Why is Ford only building 25,000 hybrid Escapes and Mariners this year
Click the 2009 Escape Hybrid for a high res gallery
Prior to our drive of the 2009 Ford Escape the other day, several Ford representatives talked about the changes for the new model year along with how the Escape is doing. Since the debut of the 2008 models a year ago, the Kansas City Assembly Plant that builds the Escape, Mariner and Mazda Tribute has been running at capacity including some overtime, a rare occurrence these days at Ford. While sales of many Ford models have been dropping like a stone this year, the Escape has done well, registering a 10 percent increase. One Escape model that hasn't increased sales in the last couple of years is the hybrid which is holding steady at about 25,000 annually and that will remain the case for 2009. Even though gas is now at or above $4/gallon, Ford will only build 25,000 Escapes again this year out of about 220,000 total (including Mariner and Tribute).
The obvious question is why. Although battery supply constraints would seem to be one likely answer, that is apparently not an issue. Ford claims they can get as many batteries as they need. It turns out that it's a business decision. With the plant running at capacity, in order for Ford to build more hybrids, they would have to cut production of the other models. Although no one from Ford was willing to openly admit it, the continued references to building as many Escapes as they can while limiting hybrid production at an arbitrary number indicates that it comes down to profit. Ford can clearly make a larger profit margin on the non-hybrid models and has made the calculation that 25,000 is enough to indicate they are serious while still maximizing cash flow wherever they can. Given Ford's precarious financial situation of late, you sure can't blame them although many who might want a high-mileage crossover might be disappointed. Later this year, Ford will be doubling their total hybrid production when they add the new Fusion and Milan hybrids. Those will apparently use an upgraded, next-generation version of Ford's hybrid system.
Gallery: 2009 Ford Escape Hybrid
[Source: Ford]
Reader Comments (Page 1 of 1)
GoodCheer 8:51AM (5/16/2008)
If the hybrid is the vehicle you want and your local dealers say they aren't available, the obvious question to ask is how much over MSRP you'd have to offer to get one.
In fact I'd encourage potential buyers to consider that as an option. If the demand really is there, and the fuel savings (& lower emissions) make economic sense to you it would be good for Ford to know that, and that they might be able to sell the hybrids for as much or MORE profit than the normal versions.
At ~$4.00/gal (before the summer driving season starts), the economics of upfront cost vs. fuel savings change quickly.
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russorat 8:55AM (5/16/2008)
There are no profit margins, only loss margins. The only vehicle ford makes money on is their trucks. They are losing money on every other vehicle.
http://www.leftlanenews.com/study-domestic-automakers-losing-money-on-every-vehicle.html
The deal is they lose a lot more money when it's a hybrid.
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Earl 10:04AM (5/16/2008)
Ford and Chrysler have no interest in high fuel economy vehicles, they only need a few models for marketing ploys. "Look at us, we're economical too". Bring on $5-$6 gas and drive Ford and Chrysler out of business.
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Whopper 12:21PM (5/16/2008)
Thanks Earl. I'll be sure to pass on your kind words to the 300,000 employees at Ford and the 97,500 employees at Chrysler. Sorry, you self-centered slug, your taxes will go up in order to pay the unemployment for the additional 500,000 people who work in related industries.
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Karkus 11:11AM (5/16/2008)
How about raising the price on the hybrid and then making more? At some price, the supply and demand will become even (right now it clearly isn't) and maybe at that price it will not lose money for Ford. Besides Ford still qualifies for the tax credit (whereas Toyota doesn't), so they can raise it 2 grand.
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Throwback 2:01PM (5/16/2008)
I don't blame Ford. They have mortgaged everything of value to fund their turnaround. They need to make money on every vehicle they sell. Leftlane news would not be my source for information. I am sure Ford is making money on the Focus, Fusion, Milan among others. The Focus tooling was paid off years ago. The Fusion/Milan are built on the Mazda 6 platform so the economies of scale are there for a profit. Lastly, Ford did turn a profit last quarter so they are making money on something.
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GoodCheer 2:13PM (5/16/2008)
The company is losing $X/year, and they sell N vehicles/year, so clearly they lose X/N $/vehicle they sell.
That's not the same as saying they don't make a profit on the sale of a vehicle. It's not like they would be WORSE off if they sold MORE vehicles, they simply have lots of overhead costs.
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Mike 12:18PM (5/17/2008)
It's too bad Ford didn't take a different business approach, in making their Escape exclusively hybrid, like the Prius or former Insight. I know the two don't compare, but think about the marketing/brain-washing Ford could do with American consumers who want a "big-ger" automobile as well as good gas mileage.
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mike 10:38AM (5/17/2008)
I just priced a Escape Hybrid on Ford's web site. ( US ) And, with minimum options you can't walk away for one for less then $28,000. If they're losing money of this car at this price, then there's really no hope for FORD.
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doug 6:06AM (5/19/2008)
Customers can feel free to factory order their Hybrid. The wait time is at least 4 months, but you'll get what you want. I don't know how many Hybrids my dealership could have sold last year, but we ended up selling 2 - both factory orders. I'll tell you than interest is very high.
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TommyD 8:12AM (5/19/2008)
Why doesn't Ford make a Lincoln version of the Escape and charge more for it? A "premium hybrid crossover" would more likely be worth the $35k they could get for it. A better interior, more features and a profit.
Here in the NYC area, the hybrid Escape/Mariner is unavailable at any dealer. The regular Escape is just another guzzling tall wagon with a cheap interior and bad brakes--how much longer can Ford sell these things?
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Robert 12:05PM (5/19/2008)
Ford's hybrid program is break-even right now and will be profitable at the end of the year when the Fusion and Milan launch.
The difficulty with any kind of expansion is that they have to hire unionized workforce, which means they are committing to a long-term production increase. That's the challenge Ford faces with their union (similar to GM and Chrysler) - they are operating above capacity at KC and Wayne and could probably stand to make more of the vehicles out of each plant, but they can't adjust properly for short (or medium)-term demand spikes. Ford has to be sure that the demand increases are permanent before they add a single employee.
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vic 11:25PM (8/01/2008)
I just ordered the luxury Escape 2009, with all the bells and whistles, for 37,000 tax included.
only $500 deposit, but
3-6 months to wait for it!
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