Because the demand for small cars is diminishing, Ford could enter a partnership to build such vehicles, according to the company’s Chief Executive Mark Fields.
The profits generated from the small cars segment have always been quite narrow, but the low gas prices have made those margins even smaller, with customers turning their focus on SUVs and trucks. And last year’s record sales numbers were a proof of this trend, as the demand has never been so high for big cars, while the more compact vehicles have been left behind. In order to cope with the market flow, many automakers have already declared they will shift production to regions with lower labor costs, while others announced they would stop building some small cars. Ford is also considering maximizing the production costs of such vehicles, by joining financial forces with other companies. “We are always open to talking with others” about partnerships on small cars, Ford Motor Chief Executive Mark Fields recently said.
Fiat Chrysler Chief Executive Sergio Marchionne said last week the company would stop making two sedans, the compact Dodge Dart and midsize Chrysler 200, and said he was looking for partners to share small car production. Asked about an alliance with its rival, Field said Ford is “always open to talking with others because we realise that we have to be very realistic around what is the type of revenue that these vehicles will be able to command and make sure we have an appropriate cost structure to earn a reasonable return.”
In a separate interview, Ford Chief Financial Officer Bob Shanks pointed to Ford’s collaboration with General Motors Co on fuel-saving transmissions as an example of how the company will work with rivals to share costs. “I think there are all sorts of things that one can do in terms of partnerships and collaborations, at the vehicle level, and the component level, and elsewhere. I think everything’s on the table,” Shanks said.