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US:Sagging SUV sales cited as major factor behind Ford's stalled turnaround

Sagging SUV sales cited as major factor behind Ford's stalled turnaround

AMY WILSON | Automotive News

DETROIT -- Tanking SUV sales are a major reason Ford Motor Co.'s turnaround has been interrupted.

Sales of the Ford Explorer, the automaker's second best seller after the F-series pickup, plunged 25.2 percent during the first five months of this year. Expedition sales are down 21.7 percent this year. High-margin SUVs have been big profit contributors.

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.

"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.

Total market share of Ford Motor's domestic brands is at a 77-year low. Through May, the Ford, Lincoln and Mercury brands held 17.9 percent of the U.S. market, down from 21.9 percent at the end of 2001.

As SUVs falter, Ford Motor is introducing cars and crossovers such as the 2005 Ford Five Hundred sedan and Freestyle sport wagon. The mid-sized Fusion sedan arrives this fall. Mazda6-based sport wagons for Lincoln and Ford go on sale in late 2006.

But no matter how well those vehicles sell, their profit margins are unlikely to match those of big-ticket SUVs. In better times, profits were estimated at more than $10,000 a vehicle for nameplates such as the Lincoln Navigator.

The SUV boom in the late 1990s fueled Ford Motor to record profits. In 1999, the automaker posted $7.28 billion in pretax automotive profits alone. With the rise of overseas competitors, Ford Motor's fall in market share and the decline in SUV sales, a return to that level of profitability seems unlikely.

"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."

My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.

My next Ford.....
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