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Will Ford Run as Smoothly in 2011?

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It's not much of a surprise, but for Ford (NYSE: F  ) shareholders, it's still great to hear: From a sales perspective, 2010 absolutely rocked for the Blue Oval.

Speaking earlier this week, Ford sales analyst George Pipas called it one of the company's "best years ever." Hyperbole around sales results is a time-honored Detroit tradition, but for once, the hype might be justified.

The key milestones
There was plenty for Ford to cheer about in 2010. Consider:

  • Sales up 19%. The economic recovery certainly had something to do with that growth, with overall U.S. vehicle sales up 11% over 2009. However, not only was Ford's growth well above the average -- among the major automakers, only Nissan (18%) and Hyundai (24%) came close to Ford's sales growth rate in the U.S. -- but it also followed a pretty good 2009 as well.
  • Sales up across the model range. Ford's F-Series trucks continue to be the company's (and the nation's) best-seller, the only vehicle to sell more than half a million copies in the U.S. last year. But Ford also sold more than 200,000 of its midsize Fusion sedan, a gain of 21% and the best result for a Ford car since 2004. Sales of the big Taurus sedan were up 51%.
  • Market share gains. For the full year, Ford's U.S. market share was 16.4%, up a point from 2009 and more than two points from 2008. The company said this was its first back-to-back increase in market share since 1993, and returns Ford to a solid second place in the U.S., behind General Motors (NYSE: GM  ) but well ahead of Toyota (NYSE: TM  ) and Honda (NYSE: HMC  ) .
  • Global gains as well. Ford sold almost 84,000 vehicles in India, well short of the 567,000 sold by local favorite Tata Motors (NYSE: TTM  ) but nearly triple its 2009 results. The company hasn't released year-end numbers for China yet, but sales were up a solid 39% through October, a few points ahead of the market's overall growth, and Ford added 100 new dealers in the country during 2010. Ford also led the Canadian market for the first time in more than 50 years.

It wasn't all good news, of course. While Ford has now officially wound down its Mercury brand, it did declare its commitment to its venerable Lincoln luxury brand in 2010. Certainly Lincoln needs help, as sales were up a mere 3.6% year over year. And sales of the much-hyped Fiesta subcompact were subdued, though the car has been strong in markets that aren't traditionally strong for Ford, such as Los Angeles.

But all in all, Ford's year-end totals were good news, and the company's fourth-quarter and year-end financial results -- due in a few weeks -- should look solid.

So what's ahead?
Ford said it expects the U.S. economy to expand 3% to 4% in 2011, and for total U.S. vehicle sales to land between 12.5 million and 13.5 million -- a sizable jump from the roughly 11.5 million sold in 2010, but still well short of the pre-recession trend (more than 16 million were sold in 2007).

Can Ford capture more market share in the U.S. in 2011? It's possible. The company has several important new models coming to market -- the all-new Explorer and just-refreshed F-Series trucks began shipping in December, and a completely new Focus compact will start to arrive at dealers before spring. The Explorer and Focus both represent significant improvements over the vehicles they replace and should sell well, driving further sales growth.

But as I pointed out the other day, Ford's edge (so to speak) over its key rivals may shrink in coming months, which may make market share gains harder to come by. Ford's biggest strength has obviously been its product -- and its ability to maintain its investments in product development through the worst of the economic downturn. But GM and Toyota are catching up: Toyota has promised 10 new or significantly updated products in 2011, and post-IPO GM is expected to make aggressive product-development investments as well. And Hyundai is rapidly becoming a force to contend with in the U.S. and elsewhere.

Still, Ford shareholders should be encouraged. Ford's relatively small global vehicle lineup means greater efficiencies, and that means per-car profits will increase as sales increase. As long as the world's economies continue to improve, and as long as Ford stays focused (so to speak), the company's gains should continue.

Want to read more about Ford? Add it to My Watchlist, which will find all of our Foolish analysis on the Dearborn dynamo.

Fool contributor John Rosevear owns shares of Ford and General Motors. General Motors is a Motley Fool Inside Value choice. Ford is a Motley Fool Stock Advisor recommendation. 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 Fool's disclosure policy still remembers when a fine Ford whine meant it was time for a trip to the mechanic.

Read/Post Comments (5) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 06, 2011, at 10:12 AM, mfangelo wrote:

    You forgot to mention Ford Sales increase in Brazil 10% more than 2009.

  • Report this Comment On January 06, 2011, at 10:28 AM, Optimyst wrote:

    I agree that even with the many new competitive offerings coming out, Ford will continue to do extremely well this year here in the U.S.

    But ponder this... We're all impressed with what Hyundai has done here in the U.S. (and rightfully so). Ford is to India and China, as Hyundai is to the U.S...

  • Report this Comment On January 06, 2011, at 7:33 PM, TMFMarlowe wrote:

    @mfangelo: I didn't forget, I just ran out of room! Thanks for mentioning it here.

    John Rosevear

  • Report this Comment On January 06, 2011, at 11:19 PM, baldheadeddork wrote:

    "Toyota has promised 10 new or significantly updated products in 2011, and post-IPO GM is expected to make aggressive product-development investments as well. And Hyundai is rapidly becoming a force to contend with in the U.S. and elsewhere."

    I think you're greatly exaggerating the threat of these three in 2011.

    I don't think Toyota has found bottom yet. Reviews of their first "significantly updated" products have been scathing. The new product, like the Camry, were set-in-stone two or three years ago. And the PR campaign to repair their image has gone nowhere. Their incentives for 2010 were up 60% from 2008, and they fell 46 points in Consumer Reports brand favorability survey last month. They can rebound a little if they put enough cash on the hood, but they're a long way from regaining market share on the strength of their products and their brand.

    GM's accelerated product development isn't going to bear fruit in 2011. This is going to be a horrible year for GM putting new product on dealer lots and their best car from 2010 (the Cruze) is running into a storm of really good new competition this year from Ford, Hyundai and (probably) Honda.

    Hyundai's outlook for 2011 isn't as simple as it appears on the surface. If the SAAR increases from 11.5m to 12.8m, Hyundai will have to sell 600k units just to hold their 4.6% market share. To reach 5% in a 12.8m SAAR you're looking at 640k, which is almost a 50% increase over their 2008 results. Do they have that much untapped capacity? Don't get me wrong, Hyundai is a growing into a major player but they're going to have growing pains along the way.

  • Report this Comment On January 10, 2011, at 11:11 AM, TMFMarlowe wrote:

    @baldheadeddork: Points well taken, but I am not (yet) ready to stop being wary of underestimating Toyota. I'm not exactly suggesting people buy the stock, but I expect the company to at least try to hit back, and hard.

    John Rosevear

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