Every now and then a business headline drives an immediate “wait, what????” response. That’s what happened when I saw the headline that Ford Motor Company was going to stop selling cars in the US market and only sell SUVs and trucks.
Given the internet’s tendency for exaggeration, I went off to learn if it was fake news. Sadly, it’s not. You can read about it here.
The comments by the Ford CEO are surprising. They reveal an incredible insensitivity to existing Ford customers. “That car you own destroys value so we’re going to leave you high and dry and stop production.” Yes. He described the cars as things that “destroy value”. Sigh.
The communication here shouts in a very loud voice “Hello markets! We really screwed the pooch!!!” Less than 10 years ago Ford was the healthiest US car company and avoided needing government bailout money because of the strength. At the time they were regularly praised for outstanding strategic vision and smart choices. Now they are eliminating cars to become a niche market player. Huh?
How could they end up in this place? Things didn’t change that much in 10 years. But it looks like their internal perception of themselves changed dramatically and that fatalism and narrowed vision won out.
Here are some things I guess contributed (note that I have NO first hand knowledge of their internal discussions):
This is the kind of move that comes from too much obsession with detailed numbers. By blaming product lines as “losers”, it indicates they are attempting to attribute profit to each product line. To have made such a dramatic choice suggests, further, that their equations probably were incapable of dealing with what W. Edwards Deming called “the unmeasurable”. Deming suggests that many of the very important things aren’t measurable. What here? The impact on the total Ford brand of a wide range of cars. Bringing a Focus buyer up to the Escape and eventually an Explorer. Etc… Sure looks like the executive committee has a “I love disruption” consultant right now – so they are proving how disruptive they can be. I see a lot of people get their ego’s tied with needing to look decisive even if that decisiveness destroys business. And rushing to embrace disruption is one of those “decisive” choices. Except, it’s also usually not the right choice. My prediction? This will put Ford into a downward spiral toward bankruptcy. They will be losing so much brand/market/consumer value in making this move that it cannot but hurt them. Does that mean bankruptcy is inevitable? Nothing is inevitable. But this choice creates challenges that will be hard to overcome.
And that leads me to Sears. It’s not that there’s a 1:1 correlation between what Sears is doing and what Ford is doing. Yet it sure looks like it’s destined to end up (someday) with the same result: going out of business.
Sears spun off Craftsman (and that accelerated it’s diminishing value) then finally put it up for sale (which accelerated brand value loss even more) and in the end sold it. (Sadly, Lowe’s seems to be betting that the failing brand Craftsman will be more valuable to them than their growing brand Kobalt. Not sure how they make that calculation.)
Sears is attempting to spin off Kenmore. Sears bought Kmart (failing brand buying failing brand?).
This string of bad choices pile up into what Steve Dennis calls the “World’s Slowest Liquidation Sale”.
Who knows what the future holds for Ford. But based on this announcement it’s quite hard for me to feel positive about it.
Copyright 2018 – Doug Garnett – All Rights Reserved