Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Is Ford's Momentum Returning?

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Could auto sales -- and with them, prospects for Ford (NYSE: F  ) in its most important market -- finally be picking up?

The official tallies won't be out until mid-day Thursday, but it's already looking like November has been a very good month for light-vehicle sales in the United States. Several automakers are expected to post double-digit gains, according to analysts at Edmunds, including Ford -- which confirmed on Tuesday that its sales have been strong in recent weeks.

But not all the news is good, as some longer-term problems are expected to persist.

A strong month for Ford and Detroit
Ford sales analyst Erich Merkle told reporters on Tuesday that he expected the annualized rate of U.S. auto sales -- called the SAAR, for "seasonally adjusted annualized rate," a widely used industry indicator -- to hit the "mid-13-milion range" for November. That would be a sizable bump from last November's 12.3 million SAAR and a promising uptick from last month's muted results. While he declined to give official forecasts, Merkle did note that Ford expected a surge in sales of small SUVs -- a segment led by Ford's Escape -- and further evidence that consumers are shifting into smaller vehicles.

Those expectations agree with Edmunds' forecast, which calls for an SAAR of 13.6 million (coincidentally, a 13.6% year-over-year gain) led by double-digit sales increase for Ford and Chrysler and a gain of nearly 10% for General Motors (NYSE: GM  ) . That would be the highest level seen all year and a strong positive sign for the economy and for the ongoing Detroit revival.

Clearly, Detroit's product renaissance is continuing to pay off, with GM and Ford offering (for the first time ever, basically) very competitive smaller cars and Chrysler continuing to reap the benefits of its high-speed product-line makeover. But that's not all that's driving this Detroit surge.

Not everyone will be seeing major gains
What else is behind Detroit's ongoing success? One key factor isn't new: Ongoing weakness at the two Japanese giants, Toyota (NYSE: TM  ) and Honda (NYSE: HMC  ) . Honda's North America chief Tetsuo Iwamura has said that he expects November results to show another difficult month, thanks to continuing production challenges related to flooding in Thailand. Iwamura now predicts that Honda will be back up to speed in January.

Edmunds' forecast concurs with Iwamura's dour outlooks, as its analysts predict a tiny 2.5% gain for Honda. Edmunds sees a similarly grim 3.5% increase for Toyota, which has been facing similar challenges but recently seemed to have escaped the worst of the Thailand floods. Nissan (OTC: NSANY), which escaped significant damage from both the Thai floods and the Japanese tsunami in March, is expected to post a gain of 8.2%, Edmunds says.

Is this a sustainable increase?
Whether this increase is a shift or a blip remains to be seen. There are some good reasons for pessimism -- some analysts have suggested that November's uptick will turn out to have been a "Black Friday" effect, with deal-minded shoppers taking advantage of dealers' year-end clearance sales.

Ford's hint at strong sales for its Escape -- a model that will be replaced shortly -- isn't at odds with that theory, though there's also reason for cautious optimism. As Ford's Merkle pointed out, to some extent demand is being driven by the fact that folks need new cars -- the average age of the vehicles on U.S. roads is nearly 11 years old now, well above recent historical norms.

This is the "pent-up demand" that Ford CEO Alan Mulally and other industry-watchers have cited as they look toward 2012 with optimism, though GM CEO Dan Akerson has been sounding more cautious notes as he looks at Europe with concern. As Merkle said, while recent numbers have been strong, sustaining sales at that level will depend on factors like consumer confidence, employment rates, and the stock market -- factors that continue to be well beyond Detroit's control.

Will Ford's dividend really return soon? It's looking more and more likely, but you don't have to wait to put the power of reinvested dividends to work in your portfolio. In a special new report, Motley Fool analysts identify "11 Rock-Solid Dividend Stocks," all great additions to a long-term investor's portfolio. This new report is completely free for Fool readers -- click here to get instant access.

Fool contributor John Rosevear owns shares of Ford and General Motors. You can follow his auto-related musings on Twitter, where he goes by @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

Read/Post Comments (2) | Recommend This Article (10)

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 November 30, 2011, at 4:58 PM, havvey wrote:

    Power by Ford? or lack of??

  • Report this Comment On December 02, 2011, at 5:59 AM, TMFMarlowe wrote:

    @havvey: Not sure what you're asking. Ford's execution has been mostly flawless. Mostly, the company just needs the global economy to cooperate.

    Thanks for reading.

    John Rosevear

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1733504, ~/Articles/ArticleHandler.aspx, 10/26/2016 2:30:37 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 5 hours ago Sponsored by:
DOW 18,169.27 -53.76 -0.30%
S&P 500 2,143.16 -8.17 -0.38%
NASD 5,283.40 -26.43 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/25/2016 4:01 PM
F $11.85 Down -0.19 -1.58%
Ford CAPS Rating: ****
GM $31.60 Down -1.38 -4.18%
General Motors CAPS Rating: ***
HMC $29.92 Up +0.23 +0.77%
Honda Motor CAPS Rating: ****
TM $115.25 Down -0.20 -0.17%
Toyota Motor CAPS Rating: ***