Why Ford may be killing the Fusion, and why there are problems with that

ford fusion 2017

Automotive News ran a piece this week titled "Why Ford would be comfortable killing the Fusion," based on," based on the plan to move production to China — along with Ford's statement it won't import Fusions to the U.S. from China.
The article touched on three reasons Ford's midsized sedan has a better chance of meriting a tombstone than a next generation. Of the reasons given — crossovers, fuel economy, and longer auto loans — one makes sense to us, one makes us wonder what might have been, one makes us wonder what's coming.
We also need to charge the right perps for the Fusion's death. Ford's an accomplice, but not the only ax man. Our take:

1. Kick the crossover
It's probably time to drop the conditional tense and accept the Fusion's coming flatline, especially since Ford CEO Jim Hackett said, "I'm giving you a hint" it's a goner. The Fusion's on its back wheels in the Coliseum, bleeding 5W-20 into the sand as it's hacked to pieces by tag-team gladiators Crossover and SUV, while a frothing car-buying public quakes the stands shouting, "END IT!!!!!"

Dealers have sold 192,179 Fusions through the end of November, a figure at once notable and disappointing because it represents a 22 percent year-on-year decline. This year will mark the third straight year of lower Fusion sales. Segment-wide, there isn't merely blood on the sedan sales floor, there are organs, bits of limbs, and resuscitation experts who ran out of stamina and hope. Of the top 30 best-selling vehicles in November, 10 are sedans, but eight of those 10 have posted year-on-year drops compared to the first 11 months of 2016. Only the Honda Civic and Nissan Altima posted gains.

The hoary Fusion lags 150,000 units behind the new Toyota Camry so far this year. The Ford Edge crossover is doing two-thirds of Fusion numbers, the Ford Escape has romped ahead by nearly 100,000 units, and have you seen the transaction price spikes in the crossover market? Hello Edge (and Escape and Explorer) profit margins. Place these numbers next to the mass psychosis known as Crossover Disease, and we can understand why Ford would ditch the midsize sedan party well before the music stops and the lights come on.

2. It's the fuel economy, stupid
In the Automotive News piece, Hackett said, "The reasons for the balance [in sales between sedans and crossovers] in history had more to do with fuel than customer preference. And so, if you can get rid of the difference there because of fuel, you start to relieve the pressure of what kind of portfolio you have to have." Or, put another way, "He foresees a time when consumers won't distinguish between a pickup or SUV and a sedan on mileage. And given a choice, the sedan will lose." Except the "he" in that second quote doesn't refer to Hackett, it refers to Fiat Chrysler CEO Sergio Marchionne, the sentence taken from a March 2016 interview Marchionne gave Motor Trend at the Geneva Motor Show.
Let's talk about Fusion fuel economy. The EPA rates a 2018 all-wheel-drive Fusion with the 2.0-liter EcoBoost at 20 mpg in the city, 29 on the highway, and 23 combined at FuelEconomy.gov. Compare an AWD Fusion to an AWD Edge with the same engine: They both get the same combined and city mpg, but the Fusion beats the Edge by 2 mpg on the highway. The numbers barely change with a front-wheel-drive comparison. The EPA says you'll spend the same on gas for the AWD models over five years compared to the average new vehicle. Ford's site doesn't list a curb weight for the AWD Fusion, but the FWD Fusion weighs 440 pounds less than the FWD Edge. We'll assume a similar difference in the all-wheel versions. Plus, the Fusion's drag coefficient pops at .275, whereas the Edge's drag coefficient understandably gets filed under "squoval."

So let's ask the obvious question about Fusion fuel economy: What happened? The best mpg you can get on a non-hybrid Fusion is 21 city, 31 highway. The worst you can do with a Toyota Camry or Honda Accord is 22 city, 32 highway; the middle Camry gets 28 city, 39 highway, the mid-range Accord EX gets 30 city, 38 highway, and you can do better with either model if you choose a different trim. This isn't about the Toyota and Honda being new, either — the previous Camry and Accord both trounced the Fusion too.
To hear Hackett and Marchionne tell it, the Camry and Accord are doomed once the Toyota RAV4 and Honda CR-V, respectively, reach rough mpg equivalence. That might be true. But it seems like a few generations away, since Toyota and Honda appear to have figured out how to keep their much lighter, sleeker sedans from getting run down by their windjammers.
Ford has clearly thrown more engineers and money at crossover efficiency than sedan efficiency. Yet when the AN piece quotes Hackett speaking of "starting to crack that code" of crossover vs. sedan gas mileage parity, it sounds like the code for Fusion fuel economy was, "Put the janitor in charge." We can't say stellar mpg would rescue the Fusion — the Chevrolet Malibu, for instance, posts tidy mpg numbers and is still taking a sales beating — but we wonder what the Fusion could have become if Ford hadn't stuck a fork in it some time ago.

3. At what price crossovers?
Michael Martinez writes in his AN piece, "Although [the Fusion is] still cheaper than the Escape or Edge crossover, longer loan terms have made the difference in many buyers' monthly payments hardly noticeable." There's the worrying line. We consumers have made it useful for automakers and banks to create ways for us to purchase larger, heavier, thirstier, more expensive vehicles on what appear to be similar terms to those we once used to own smaller, lighter, more fuel efficient, less expensive vehicles. The modern terms aren't the same, though, and consumers are stretching themselves worryingly thin to meet them.

Much has been written about the subprime auto loan situation; Jalopnik published a long piece recounting tales usurious enough to make Dickens wince. Other commentators want to determine if the supercharged loaning and supercharged defaulting should be considered a bubble, and if so, whether that bubble could do the same damage as the mortgage bubble.
We can turn away from the worst predictions and predations, though, and still find alarming numbers. Earlier this year, the length of the average auto loan rocketed to an all-time high of 69.3 months. The average price of a new vehicle before incentives climbed to $35,309, another record. The average buyer finances $30,945 of a car purchase, also a record. Monthly payments average $517, another record.
If you spend a now-common seven years paying down that $30,945 average loan on a $35,309 average price, it'll cost you about $4,000 in interest. With taxes and fees, the real total cost of the vehicle is over $40K.
Meanwhile, median household income stood at $59,039 in 2016, and the personal savings rate is doing the limbo at around 3.2 percent, a level not seen since 2008. And you remember what happened in 2008.
An AN story from March reported, "Through February 2017, 33.8 percent of loans were 73 to 84 months." As of the end of 2016, out of those six- to seven-year terms, "28.7 percent of new-vehicle loans were 84 months." More records. Ten percent of used-car loans on 2010-model-year vehicles run 73 to 84 months. Seven-year car loans on seven-year-old cars? Yeah. That's how you get this sentence: "According to Edmunds.com, an estimated 32 percent of all trade-ins toward the purchase of a new car through the first nine months of 2016 were underwater."
It's clear things won't end well for the Fusion. And we can't blame Ford for the stupefying crossover exuberance that's choking out the Fusion (maybe the finance arm and that janitor, though ...). But for the moment, looking at the expensive craze that's caused the Fusion's death, it seems familiar: We've overextended ourselves before. And it's hard to figure out how that's not going to end badly this time, as well.


Automotive News/Auto Blog

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