In 1980, Ford Australia planned to phase out the full-size, rear-wheel drive Falcon after the 1982 XE model. It was to be replaced by a smaller front-wheel drive car derived from the Ford Telstar/Mazda 626 platform, in a program dubbed Project Capricorn. However, the market success of the XD Falcon against the smaller Holden Commodore saw Bill Dix, who became CEO in 1981, cancel the project. Ford instead began development of the EA26 Falcon program, a new full-size, rear-wheel drive car range. The XF Falcon was conceived as an interim facelift for the XE Falcon until the all-new car was ready to go on sale.
