Tanking SUV sales are a major reason Ford Motor Co.’s turnaround has been interrupted, according to a report in Automotive News.
Sales of the Ford Explorer, the automaker’s second best seller after the F-series pickup, plunged 25.2% during the first five months of this year. Expedition sales are down 21.7% this year.
Ford Motor expected industrywide SUV sales to slide. But the depth of this year’s decline is jarring.
Ford Motor executives blame gasoline prices that soared to $2.30 a gallon this spring. Yesterday (June 20), crude oil hit an all-time high approaching $60 dollars per barrel prompting some analysts to forecast the possibility of $3 a gallon gas.
“With gas at $1.80 per gallon, like it was a little over a year ago, we’d have a very different picture here at Ford,” says Steve Lyons, Ford Motor group vice president of marketing, sales and service. “Our share would be up, and we’d have quite a different financial picture as well.”
The plunge in SUV sales is one of several head winds blowing the comeback off course. CEO Bill Ford calls it a “perfect storm of external factors.” With sinking retail share, spiking commodity costs and ever-fiercer price competition, Ford Motor in April backed away from the financial centerpiece of its plan: $7 billion in pretax profits in 2006.
Ford Motor still has that $7 billion goal. But executives now won’t say when it can be achieved.
As SUVs falter, Ford Motor is introducing cars and crossovers in its new product line. But no matter how well those vehicles sell, their profit margins are unlikely to match those of big-ticket SUVs.
“I certainly wouldn’t rule out the ability to bring leading products to market that will enjoy substantial margins,” says Mark Oline, analyst with Fitch Ratings of New York. “Whether you will have another time with the company so focused on one segment of the market that is so profitable, I don’t think you’ll see that.”