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Ford Turns To A New Direction in the North American Auto Industry

Ford+truck+owner%2C+Tim+B+of+Hamburg%2C+recently+bought+an+F-150+and+a+Ford+Transit+utility+van.+His+family+has+switched+from+sedans+to+trucks+and+SUVs.
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Ford Turns To A New Direction in the North American Auto Industry

Ford truck owner, Tim B of Hamburg, recently bought an F-150 and a Ford Transit utility van. His family has switched from sedans to trucks and SUVs.

Ford truck owner, Tim B of Hamburg, recently bought an F-150 and a Ford Transit utility van. His family has switched from sedans to trucks and SUVs.

Becket P

Ford truck owner, Tim B of Hamburg, recently bought an F-150 and a Ford Transit utility van. His family has switched from sedans to trucks and SUVs.

Becket P

Becket P

Ford truck owner, Tim B of Hamburg, recently bought an F-150 and a Ford Transit utility van. His family has switched from sedans to trucks and SUVs.

Becket P

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By Becket P

In late April of this year, Ford CEO, Jim Hackett, announced the Ford Motor Company’s plan to phase out their sedan lineup.

By 2022, the only cars Ford plans to sell will be the Mustang and a crossover of the Focus. This means that the Fiesta, C-Max, Fusion, Taurus and Focus sedan will be discontinued. Ford says that this is part of a larger plan to save the company money as the market is taking a shift towards SUVs and trucks. Because of this, the sedan lineup was considered a low-performing area of the business. According to CFO, Bob Shanks, the previously estimated $14 billion of savings from this cut is really a $25.5 billion of savings. After the announcement of this plan, Wednesday afternoon Ford stock increased 3%.

Consumers don’t seem to mind this change.

Branden Swan of Angola, NY who owns a Ford Fusion and a Ford Super Duty, says, “I think it’s great. Smart move on Ford’s part. They’re losing money on cars so they’re getting rid of it.”

Brandon Britton, a senior and Ford Fusion driver, said “I don’t mind all that much. I mean, there’s  other cars still and there’s still small crossover SUVs.”

A large portion of this plan will be implemented by 2020, which is when Ford promised to increase its profit margin from 5.2% to 8%. We’re beginning to already see an increase in Ford’s net income, which rose 9% during the first quarter. According to Ford, this was largely due to federal income tax breaks implemented by the Trump Administration. This is only expected to rise further with continued federal support such as these tax breaks and the cutting of the sedan lineup.

However, costs for things such as steel and aluminum have increased as well, causing an increase in capital spending by about $443 million. This issue will also be tackled however, as Ford plans to cut spending by $5 billion from 2019 to 2020. By spending less money on low-performing areas such as cars and restructuring or removing these areas, CFO Shanks is optimistic for the future.

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