Why Ford Has to Bring Back the Ranger
I consider management to be the biggest factor when choosing which companies to invest in. The best products in the world will fail if the company is run by idiots. Ford has great management, but its decision to stop selling the Ranger in North America is a mistake. Trucks bring in the majority of profits for Ford and General Motors , making it the most important segment to the Detroit companies. It's a segment Ford has long dominated, and killing the Ranger gives its rivals - like the Toyota Tacoma - a chance to grow revenues. So far management has stuck to their guns and the Ranger is only available overseas, but I strongly believe Ford will change that - maybe as soon as this year.
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In the U.S. market the trend is vehicle downsizing, as pointed out in a survey by J.D. Power. They recorded that 27% of consumers purchased a smaller vehicle than their previous ride. Following that logic, we could potentially see a future rebound in the midsize truck segment, which has been in decline for years. Killing the Ranger eliminates the midsize pickup truck option for Ford's loyal customers and that's costing the company money.
Some argued that Ford's trimming of platforms to create a leaner operating structure is why the Ranger was killed. That couldn't be further from the truth. The Ranger is sold in 180 countries and will remain a core platform down the road. It's become a hot commodity in Australia and has a chance to be Ford's No. 1 seller in the country this year. It's also gaining popularity in parts of Asia and looks to play a role as that region's sales explode.
Ford defended its move by saying loyal customers would simply step up to the F-150. That was a bad assumption - as the Ranger made its market exit the market share of the Tacoma jumped 16% in 2012.
The fact is that not everyone needs or wants an F-150. For some it's just too big to be a viable option, or too expensive. There is the crowd that uses these trucks as tools for work; those consumers will always buy the large pickup. That said, there's a large crowd of people like myself who would like to own a smaller truck for the few times I need to haul something - while still having a viable ride in the city.
Currently the Toyota Tacoma and Nissan Frontier are the only options for us, but GM confirmed that a redesigned Chevrolet Colorado will resurface later this year. When that happens, expect the Colorado to quickly take the sales lead in the segment and follow it up by sticking its tongue out at rival Ford. I then expect Ford to hastily set up a press release stating plans to bring the Ranger back to the U.S. market - maybe as soon as next year.
The Ranger model that is sold overseas is near the top of its compact class for towing capacity and has impressed in many different categories. With the current engine it's rated between 26-28 MPG and can still tow a payload of over 7,300 pounds. The Ranger has already been produced to comply with government standards in North America, leaving zero reason why it can't be brought back right away.
If gas prices ever go through the roof this truck could bring back sales the midsize segment hasn't seen in over a decade. If gas prices never go through the roof, I'm still convinced the Ranger - with EcoBoost engine options - would still sell very well. It wouldn't bring in quite as much profit per vehicle as the F-Series, but it's better than losing sales to competitors. As a Ford investor, I want the Ranger back in the U.S. and contributing to its revenues as soon as possible. I believe it isn't a matter of if Ford brings the Ranger back, but when.
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The article Why Ford Has to Bring Back the Ranger originally appeared on Fool.com.Motley Fool contributor Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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