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Challenging GM And Enhancing Margins Aim Of Ford To Boost Production Target Of Suvs


02/12/2018


Challenging GM And Enhancing Margins Aim Of Ford To Boost Production Target Of Suvs
In a direct challenge to the dominating position of General Motors with respect to sport utility vehicles, production targets for the same would by enhanced by Ford Motor Co to increase the profit margins of the company, the company announced on Monday. 
 
“We can sell every single vehicle we can produce here,” Ford global operations president Joe Hinrichs said ahead of the announcement. He added: “These are high-margin vehicles, so that is very meaningful.”
 
Ford wants to increase the production at its Kentucky Truck factory for its two SUVs - Expedition and Navigator, which are the highest-priced vehicles sold by Ford sells. There is pressure on the company to increase its automotive profit margins which have shrunk to 3.7 per cent in the fourth quarter of 2017 from 5.7 per cent in the same period a year earlier. General Motors Co and Fiat Chrysler Automobiles NV, the two closest rivals, are delivering far better profit margins compared to Ford.
 
The company shares had fallen even before the recent volatility in the market. Consider a 1.2 per cent increase in the shares of GM, the No. 1 automaker in the U.S., year to date and compare that with a 14.7 per cent drop in the shares of Ford in the same period.
 
The large SUV models of GM such as the GMC Yukon and Chevrolet Suburban dominates the market in the US and this is partly responsible for GM financially outperforming Ford. A little less than 3,500 Expeditions and 1,300 Navigators were sold in January by Ford. In contrast, over 19,000 of its large SUVs were sold in the same month by GM.
 
“There is a big dog in the segment,” Hinrichs said. “We aim to get out there and challenge them with vehicles with better fuel efficiency and driving dynamics.”
 
The production increase target would be supported by Ford with an additional investment of 25 million at the Kentucky plant which would put its total invests there at $925 million. Installation of a 3D printer to save on time and money on parts and tools, a centralized data analytics center and 400 robots were among the elements that were upgraded at the plant where the Super Duty pickup truck one of the most popular vehicles of the company is also produced.
 
Ford has been trailing its rivals in the U.S. large SUV market mostly because of its previously continued focus on smaller cars during a period when federal fuel economy rules were being stiffened for large trucks like the Navigator and the high oil prices. And since the 1990s, this is the first time that complete makeover for the Expedition and Navigator is being done by the company.
 
And since the 1990s, the prices of oil have gone down and stabilized at low rates which has driven Americans to prefer the larger and high-margin providing SUVs and pickup trucks over the fuel economy smaller vehicles. Among all of the light vehicles sold in the country in 2017, the percentage of sale of passenger car was just 36.8 per cent.
 
(Source:www.reuters.com)


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