A consumer shift from larger vehicles to smaller cars will have a negative impact on Ford's profit margins, the Dearborn-based automaker revealed on Wednesday.
For the last few decades, Ford – along with its Detroit rivals – has relied on larger trucks and SUVs like the F-150 and Expedition to drive double-digit profit margins. However, in the wake of $4 gas and an uncertain economy, many of those buyers have shifted to smaller vehicles like the Focus and Fiesta.
Although good for Ford's sales sheets, the shift hasn't been as kind to the company's bottom line – trucks and SUVs are highly profitable while small cars are typically thin on margins.
“We continue to see consumers trading down to smaller vehicles,” Mark Fields, Ford’s president of the Americas, told Bloomberg. “Less trucks, more small cars and those vehicles have smaller margins.”
As a result, Fields warned that Ford's current 12 percent profit margins will likely slip to between 8 and 10 percent in the coming years.
Through the first nine months of the year Ford has earned $6.47 billion – more than all of last year – but Fields cautioned that margins won't be as strong in the fourth quarter, limiting the company's overall success during the period.