This morning’s announcement by Ford of Europe that it intends to drop out of unprofitable market sectors to drive harder into the niches that make real money follows close on heels of a very similar plan unveiled by Fiat-Chrysler (FCA).
Last week FCA boss Marchionne revealed a new strategy that would see run-of-the-mill (and barely profitable) US-market saloons such as the Chrysler 200 and Dodge Dart dropped and factory space given over to RAM pick-ups and Jeep models, both of which are experiencing booming demand.
Ford of Europe boss Jim Farley didn’t say directly which models the brand would be dropping in Europe, but his future strategy was not dissimilar: more SUVs, more premium-trim Vignale models and a push on performance models, which already do pretty good business in Europe.
While this is sound business practice for the medium term, established car makers are also facing longer-term societal shifts. The move towards the market splitting between budget and premium or upmarket branding, which began over a decade ago, is the new norm.
For example, a whole generation of future car buyers have grown mixing budget clothes from Top Shop and pricey Apple iPhones. The middle market - although it still has traction with older buyers - has been buckling under the strain.
Indeed, the UK’s own Marks and Spencer is a perfect test case. It sells ever greater amounts of upmarket food but struggles to make decent headway with middle market fashion.
Mass carmakers are facing the same strains and stresses. One senior European car boss once told me that the continent’s mainstream car market was a “break-even at best” business and lamented that the few profitable niches open to the mainstream were being hammered by premium makers stretching their ranges – BMW’s venture in MPVs being a case in point.
For Ford - and Vauxhall-Opel - know it is not enough to roll out new crossovers. They are also engaged in a serious battle to change perceptions of their brand image. There’s no margin in being ordinary. Hence Ford’s massive ‘Unlearn’ marketing campaign which broke a coupe of weeks ago.
According to the UK website, ‘Unlearn’ is about “letting go of what you know, taking a fresh look and stepping outside to new ways of thinking. This progressive thinking is reflected in our latest vehicle line up including the Ford GT, Focus RS, Ford Mustang and Edge, and in many of our latest technologies.” Amusingly, the ad campaign uses three Ford US-developed models, the Edge SUV, Mustang and GT supercar.