision to abandon the sedan market in the U.S. tells us anything, it underscores the importance of diversification. So, while I will reminisce about the days of my dad’s sedan, I do look forward to discussing whether you think Ford’s announcement will be good for consumers.

And I’m secretly happy Ford decided to keep the Mustang. That, to me, would have been a sad day for all Americans…

Distributed by Financial Media Exchange.