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Morningstar | Ford Seeks to Put a Poor 2018 Behind It With More Restructuring and New Light Truck Models

We remain optimistic about Ford’s long-term prospects because the company now makes cars people actually want to own instead of vehicles that are purchased only because of heavy incentives. Ford's challenge is to increase share profitably while also elevating Lincoln into a global luxury brand. The mostly no-moat nature of the auto industry will make these tasks difficult, and we see headwinds from commodities, exchange, investments in mobility and electrification, and a slowing U.S. and China market hurting results for some time. Management by its own words needs to get the company more physically fit so it can better offset headwinds it cannot control, such as currency and commodities. Based on our talks with management, many costs in areas such as marketing, product development, and testing need revamping, and these changes will take time. Ford is also more focused on spending on the most profitable businesses so it is exiting car models in North America except for the Focus and Mustang. This bold move makes sense to us, and other options such as restructuring in foreign markets has begun.Another key change is building more Ford models on common platforms, which will improve economies of scale. In 2007, Ford had 27 platforms but has reduced that to 9. It is now moving to five flexible architectures across unibody, body on frame, and battery electric vehicles. This move allows Ford to switch production faster to meet changing demand while cutting costs via better economies of scale. In the past, Ford had a different platform in each segment for each part of the world, which wasted billions.We'd like to see more frequent product launches as they've been too clustered together. A strong luxury group will increase profits because it will allow Ford to sell to all consumer variants while retaining current Ford customers and selling Lincolns for more profit than Ford brand vehicles. For now, however, Lincoln's offerings put it more in the premium segment, so better product is needed, and this transformation will go beyond this decade. The Continental sedan is a step in the right direction. Lincoln also entered China in fall 2014.