On September 5, 2006, Alan Mulally moved into the corner office at the Glass House. He brought with him a simple management philosophy he developed over three decades at Boeing Commercial Aircraft. After a short time at Ford, he formalized his philosophy, which continues to guide the company under Mark Fields.
He called it One Ford — and along with a lot of hard work, that philosophy transformed the Blue Oval into the profitable, future-oriented automaker we know today.
Translating One Ford into an feasible operating strategy began with the acknowledgement that Ford is a global automaker and it must leverage its far-flung operations to accelerate new product development while simultaneously reducing its cost.
Toward that end, Ford has been on a mission to consolidate vehicle platforms. As of 2007, Ford produced 105 nameplates across 27 platforms. Among those 27 platforms were two different compact truck architectures, one each for the global and the domestic Ranger. On the eve of the economic downturn that hit automakers in 2008, both Rangers were in need of updates, but the company had insufficient resources to invest in its entire lineup.
Between 2002 and 2007, the compact pickup segment shrank 23 percent in the U.S. and domestic Ranger sales plummeted 57 percent. The cost of consolidating the two Rangers and maintaining its North American presence was not as attractive as other programs. As a result, the domestic Ranger — long a pillar of Ford’s North American lineup — was allowed to lapse. The midsize body-on-frame (BOF) platforms hosting Ranger would need to be consolidated incrementally over time.
The global Ranger lived on, largely through Ford’s close association with Mazda, and received updates in 2006 and 2009. However, the Blue Oval was not only consolidating platforms, but brands as well. Between 2008 and 2010, Ford divested its interest in Mazda, forcing a dramatic change in the next-generation global Ranger’s development. Ford of Australia was selected and its team created the all new 2011 Ranger. Henceforth, Rangers sold in Latin America would shift from their historic North American origin to the new global Ranger designed down under, code-named T6. For a variety of reasons, enumerated elsewhere, Ford elected not to bring the new, larger midsize T6 to North America.
Step one of the incremental Ranger consolidation project was complete. The North American Ranger platform was gone and the Australian development team went on to execute the T6 update for 2015. The same team has been tapped to lead development of the next generation Ranger. Ford will design the new Ranger platform with global manufacturing in mind and spawn multiple other vehicles from the same effort, notably the Everest and Bronco SUVs. Other derivations may follow, but the sales volume supported by these three nameplates alone will justify a new shared BOF platform.
What will the market look like when the new Ranger becomes available to American consumers in 2018?
The midsize pickup segment has grown in the last three years and will post growth of 72 percent since shifting just a quarter of a million units at its nadir in 2013. This compares to 20 percent growth in full-size trucks and 25 percent growth in midsize SUVs over the same period. But the prolific growth rate of the midsize truck segment is not sustainable. Midsize pickup market share in America, at 2.6 percent, is the highest it’s been in the last seven years.
Hot markets attract competition. Toyota and GM recently expanded their midsize truck production capacity and Honda reentered the market with its new Ridgeline. Add to that a new Nissan Frontier, a major update to the GM Colorado/Canyon twins, and a Wrangler pickup, all due by 2018.
If one assumes overall automotive sales stay around 17 million and the midsize truck market grows another 15 percent over the next couple years to account for a full 3.0 percent of the market, there will be demand for approximately 510,000 trucks, against a current installed production capacity of about 550,000. When the Ranger and Wrangler pickup come online, capacity will increase to over 750,000. Manufacturers may be running flexible production lines, which enable product switching and mixing, but the market will not be in equilibrium when capacity exceeds demand by 50 percent, as it is likely. Consumers often benefit in the short-term through price wars, but manufacturers will curtail investment in unhealthy markets.
Toyota and GM are the current market leaders, commanding a combined 76 percent of the midsize truck segment, a share neither will give up easily. However, Automotive News reported in late 2015 that 50 percent of Colorado buyers were conquested from other brands, demonstrating that even historically loyal truck buyers will defect in the face of limited options. Although Jeep is joining the fray, Ford will be well positioned to capitalize. The Ranger’s long-suffering fans, in conjunction with the strength of the Ford brand and its leadership in commercial vehicles, will all but guarantee sufficient demand justifying the expense associated with the Ranger’s return.
Ford will muscle into the market, but is unlikely to rocket back to the one-third share it enjoyed in the early 2000s, much less the one-quarter share it attained in its later years. Ford will be modeling a market share closer to 18 percent in its first couple years back in the market, equating to 80,000 to 100,000 Ranger sales per year. That’s enough demand to keep newly retooled Michigan Assembly humming, but not without a platform mate.
None of this is news to Ford.
Midsize SUV sales have flattened this year, at around 1.95 million units, but they’ll still account for 11.3 percent of the total passenger vehicle sales in the U.S., their highest share ever. Although growth in the midsize SUV segment is slowing and counts at least 20 competitors, it dwarfs the midsize truck segment. For every midsize truck sold in 2016, 4.4 midsize SUVs find homes in American driveways.
FCA is the segment leader at 24 percent of sales, based largely on the strength of Grand Cherokee and Wrangler, which rank second and third behind Explorer. The Durango’s 69,000 units are also material as they push FCA past the number two brand in the segment, Ford, which itself will account for 20.5 percent of segment sales this year.
The forthcoming Bronco will slot into the midsize SUV segment, and more specifically into the unique space presently owned by Wrangler.
Since the launch of the four-door Wrangler in 2007, its rise has been nothing short of meteoric. In 2006, the pre-four-door Wrangler sold 85,000 units north of the Rio Grande, up from 64,000 in 2002. This year, Wrangler will find 210,000 buyers in the U.S., plus another 20,000 in Canada. This off-road oriented, open-top, lifestyle vehicle has defied expectations and would have sold even more units had FCA scheduled sufficient production capacity. Wrangler owners may be known for their legendary loyalty, but die-hard devotion alone does not explain a 170-percent sales explosion over the last decade. The primary driver behind Wrangler’s sales success is four doors.
Ford will have little difficulty tapping into Wrangler’s image-driven lifestyle proposition with the storied Bronco, assuming it features an open-top design. By the time the Bronco arrives, the production constraints that have kept a lid on Wrangler sales will have been removed and the potential of this sub-segment more clearly defined. Regardless, there is already space in the two-million-vehicle midsize SUV segment for Ford to launch a Bronco aimed directly at Wrangler.
Aiming the Bronco at Wrangler makes a lot of sense and will free Ford’s product planners to more narrowly define its other SUV offerings. For example, the Explorer can continue as the modern day interpretation of the station wagon it already is, without attempting to spawn trims aimed at Grand Cherokee, 4Runner, and Discovery. The Edge can continue to develop its two-row urban crossover image. And Flex can be reimagined as the urban oriented three-row almost-minivan it has long sought to be — if Ford decides to continue it. The resurrected Bronco will not mimic the Ford Everest known to consumers outside North America as Ford’s mainstream body-on-frame SUV. An Everest-like Bronco would be too difficult to differentiate versus Explorer. Yes, Ford is designing a new Everest alongside the new Ranger and Bronco, but that doesn’t mean the two SUVs will be one-in-the-same.
By 2018, Ford will have one global midsize body-on-frame architecture hosting a minimum of one truck and a pair of SUVs. Here’s what may be unexpected: In North America, the Bronco, selling into a vast segment and aimed at a single competitor, could be more popular with consumers than the Ranger.
Ranger may be available before Bronco, but Ford will move rapidly to launch Bronco because it will not only outsell Ranger, but it will be a larger revenue and profit driver with a higher average transaction price.
Sales Prediction: Ranger 90,000, Bronco 140,000
[Image: © Radek Beneš/The Truth About Cars]