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Ford Small Utility Vehicles Going Global in Bet on Growth

Updated on

May 30 (Bloomberg) -- Ford Motor Co., which spurred the U.S. sport-utility vehicle boom of the 1990s, is rolling out smaller utilities to more markets worldwide, betting that growth of recent years will continue.

Ford’s EcoSport subcompact utility will be in more than 60 countries by 2017, from just 10 now, Erich Merkle, Ford’s sales analyst, told reporters yesterday. The Edge utility will spread to 40 markets in that span from 16 last year, and the Escape, which sells as the Kuga outside North America, begins selling in China this year, he said.

Chief Executive Officer Alan Mulally has pushed for Ford to round out its utility lineup with smaller models and put behemoths such as the Explorer SUV on a diet to draw buyers looking for both cargo space and fuel economy. Diminutive utilities are making big gains as Americans downsize and wealth grows in developing markets such as China and India.

“People around the world are falling in love with this body style for many reasons,” Jim Farley, Ford’s chief marketing officer, told reporters at the company’s headquarters in Dearborn, Michigan. “Part of it is image, but that’s not the only reason -- sitting above traffic, putting people in the vehicle plus your goods. But the real breakthrough was the fuel economy.”

Global deliveries of utilities, which have surged 35 percent since 2005, will continue to outpace industry demand through 2017 and boost their share of vehicles sold to almost 20 percent, according to researcher IHS Automotive.

North America

Ford rose 1.7 percent to $15.90 at the close in New York. The shares have gained 23 percent this year, compared with a 16 percent increase for the Standard & Poor’s 500 Index.

Capturing a larger piece of that market should help Ford’s financial performance outside North America, the only region where it’s solidly profitable. Ford’s North American operations earned a pretax profit of $8.34 billion last year and $2.44 billion in 2013’s first three months, which are annual and quarterly records for the company.

In Europe, where Ford lost $1.75 billion last year and $462 million in the first quarter, utilities are the only segment that has grown since 2005, according to IHS. The company is increasing Kuga output in Europe by 8 percent this year and will surpass 100,000 units of production for the first time.

“That’s a huge increase versus our last Kuga,” Farley said yesterday, without elaborating. “Our orders are far beyond our production in Europe.”

Farley attributed the rise of small utilities in the U.S. to baby boomers seeking vehicles smaller than the large SUVs they purchased in the past. As parents become empty nesters, they need less vehicle space.

By contrast, in developing markets such as India, upper-middle-class consumers are moving up from small cars into utilities with similar length and width, only with more room and similar fuel economy.

“The world’s needs are really converging globally,” Merkle said yesterday.

To contact the reporter on this story: Craig Trudell in Dearborn, Michigan, at ctrudell1@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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