Cars: Ford is killing the Fusion and giving the name to a sport wagon

This article first appeared in The Edge Financial Daily, on July 16, 2018.

The Fusion name probably will live on when the Ford sedan exits early next decade, according to a spokesperson. Photos by Bloomberg

With sales up 5.5% this year, the Outback is Subaru’s top-selling model and wins kudos for its practicality, dependability, and fuel economy.

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Ford Motor Co is killing its slow-selling Fusion sedan while keeping the name to affix to a sport wagon it is developing to take on Subaru’s popular Outback, according to people familiar with the automaker’s plans.

The Fusion name probably will live on when the sedan exits early next decade, according to a spokesperson. It will be replaced in the showroom by a high-roofed hatchback built on the same mechanical underpinnings, said two people who asked not to be identified revealing future product plans.

Ford shocked the auto industry — and many of its dealers — when it announced plans in April to abandon the shrinking sedan market and go all in on higher-profit sport utility vehicles (SUVs) and pickups. By early next decade, only the Mustang pony car will remain in Ford’s US line-up. Worried that customers will defect to rivals, dealers have pushed to retain the Fusion name, which just four years ago was such a strong seller that Ford had to add a second factory of production.

“They spent hundreds of millions of dollars for brand equity in that Fusion name — not US$10 million or US$20 million — but hundreds of millions,” said Rhett Ricart, one of Ford’s top dealers, whose showroom is near Columbus, Ohio. “The smart thing is to play on that brand equity.”

Ford spokesperson Mike Levine declined to speculate on the new Fusion’s design while confirming “we’ll likely continue to use the name because of its awareness, positive imagery, and value with consumers”.

 

Focus lives

The planned reinvention of the made-in-Mexico Fusion is akin to how Ford is transforming the Focus compact car into a crossover utility vehicle that the automaker will begin making next year in China.

Ford needs to find a way to keep its sedan buyers returning to its showrooms. A trade-in analysis by researcher Kelley Blue Book (KBB) found that less than half of Ford Fusion owners were loyal to the brand. The most popular SUV models that Fusion owners consider are the Honda CR-V and Toyota RAV4, KBB found.

“Ford has a hard time moving people from their cars to SUVs,” said Michelle Krebs, a senior analyst with KBB affiliate Autotrader.

And that is more important than ever as the exodus from cars to SUVs accelerates. Ford reported this month that sales of traditional cars had fallen to their lowest since the 2009 recession that drove General Motors Corp and Chrysler LLC to reorganise in bankruptcy. SUV sales to individual retail customers rose 9% in the first half of this year, while car sales fell 13%, Ford said.

“We are continuing to see a strong shift out of cars and into SUVs,” Mark LaNeve, Ford’s US sales chief, told reporters and analysts on a July 3 conference call. “Industry car sales are running at levels we haven’t seen since the recessionary period of 2009.”

 

Changed course

The automaker has been vague on the Fusion’s future, even as it revealed it was ending production of the Taurus sedan in March 2019 and the subcompact Fiesta in May 2019. The Fusion sedan seems to be retiring sometime in 2021, but the automaker appears to have reversed course on whether to keep the name in the line-up.

“They were cancelling it originally, but then they were like, ‘No, we’re not cancelling it,’” said John Murphy, an analyst for Bank of America Merrill Lynch, who publishes the closely watched “Car Wars” report that predicts future product plans for all major automakers.

A sport wagon similar to the Subaru Outback will thrust Ford into a fast-growing and competitive segment of the market. With sales up 5.5% this year, the Outback is Subaru’s top-selling model and wins kudos for its practicality, dependability, and fuel economy.

Jim Farley, Ford’s president of global markets, hinted that such a vehicle was coming in April when he explained that the company was exiting sedans to offer a “growing variety” of “utility body styles”. He said those new models would “give customers the utility benefits without the penalty of fuel economy”.

Ford dealers are just happy they will not suffer the penalty of losing the Fusion name.

“There’s no doubt that we’ve built up equity in that name,” said Jack Kain, an 89-year-old Ford dealer near Lexington, Kentucky. “We can’t let that go.” — Bloomberg