Is Ford Losing Ground at Home?

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Despite lingering economic concerns, U.S. auto sales have been strong, with sales of cars and light trucks (pickups and SUVs) up 14.8% in the first half of 2012.

That momentum looks set to continue. The analysts at are calling for the "highest July since 2007," and their counterparts at Edmunds and Kelley Blue Book are also calling for a substantial gain.

What's driving that gain? I'll tell you what's not driving it, at least if these analysts' projections are to be believed: Big sales growth at Ford (NYSE: F  ) .

A potential slump for the Blue Oval
Between the post-tsunami resurgence of Toyota (NYSE: TM  ) and Honda (NYSE: HMC  ) , aggressive sales efforts from Nissan and Volkswagen (NASDAQOTH: VLKAY.PK), an admirable reluctance to increase spending on incentives, and -- possibly -- some hard limits on manufacturing capacity that would take big investments to overcome, Ford's sales have been under pressure.

In a month when it foresees a 10.6% year-over-year gain for the industry as a whole, sees Ford's sales actually slipping by 1.1% versus last year's numbers. Its peers are similarly pessimistic, with Edmunds and Kelley both predicting that Ford will be the only major automaker to post a decline in year-over-year U.S. sales in July.

That would be a frustrating development for shareholders, after strong truck and SUV sales carried Ford to a decent gain last month. But there are some important nuances behind the headline figures. TrueCar says that the retail sales increase will only be up 3% over July 2011. Fleet sales, on the other hand, are expected to be up significantly -- to account for 21% of total U.S. auto sales in July.

How much of that will be Ford? It's hard to say. While Ford has been a significant player in the fleet market this year, production constraints on key models may have led to a shift in emphasis. Ford may be decreasing its fleet sales to ensure that its dealers have enough supply. That would be a good thing for shareholders: Retail sales tend to have a higher margin than fleet sales, generally speaking.

But it might not work out that way. And if it doesn't, Ford will have some explaining to do.

Trouble for the General, too
Ford isn't alone in its sluggish sales growth. General Motors (NYSE: GM  ) is also expected to report sluggish results in July, despite what TrueCar expects to be the third-highest level of spending on incentives in the industry, close behind Chrysler and Nissan. But while Chrysler's sales are expected to be up nicely, GM's are expected to be close to flat -- up a little, but only just.

GM's problems seem like they should be different from Ford's. While many of GM's products are a bit long in the tooth -- lots of replacements will be forthcoming over the next year or two -- and sluggish sales could reasonably be expected, Ford's product line is top-notch, the best it has ever had.

Ford, to its immense credit, has been determined to hold the line on pricing. Its incentives spending used to be comparable to GM's but has fallen sharply as the company has rolled out its newest models. This is a strategic decision, part of the vaunted "One Ford" plan that remade the company. Ford's goal is to build best-in-class vehicles, load them up with premium features, and ask (and get) premium prices. So far, it has worked: Ford has reported quarter after quarter of strong profits in North America.

But the flip side of that strategy is that rivals who are willing to undercut Ford's premium pricing may be able to make sales gains at the Blue Oval's expense. Is that what's happening? We'll find out more when the official July sales numbers are released later this week.

Thanks to sluggish growth at home and rising concerns about Europe, Ford's stock has been under pressure lately, dropping to levels not seen in years. But the company is still executing very well and is investing heavily for growth abroad. Have these short-term pressures created an incredible buying opportunity, or are there other hidden risks with the stock that investors need to know about? To answer that, one of our top equity analysts has compiled a premium research report with in-depth analysis on whether Ford is a buy right now, and why. Get instant access to this premium report.

Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford and General Motors, as well as creating a synthetic long position in Ford. 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 (4) | Recommend This Article (3)

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 July 30, 2012, at 7:30 PM, LoadDrive wrote:

    One thing For Sure...I would Buy a Ford before I would Ever buy a Government Motors..I mean a G.M. Truck of car.

  • Report this Comment On July 30, 2012, at 9:14 PM, baldheadeddork wrote:

    I may have missed a month, but I remember two of these stories about Ford underperforming in no more than the last three months, and Ford beat estimates both times.

    But eventually the ball has to drop on red, right?

  • Report this Comment On July 30, 2012, at 10:15 PM, sondo1313 wrote: mention of the 2013 Fusion, only three months away? Projected sales?? Don't think it matters???

  • Report this Comment On July 31, 2012, at 8:08 AM, TMFMarlowe wrote:

    @baldheadeddork: It's noteworthy when all three of these outlets see the same drop. And truth is, F's sales growth in 2012 has lagged most months, even if they come in a point or two ahead of where Edmunds or whoever thinks they will. What's going on? Some of that is their own production limitations, some of it is pricing. But it's sure as heck worth noting.

    @sondo1313: It'll matter when it gets here. I expect it to be a big hit. They may not be able to make enough to satisfy demand. But it won't affect July sales numbers, which is what I was looking at here.

    John Rosevear

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