Is Ford Falling Behind?

Is Ford's (NYSE: F  ) recovery in danger of falling behind?

Certainly the news on the surface looks pretty good: Ford posted another strong month in May, with U.S. sales up 23% over year-ago numbers. Year-to-date sales are up 31% over last year at this time, and the company claimed an increase in market share for the 19th time in the last 20 months. Sales of key models such as the Fusion, the F-150, and the Escape continued to be very strong, and numbers from important overseas markets like India and China showed solid gains as well.

But for Ford shareholders who have been riding the company's tremendous turnaround, there's a major new challenge emerging -- one that I didn't expect to see quite this soon.

Guess who just blew past Ford?
Nope, it's not Toyota (NYSE: TM  ) . The Japanese giant was looking strong until the unintended-acceleration recalls and scandals emerged earlier this year, and while they're still a major global force, they've fallen well behind Ford in year-to-date sales in the U.S. despite aggressive incentives. However, Toyota remains firmly in third place, having sold nearly 45% more cars and trucks than its rival Honda (NYSE: HMC  ) over the first five months of 2010.

No, it's Ford's ancient nemesis General Motors that has put Ford solidly in its rearview mirror. GM posted its own solid gains for May and seems to be settling right back in to its long-held position at the top of the U.S. sales charts.

Surprised? I am. It was just a couple of months ago that these three companies were neck-and-neck-and-neck for first place in U.S. sales, and I thought that 2010 could end up being the year that Ford passed by GM once and for all.

GM, after all, is just a year out of bankruptcy, and its management team is only now starting to come together after months of disarray. The company still has huge holes in its product line and a marketing message best described as "muddled" -- though the recent hire of marketing whiz Joel Ewanick should help with the latter. And despite their much-ballyhooed loan "repayment," they're still in hock to the U.S. government for some $43 billion -- a sum their impending IPO might not cover.

GM might finally be staggering to its feet, but it's still staggering. And now we're hearing that this trainwreck is the company that has run past Ford and Toyota for a solid first place in U.S. sales?

It's enough to make one wonder what GM will be like when it really gets its act together.

Under the General's hood
GM's sales were up 17% in May, a solid but not stunning number. But a look under the hood shows more impressive details: GM's four surviving U.S. brands -- Chevrolet, Buick, GMC, and Cadillac -- together posted a 32% gain over year-ago numbers. They're up 31% year-to-date, more than making up for lost sales from discontinued brands Saturn, Pontiac, and Hummer.

Bright spots? Key Chevy models -- Malibu, Silverado, Equinox, Camaro -- all showed nice gains at the retail level, and the new Cadillac SRX -- an SUV-like vehicle GM calls a "crossover" -- is selling briskly, as are its Buick and GMC cousins.

And as I said, GM is still getting its act together. It's about to bring a new small car to market, the Chevy Cruze, that is expected to be a big step forward from the current Cobalt. Buick's new Regal, derived from a European-designed Opel model, looks like it could be a hit. (Yes, a hit Buick -- Buick's U.S. retail sales were up 46% year over year in May, and believe it or not, the brand is hotter-than-hot in China.)

So is a real GM turnaround finally emerging? Let's put it this way: If the General's new products continue to be strong, and Ewanick manages to get the company's marketing act together, and they really do manage to pay off the government ... GM may be hard for anyone to catch.

Fool contributor John Rosevear owns shares of Ford. Ford is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


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  • Report this Comment On June 03, 2010, at 4:40 PM, whoffman14 wrote:

    Once again, you only tell one part of the story. Very biased non-reporting. What about the fleet sales where GM sold 6 percent more of their vehicles to fleet customers? Take 6 percent away, equalling Ford's fleet sales and their total numbers are statistically almost identical. Fleet sales can be pushed from month to month to increase sales and not giving that data element is biased and almost fraudulent in reporting.

  • Report this Comment On June 03, 2010, at 4:45 PM, productionspec wrote:

    How is it possible that you never mention GM's 37% fleet sales figure for the month of May. Ok, some fleet sales are profitable, but those to rental car agencies walk a fine line. The rental car agencies were not buying in May of 2009 and as a result they have vehicles with 40 to 50K on their lots. They are buying now - a little pent up demand if you will - but this purchasing level will not last. Also - what about GM and its production capacity constraints? Let's tell the whole story here please.

    Check your facts!!

    automotivenews.com

    gminsidenews.com

    autoblog.com

    media.gm.com

  • Report this Comment On June 03, 2010, at 5:05 PM, TMFMarlowe wrote:

    Fleet sales were also 37% of Ford's May sales totals. It's a wash. Check your facts too, guys. (Try looking at Edmunds Auto Observer for that one, whoffman14... not sure where you got that other number. You may be confusing percentage increase of Ford's fleet sales over May 09 -- 32% -- with fleet's percentage of total sales in May 10 -- 37%).

    Thanks for reading.

    John Rosevear

  • Report this Comment On June 03, 2010, at 5:16 PM, productionspec wrote:

    One more time. Check your facts: GM: 38% Fleet.

    There is a HUGE difference in profit margins when selling rental vs. commercial fleet.

    From The Detroit News:

    The Detroit automaker's sales were fueled by stronger fleet sales as rental companies restock vehicles after delaying purchases during last year's industry downturn.

    Fleet sales of GM's four core brands rose 44 percent compared to a year earlier, representing about 38 percent of the automaker's total volume.

    GM expects that percentage to decline to about 25 percent by the end of the year, Carlisle said.

    Ford's fleet sales, meanwhile, climbed 32 percent last month thanks to increased sales of trucks to commercial customers.

    From The Detroit News: http://detnews.com/article/20100602/AUTO01/6020390/Chrysler-...

  • Report this Comment On June 03, 2010, at 5:24 PM, haul1959 wrote:

    so when are we going to be able to buy GM-stock?

  • Report this Comment On June 03, 2010, at 5:30 PM, TMFMarlowe wrote:

    One more time for you, productionspec, this time in baby steps:

    GM: 44% increase over last May. 38% of May 2010's total sales volume for GM.

    Ford: 32% increase over last May. 37% of May 2010's total sales volume for Ford.

    "Ford sales were boosted by outsized fleet sales, which accounted for 37 percent of May's total sales volume - a number that represents a jump of 32 percent compared with last May. "

    http://www.autoobserver.com/2010/06/healthier-may-sales-have...

    Apples to apples. It's a wash.

    John Rosevear

  • Report this Comment On June 03, 2010, at 5:31 PM, TMFMarlowe wrote:

    haul1959 -- when they go public again via an IPO (Initial Public Offering)... probably late this year, but no date has been announced yet.

    Thanks for reading.

    John Rosevear

  • Report this Comment On June 03, 2010, at 5:46 PM, Milligram46 wrote:

    Everyone focusing on fleet sales if focusing on the wrong thing, and as noted only part of the data. GM and Ford fleet sales were identical. Chrysler's fleet sales are down, but they were at 58% last month! Toyota doesn't give a specific fleet sale number, but it is widely believed to be also up.

    Businesses and rental agencies have put off upgrading their fleets for the last 18 to 24 months. For those who are frequent travelers you have probably observed some older, higher mileage rental cars beyond the normal. Between government spending, fleet purchases and rental company upgrades, because of a broader economic improvement, no duh everyone has big fleet sales right now.

    And lets not forget, when Bob the Builder needs a new van or pick 'em up truck who does he call? Well he calls Ford, GM or Dodge for the most part. Toyota doesn't even offer a work style van, and the Tundra has proven out to be a sales dud. I don't care to get into the partisan bickering of who makes a better truck.

    Look at the top ten sales data - top selling vehicle - again - the F-150. The trucks weren't at the top of the pile this time last year. Number two - again - the Silverado.

    The fleet sales numbers are inflated not because the car makers are dumping iron any way they can - they're up because there is pent up demand across the board, which is a sign the eocnomy is getting better.

    One month of sales data a trend does not make. Chrysler's abysmal reliance on fleet sales is a much bigger picture issue. Toyota's growing dependence on fleet sales is of interest. If this trend continues at GM and/or Ford - then maybe things are as good as they look.

  • Report this Comment On June 03, 2010, at 6:01 PM, TMFMarlowe wrote:

    Milligram46, excellent points as usual. Long story short, the fleet sales numbers are inflated because fleets weren't buying much at this time last year, which makes the absolute totals and the year-over-year gains look fat.

    As for Chrysler... I can't really knock their dependence on fleet sales, given that they're just trying to get through the year in one piece to the point where their new product starts rolling out. So far so good.

    Toyota... there's lots to look at there. You saw that the Camry is losing ground to the Accord? I didn't have room today, but I'll get into that in another article tomorrow or Monday.

    John

  • Report this Comment On June 03, 2010, at 6:15 PM, JustMee01 wrote:

    As long as sales gains don't reverse, there's no reason to fret over GM or Toyota taking back some of their share.

    Ford shouldn't care about gross sales. If they take care of their own house, everything will be okay. With the Superduty, Fiesta, Explorer and Focus launches, they have a new crop of new models. It's all about minimizing the use of incentives and gaining some pricing power. The resurgence of Ford is certainly from market share improvement to some extent. But, a huge factor in the rebound and probably even a bigger factor from here on out, is the improvements in their margins. IMO, folks need to stop counting cars and start focusing on the prize: rejuvinated margins and profitiability. That's the story that's impressive and the one to keep a close eye on. If the new Ford models can't keep up the pricing strenght, then it's time for concern. But, if they do, then it doesn't mean a hill of beans if Ford is selling fewer cars than GM, if they're doing it profitably.

  • Report this Comment On June 03, 2010, at 9:05 PM, Milligram46 wrote:

    @John. Given that Toyoda came out two weeks ago and basically said, "well shoot, compared to Hyundai, Ford and General Motors the Camry isn't all that good, and we can't keep doing stuff like this."

    Given these comments and the decision to delay the FT-86 under withering competition from Hyundai, Ford and General Motors in the projected price point (hello, who is going to buy a 170HP RWD sport coupe for $23K when you can buy a 306HP Ford Mustang that will run circles around it in every single category, and get 31 MPG and sells at the same price point - d'oh) there are some signs that Toyota is starting to grasp how fall they have fallen.

    The new Avalon launch is appearing to be a disaster. Sales are down, from a very low bar they had to hop over. Maybe its the current ad campaign that seems to be targeting anyone over 85 years old as their demographic???

    No comment also on the death of Mercury. A lot going on!

  • Report this Comment On June 03, 2010, at 9:51 PM, baldheadeddork wrote:

    Milligram - where have you been hiding? Good to read you again.

    Want to know why GM has surged? The answer is here: http://www.autoobserver.com/TCI%20May%202010.gif Take a look at GM's spike in incentives last month. They're now putting 20% more on the hood than Ford, and they are even offering more now than they did during the carpocalypse (TM Jalopnik) last May. Their market share, while still #1, has slipped despite increasing the incentives. (For comparison, Ford has cut their incentives YoY by almost 20% while still increasing their monthly and YTD market share.)

    I know I keep beating this drum, but I still think the big story in the April and May numbers is Toyota. This is the second month in a row they've lagged the field in sales growth and lost market share, despite still offering near record incentives. Toyota's incentives last month were up 25% from May 2009, but their market share is down 10% from last year.

    The best way to read this for Toyota is that the huge surge in March pulled sales forward and the company will rebound to a 17% market share later in the year. The other way is that this is the new normal for Toyota and they'll have to put more than two grand on the hood just to keep a 15% market share for the foreseeable future. Either one will put a big crimp in their revenues and profitability, it's just a question of how long it takes to recover - or if there's a recovery at all.

  • Report this Comment On June 03, 2010, at 11:00 PM, stan8331 wrote:

    So far, I haven't seen anything that would make me believe Ford's management doesn't know exactly what they're doing. Ford is developing a great long-term strategy; GM is busy trying to survive. GM may end up doing very well - I hope they do - but I certainly haven't seen anything resembling a good reason to sell Ford.

  • Report this Comment On June 04, 2010, at 12:30 AM, wenger2k wrote:

    As an investor its obviously important to look at numbers, balances sheets, etc. But as small investors I think its important to go outside of the CFO view of the world and go into the business to get some view - what do the customers think, what do the employees think etc. I bought AAPL 3 years ago not because their balance sheet was becoming more interesting but because the user base was becoming fanatical about the products and was starting to drive their own cross sells and upsells and this was all based on not a perceived but what the consumers truly viewed as superior value. Sorry to the GM fans out there but I just don't see how you can make a similar case with GM, especially when compared to Ford. They're selling more because they're incentivizing the sales more but the increase in sales certainly isn't based on superior products or value, again especially compared to Ford. When I simply compare the genuine innovation coming out of Ford vs that at GM and I think i'll be hanging on to my ford preferred's thank you very much.

  • Report this Comment On June 04, 2010, at 2:02 AM, thidmark wrote:

    So I guess Obama was wrong when he insisted we couldn't afford to let GM go bankrupt?

    And we're supposed to believe his yammering on health care??

  • Report this Comment On June 04, 2010, at 7:22 AM, TMFMarlowe wrote:

    Milligram46, I mentioned the (then-rumored) death of Mercury last week, but I've got another article coming that will go into it in more detail. They're certainly staking out an interesting direction for Lincoln.

    John

  • Report this Comment On June 04, 2010, at 9:34 AM, SMOKEN42 wrote:

    MR. ROSEVEAR IS JUST ANOTHER ANALYST WHO KNOWS VERY LITTLE ABOUT THE AUTO-INDUSTRY !!!!!!!!!!! JUST ANOTHER ARTICLE TO FILL SPACE WITH ANOTHER OPINION !!!!!!!!!!!!!!!!1

  • Report this Comment On June 04, 2010, at 10:17 AM, Skeebo06 wrote:

    Wait a minute, forget all the fleet sales numbers... Are you really comparing the increase in sales compared to last May for two different companies? How is that apples to apples unless they sold the exact same amount of cars May 09?

    Year over year sales increases are not a good way to compare companies without significant parallels in the numbers associated with the base period. I assume that sales for GM last year were horrible compared to Ford so a larger percent increase in sales is easier to achieve for GM than it would be for Ford.

  • Report this Comment On June 04, 2010, at 10:46 AM, Big50Shooter wrote:

    GM sucks...

    I'll never own it as a stock, or any of its' vehicles (and I live in Detroit too!)....

    They should have been allowed to go through bankruptsy like a "normal" company, NOT with a Obama-hand-hold like they did... They would probably have turned out to be a stronger company afterwards as a result... But now, they are the same bloated hog, rotting in the sun....

  • Report this Comment On June 04, 2010, at 10:47 AM, TMFMarlowe wrote:

    @Skeebo06: No, I'm not comparing the percentage increases when I say GM is leading Ford... I'm comparing year-to-date (2010) total U.S. vehicle sales for both. After running neck-and-neck with F and TM a few moths ago, GM is now leading, and not by a small margin. That surprises me a little, as I'd thought Ford might overtake them. In the next few days I'll take a more in-depth look at what might be behind those sales (it's more than just incentives, guys.)

    (And just in case I misunderstood your question... no, I'm not comparing year-over-year increases in fleet sales when I say apples to apples, I'm comparing percentages of sales that were fleet sales in May 2010. For Ford, 37% of May 2010 sales were fleet sales, for GM, it was 38%... that's what I'm talking about when I say apples to apples.)

    Thanks for reading.

    John Rosevear

  • Report this Comment On June 04, 2010, at 10:55 AM, TMFMarlowe wrote:

    Edit to my last comment... I should have said "monthly and year-to-date" sales. GM led in May by a big margin, and they're up solidly on the year to date.

    John

  • Report this Comment On June 05, 2010, at 9:06 AM, wvowell wrote:

    Mr. Rosevear, probably the most important issue with GM is the fact they still owe us (Taxpayers) 43 billion dollars. Where is that going to come from? Or this may be the most important factor, the UNION owns 58% of the company!!! So doesn't that translate into 58% of the revenue/profit going to health care for employees? An auto company that has a major objective of providing health care and not making a profit is in big trouble. Have you been to a GM service center? They are awful. They have already started to be a bloated gov't run company!!

  • Report this Comment On June 06, 2010, at 7:33 AM, TMFMarlowe wrote:

    wvowell, the theory is that that $43 billion is going to come from GM's upcoming IPO. I'm not sure that theory is sound, but we'll see.

    As for GM service centers... some are good, some are lousy. The one I go to isn't bad, but I've heard plenty of horror stories. But we could say the same about Ford or Toyota or BMW dealer service centers -- some folks do okay, some folks feel ill-treated, but very few people *like* their local dealer's service department, no matter the brand.

    Thanks for reading.

    John Rosevear

  • Report this Comment On June 13, 2010, at 11:23 AM, mikempp wrote:

    GM has always made the best cars, no matter who pays off consumer reports or how bad the republicans have tried to break the unions at the middle classes expense. and let's not hear from you anti union cry babies please....

  • Report this Comment On June 13, 2010, at 4:42 PM, HOGridin wrote:

    From Rich Smith, TMF 26April2010: " ...when GM filed for bankruptcy, the U.S. government took a 60% stake in the company in lieu of repayment. ... Whitacre says he has every intention of making good on that investment and getting out of the "Government Motors" business. But how likely is it that we'll succeed in converting our national 60% shareholding in GM into $43 billion, cash money?

    Earlier ... GM filed its first complete financial report since emerging from bankruptcy protection. In it, we see that GM booked $104.6 billion in revenue last year and rang up about $21 billion in operating losses. By way of comparison, Ford collected $118.3 billion in revenue last year, with a much smaller operating loss of only $611 million. Yet despite boasting more revenue and smaller losses than GM, Ford's market cap stands at just $48 billion.

    Let's be clear: To make the government's 60% stake in GM worth $43 billion, GM as a whole would require a market cap of approximately $71.7 billion. In other words, GM needs to IPO at a price 50% higher than Ford currently carries. This, despite the fact that GM brought in 12% less revenue than Ford did, and lost more money." And eslewhere it was written that market cap would be more for GM than in its hey-day of a US market of 16-mln cars annually and higher margin, lower incentivized SUV's and trucks making up the lion's share of sales.

    Yeah, I wanna back up the truck and buy a bunch of those IPO shares.

    I think I'll stick to what I can carry on two wheels.

    HOGr

  • Report this Comment On June 13, 2010, at 6:18 PM, Autoknowtive wrote:

    You're only as good as your last record...or in this case last quarter. Look a history to learn from the mistake(s) and plan to the future. Prior, everyone was complaining how fleet sales hurt the bottom line in the long-run. Why? Fleet cars go back into the re-sale market quickly at a huge discount compared to new and deflates the re-sale value of the brand overall. GM is going back to huge fleet sales and expects a different outcome? GM is headed by a non-car guy who thinks he knows better...but if you look at the AT&T coverage slam commercials, you know this individual can be short-sighted as their "maps" have some huge gaps...and so does GM planning. Ford got out of fleet sales, but now is considering going back in...

    So looking back to the original topic - Ford falling behind? The company ALWAYS will as long as the Ford family controls the majority of voting rights with multiple voting shares in a two-tiered stock system. How this remains legal to this day is beyond me; Ford family owns all 70+ million shares of the Class B stock to ensure they keep control of the company no matter how much stock they have to issue to avoid bankruptcy. Where is the "drive" to know your job/butt is on the line if you don't perform to meet/beat the competition? They got lucky "finding" Mr. Mullaly, who by his own admission was "lucky" mortgaging all he could just prior to the market crashed. But luck does run out - Ford has to pay back to reclaim what they need to operate successfully - including the manufacturing sites/land, and the Blue Oval. Can they pay down the debt, reclaim what is needed to succeed, keep up with the R&D to stay on the cutting edge AND keep up with tantalizing designs to keep customers flocking in? Short-term juggling act (3-5 years) looks ok. After? Time will tell. And look out for the Korean and Chinese makers who can produce good copies with some innovation, but at a much lower price. Ford can make 'em but they are over-priced for middle American anymore.

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