2 Detroit Automakers Stalled in February, but 1 Surged

Perhaps the least likely of the Big Three Detroit automakers surged in February. Here's why, and what to expect in March.

Mar 4, 2014 at 12:30PM

Automotive investors are slightly on edge after the industry's slower start to 2014, with sales dropping 3% in January and checking in flat for February. A rule of thumb for those who follow the automotive sector is to take sales in three-month chunks, which means March needs to be a strong month. Let's take a look at two automakers that stumbled in February, one that surged, and why I think March will indeed be strong.

Jp

Chrysler's Jeep Grand Cherokee is surging. Source: Chrysler Group.

Chrysler surges with 154,866 units sold
While winter weather has dampened dealership traffic and put a dent in most automakers' sales, Fiat Chrysler Automobiles' (NASDAQOTH:FIATY) Chrysler Group continued to shake off the snowflakes to post an 11% sales increase last month. It was the company's best February sales mark since 2007, and the severe weather injected Chrysler's Jeep brand with extra demand.

Jeep sales were up 47%, which was good enough to capture the brand's best February sales ever. The charge was led by the Jeep Compass, Patriot, and Wrangler, which each recorded their best February sales ever. The success wasn't limited to Chrysler's Jeep brand, as Ram truck sales surged 26% higher to earn the brand's best February since 2006. While the Ram truck still trails its Detroit rivals' F-Series and Silverado in terms of volume, it is closing the gap in 2014 with strong sales increases.

Investors considering Chrysler when the company goes public would be wise to keep a close eye on Ram truck sales later this summer. That is when Ford's all-new 2015 F-150 hits the showrooms and GM will decide whether to ramp up incentive spending to prevent more market share loss.

Meanwhile, Chrysler's two Detroit rivals couldn't shake off the harsh weather quite as well.

Ford and GM stumble
General Motors (NYSE:GM) delivered 222,104 vehicles in the U.S. in February, 1% lower compared to a year ago. The biggest disappointment for investors was the ground lost in the industry's most profitable vehicle segment: full-size pickups.

This was supposed to be GM's window of opportunity to stop the Ram truck from gaining market share, as General Motors' trucks are the freshest and newest, and to convince consumers to buy the Silverado now ahead of Ford's 2015 F-150 launch later this year. Unfortunately, sales of the Silverado plunged 12.1% in February and are down 15% for the year.

The upside to the bad sales performance is that so far GM has refused to boost incentives on its trucks, so while sales are down each one remains profitable. That's about to change, as GM is gearing up for its steepest and most aggressive incentive spree to date on its new trucks. It is offering employee and supplier pricing to buyers of its new Silverado in March -- an attempt to tap pent-up demand caused by the harsh January and February weather, as well as take advantage of a month with five weekends on the calendar. Investors absolutely need to watch how many sales GM can take back from the Ram and F-Series, as well as take note of how much these incentives will eat into first-quarter profits.

While GM definitely stumbled, there were some bright spots. GM's Buick lineup was the star in February with an 18.8% gain. In fact, Buick is the only brand under GM's umbrella to post sales increases for the first two months of 2014 compared to last year; it is up 9.6% year to date. The charge was led by Buick's Encore and Regal, up 92.7% and 49.3%, respectively., Another factor for GM investors to watch are sales of the luxury Cadillac brand. Cadillac is coming off an excellent 2013, but sales are down 8% year to date. As spring nears, and incentives rise on its full-size trucks, GM needs its luxury sales to pick up to help company profitability.

Ford (NYSE:F) also stumbled last month. While the company has truly been on a hot streak over the last few years, 2014 has started off a bit slower. Ford's February sales totaled 183,947 units, which was a 6% decline from last year. The weather clearly hurt demand for Ford's car lineup -- six of seven vehicles posted sales declines, which contributed to the segment's 16.8% decline compared to last year.

G

Ford's 2015 F-150 will launch later this year. Source: Ford.

While overall sales lagged, as well as passenger cars, there were two bright spots. Ford's F-Series sales nearly hit 56,000 in February, its best mark for that month in eight years and above the 50,000 threshold that Ford considers a great month. While sales of the F-Series only increased 2.6% for the month, it didn't lose any ground to its closest competitor, the Silverado, and Ford didn't need to increase incentives to save market share, either. Make no mistake, that's a win for the Blue Oval.

Another bright spot was the struggling Lincoln luxury brand that is in the early stages of its turnaround. Lincoln sales increased 36.4% over last year, led by strong sales of the MKZ and MKX. Lincoln's sales should remain strong with spring approaching; once the MKC hits dealerships in full force, it will take Lincoln sales to a consistently higher level.

Foolish takeaway
Ford also offered some insight to why investors can expect a better March sales performance. One reason for its lower overall sales mark last month was that weather caused delivery delays for roughly 10,000 fleet vehicles. Those will give March a small boost at the expense of February's sales totals. Also, demand for Ford vehicles in the West remained robust as the weather had less effect on the region, which leads me to believe the severe winter really is causing issues elsewhere. In addition, as weather cleared up in certain areas, demand returned in a strong way. That looks to remain the case in March.

March will be the last month in these automakers' first quarters, and it will need to be strong to offset the weakness of January and February. Investors would be wise to watch incentives, sales of full-size trucks, and luxury sales to get an idea which automaker could top or miss first-quarter-earnings estimates.

2 automakers ready to surge in the world's largest auto market
U.S. automakers boomed after WWII, but the coming boom in the Chinese auto market will put that surge to shame! As Chinese consumers grow richer, savvy investors can take advantage of this once-in-a-lifetime opportunity with the help from this brand-new Motley Fool report that identifies two automakers to buy for a surging Chinese market. It's completely free -- just click here to gain access.

Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. 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 Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers