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Was it good or bad? All things considered, it was pretty decent: Ford's (NYSE: F ) U.S. sales in January were up 7% over (strong) year-ago numbers, the company said, a bit below analyst expectations and just ahead of expected gains for the overall market.
While a market-average gain might be a bit of a letdown for investors hoping for a stronger month, Ford executives were upbeat when discussing the results with analysts and media on Wednesday morning. "We're very pleased with January's sales performance, as it really carries through what we saw in the fourth quarter of last year" when auto sales turned upward, according to Ford's U.S. sales analyst, Erich Merkle.
A deeper look at the numbers suggests that Ford has some good reasons to be pleased. Consumer preferences seemed to shift during the month, right into an area where Ford has become strong recently: Smaller cars and SUVs.
A focus on smaller vehicles
To some extent, a buyer shift toward smaller vehicles early in the year is an annual thing, as Merkle pointed out. Truck sales often pick up toward the end of the year as commercial buyers look to optimize their spending for tax purposes, and then taper off after year-end.
Ford's marketing follows that pattern. Pickups are promoted extensively late in the year, and then very little is done in January as efforts are increased elsewhere. And sales followed that pattern -- but in dramatic fashion.
Sales of Ford's Focus compact were up almost 60% over year-ago figures, though that was before the current (and much more competitive) Focus had been introduced. More to the point, the Focus' sales growth contributed 30% of Ford's overall sales growth in January all by itself.
That's a big jump for a model that was expected to suffer as production of rival Toyota's (NYSE: TM ) Corolla -- the longtime segment leader -- got back up to full speed. But Ford held its ground and then some -- as did, surprisingly, General Motors (NYSE: GM ) , whose Chevy Cruze saw a 10.4% gain in a month when GM's overall sales were down about 6%.
Ford is running some incentives on Focus in some parts of the country, but executives downplayed the impact of those incentives on the sales jump. Instead, they said, consumers are turning to smaller vehicles, and the Focus is a strong product that draws buyers.
Both of those things are true -- and they had another data point that bolstered their case.
An older model showing surprising strength
Sales of the Escape were also way up on the month -- over 23% -- with Focus and Escape together accounting for nearly half of the company's overall sales increase. The Escape, Ford's smallest SUV, had its best January ever -- and what's remarkable about its recent success is that it's an older model.
Ford (and automakers in general) generally tend to see the greatest sales strength in the parts of their portfolio that are new. It's not hard to see why: New products are the ones likely to compare best against competitors. The new Escape has already been shown, and is expected to arrive at dealers this spring -- but the outgoing model continues to command outsized interest from consumers. (Sales of GM's similarly-sized Chevy Equinox were up a much more subdued 6.3% on the month.)
Given that the new model is much more dramatically styled than the current Escape, a question is raised: Is Ford about to mess with success? Ford vice president Ken Czubay thinks not. Czubay said on Wednesday that the new Escape has drawn a very positive reaction from consumers and that he is excited about its potential. He noted that the current vehicle is already on a "glide path" -- a planned sell-down -- in preparation for the launch of the new model, and sales and production of the outgoing Escape are "on plan."
The upshot: A strong portfolio saves the day
"What we saw in January was proof positive of the benefits of a balanced product portfolio," Czubay said. He's right: Moments like this, when the market seems to be shifting, are when Ford's massive product-overhaul efforts pay off big. Not long ago, a shift toward small cars would have driven a lot of consumers to Toyota or Honda dealers, but now Ford -- like GM -- is well-positioned to capture more of those sales.
That's why I remain optimistic about Ford's prospects in coming months. While the sales increase fell short of some analysts' expectations, the company's products held their own in the face of increased pressure from archrival Toyota. While the launch of the new Escape will bear careful watching, Ford should be able to sustain its momentum as Toyota -- and Honda -- continue to ramp up in the coming months.
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