Ford, a traditional auto and truck manufacturing coming off record 2015 profits, is in a technological arms race with rivals including General Motors Co. and Toyota Motor Co., which have recently announced significant investment on the road toward driverless cars. The facility is expected to begin rolling out cars from 2018.
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The industry has known for decades that domestic manufacturers struggle to make a profit on small cars.
CEO Mark Fields told investors on Wednesday the move was created to simplify and cheapen production. “For years, we have thought about the thing and how many things we sold”, Fields said. “Now we’re opening up the aperture of the lens and thinking about how people use our products”.
GM has outlined plans to use its alliance with Lyft to place electric and autonomous vehicles in ride services fleets, while expanding auto sharing through its Maven brand. In addition, “Ford will continue to make cars (i.e. Taurus and Mustang), SUVs and trucks and vans in the U.S”.
Ford Motor is aware that United States auto industry is near its cyclical downturn and auto boom may follow the period of 2008-2009 downturn – led by recession- is over. Other players such as Toyota Motor and Daimler have spent more than $1.1 billion and $1.4 billion, respectively over the last five years.
The stock was off almost 2% at $12.14 at 4 pm.in trading on Wednesday.
– CUTTING COSTS: Ford says it will gain $3 billion each year in efficiencies between 2016 and 2018. It believes that autonomous vehicles could account for up to 20% of vehicle sales by 2030.
In August, Ford Chief Financial Officer Robert Shanks said the company was seeing “sort of [a] auto recession”, according to a transcript of a conference call with analysts provided by FactSet.
“Within the next two to three years, the majority of our small vehicles will be produced in low-priced areas”, Fields told investors at an event on Wednesday.
On its investor day, Ford Motor Co.
This highlights that the Dearborn-based vehicle company has wisely planned its future financials and has even planned for a vast auto industry sales drop. “We’re focused on usage where miles traveled be”. “We have our minds wide open because it’s still very early innings on this”.
However, UAW President Dennis Williams has said there is a risk that if gasoline prices rise again above $4 per gallon as they were in mid-2008, consumers may favor smaller cars again. These will include new models in segments such as commercial vehicles, trucks, SUVs and performance vehicles. The automaker has made record pretax profit over the past 18 months, being on pace to bring in $10.2 billion in 2016. Last fall, the automaker made a commitment to invest $9 billion in USA plants and create or retain more than 8,500 jobs as part of a new four-year contract with the UAW.
The Ford Focus and C-Max are the only two small cars that Ford still assembles in the U.S. The company’s Ford Fiesta subcompact is already being produced in Mexico, and the high-performance Ford Focus RS is made in Germany.
Fields directly addressed Trump last March, arguing Ford is not neglecting America for foreign markets such as Mexico. The company is targeting 8 percent margins for its traditional automotive business and margins of 20 percent or more for “emerging businesses”.
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Ford had already made those plans clear earlier this year, but Fields’ statement Wednesday added fresh fuel to the intense fight between Trump and Democrat Hillary Clinton to become the next US president. “We see it plateauing and eroding a bit”.
