To help solve affordability concerns in the new-vehicle market, Ford Motor Co. is working to figure out the features its customers actually use in their vehicles.
Removing neglected features such as garage door openers or CD players is one way the automaker can trim vehicle costs and lower prices to more affordable levels, Ford CEO Jim Hackett told Automotive News.
"We're beginning to look at things that customers don't use at all," Hackett said.
The tactic, which Hackett calls "reductive design," could help the Detroit automaker control rising vehicle prices and avoid problematic loans. Removing content is an alternative to extending loan terms to riskier levels, a practice that Ford's captive finance company has been disciplined against, Hackett said.
"We're not doing the ... below-market kind of loans, or what I call high probability of default," Hackett said. "We're actually different than some of our competitors there, I want to point out. Much more conservative. We've actually written the balance sheet down, which obliges the company less if there's any kind of recession."
After cutting back its car offerings, Ford's vehicle pricing has skewed significantly higher than in previous years.
The average transaction price for the F-150 pickup was $48,170 in the third quarter, according to Edmunds. For the Escape and Explorer crossovers, the average transaction prices were $28,613 and $45,762. Those are three of Ford's most popular vehicles. The industry average transaction price for a new vehicle in November was $37,981.
But decontenting may not help consumers much with affordability challenges, one industry analyst said.
Ivan Drury, senior manager of industry insights at Edmunds, said reducing content will likely result in cost savings — for the automaker.
"Are they going to pass all that cost savings to the consumer? Not likely," Drury said. "How often do you hear about [sticker prices] dropping year over year? Especially when you talk about these options that are defunct — we're not talking about a lot of money."
Still, the elements consumers most desire in vehicles may not be the most expensive. Features such as adaptive cruise control are more expensive than backup cameras or Bluetooth capabilities. But for some consumers, Drury said, "a backup camera and Bluetooth are seen as mandatory, even if those are the cheapest things you can have."
Leveraging connected vehicle technology is integral to Ford's reductive design strategy, Hackett said. Because Ford vehicles are "connected, we can actually tell what they're not even interacting with in the vehicle and take content out," he said.
Ford's captive, Ford Motor Credit Co., is also using connected technology to monitor driver behavior in a bid to lower vehicle ownership costs.
This year, Ford Credit rolled out Ford Insure, a product that relies on connected technologies to send driving data from customer cars to an auto insurance provider. The product, set up with the customer's permission, lowers auto insurance premiums for consumers with good driving habits.
Michael Martinez, Nick Bunkley, Dave Versical and China Haley contributed to this report.
