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



New Ford COO Sees Pressure on Profit Margins

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

DETROIT (AP) -- Ford Motor (NYSE: F  ) said Wednesday that a switch to smaller cars and an increase in incentives will narrow the profit margins in its core North American business.

Mark Fields, who becomes chief operating officer on Dec. 1, said higher inventories will force some automakers to raise rebates and other incentives, and that is likely to cut into what has been stable pricing for Ford. Fields said U.S. car and truck inventories rose to 3.1 million at the end of October, the highest number since December of 2008.

"Even in the last couple of months the competitive environment has gotten tougher," he told analysts at the Barclays Global Automotive Conference. "We've seen incentives go up."

Some unnamed manufacturers are discounting vehicles after a year on the market at levels not normally seen until three years after launch, said Fields, currently Ford's president of the Americas.

Ford's North American operating profit margin, the portion of its revenue left after production costs, was 12 percent last quarter, aided by strong prices for new products such as the Ford Escape SUV and Fusion midsize car. Ford predicts that will drop to 8 to 10 percent by the middle of the decade, squeezed by competition and an ongoing shift from higher-profit trucks to lower-profit cars.

The automotive pricing site says U.S. incentives grew only 1 percent from September to October and now average $2,180 per vehicle. But it's difficult to track payments that manufacturers make to dealers for hitting sales targets, so those figures may not be included.

Ford raised its average incentives 3.5 percent from September to October, to $2,810 per vehicle. Its main competitors, General Motors (NYSE: GM  ) and Chrysler, cut their incentives during the same period. Chrysler incentives are down almost 6 percent to an average of $2,671, while GM's are down 3 percent to $3,145, according to Edmunds.

Fields also said there's potential for growth in full-size pickup truck sales, even with competition from a new Ram pickup and new Chevrolet and GMC trucks coming out early next year. Almost 53 percent of the full-size pickups on the road now are above 10 years old; 27 percent are more than 15 years old; and nearly 13 percent are more than 20 years old, Fields told the analysts.

"You can see there's a lot of pent-up demand out there," he said. "There could be a lot of opportunity."

He wouldn't comment on reports that Ford plans to refresh its top-selling F-Series trucks in 2014, but said the company takes leadership in the truck market seriously. "We also know that as a leader you have a target on your back," he said.

Fields, 51, was named chief operating officer on Nov. 1, a new post under iconic CEO Alan Mulally. As COO, the entire company will report to Fields. Mulally will stay with the company at least through 2014. The promotion of Fields is a strong sign that he will replace Mulally when he leaves.

Ford shares fell with the broader market Wednesday, dropping 32 cents, or 2.9 percent, to $10.68.

Read/Post Comments (0) | Recommend This Article (0)

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.

Be the first one to comment on this article.

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: 2113233, ~/Articles/ArticleHandler.aspx, 10/23/2016 4:27:18 PM

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 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

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

10/21/2016 4:00 PM
F $12.02 Up +0.05 +0.42%
Ford CAPS Rating: ****
GM $32.04 Up +0.29 +0.91%
General Motors CAPS Rating: ***