Ford files to trademark Excursion nameIf Ford really thinks they can make money on a new Excursion, they will do it.
While Ford may be able to churn a marginal profit on a per vehicle basis, the volume is likely small so it may not actually return a profit after initial engineering and certification costs. There is also opportunity costs... Excursion will reduce capacity on Superduty which is very profitable business. So Excursion will have to generate more profit on aggregate basis thru the product life cycle than the volume of Superduty it displaces. That's hard to justify... the math doesn't work.
This is how the decision has to be made:
1. Ford think it can sell 10,000 units of Excursion during the program lifetime (I made up the 10,000 unit) @ $5,000 marginal profit each so total marginal profit is $50 million.
2. Engineering and certification/compliance costs is let say $5 million each. So fixed cost is $10 million.
3. #1 - #2 = $40 million program profit
4. Superduty marginal profit is $4,000. Building 10,000 Excursion will eat into 12,000 units of production capacity for Superduty. The opportunity cost of not building the 12,000 Superduty is $48 million.
#4 < #3 by $8 million - Excursion is not a positive addition to Ford's bottom line.
This is completely hypothetical but it illustrates why Ford hasn't done it.Mon, 04 May 2020 15:16:39 +0000
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