Ford Motor Company's F-150 Loses Ground to GM and Ram

Ford's F-150 faced an uphill battle in May. Sales declined while GM and Chrysler pickups posted gains. Source: Ford Motor Co.

Ford (F -0.41%) said on Tuesday that its U.S. sales rose 3% in May -- but its retail sales rose 6%, as the company continued to roll back its less profitable fleet sales. That beat analyst estimates, which had forecast a slight decline for the Blue Oval. 

Ford posted several big sales milestones from its May results, and strong results for the Fusion, the Escape, and the Lincoln MKZ are indeed worthy of note.

But it also posted one heck of an eyebrow-raiser: Sales of Ford's F-Series pickups were down 4.3% in May. Is that a problem?

Pickup sales were down, but prices remained strong
Ford U.S. sales chief John Felice said on Tuesday that the F-Series's decline was "planned", that it's part of Ford's strategy as it heads into the transition period to its all-new F-150 later in the year. 

That transition will involve 13 weeks of factory downtime as Ford's two pickup assembly lines are retooled to produce the aluminum-bodied 2015 F-150. In the meantime, Felice says, Ford is focused on profitability, not sales totals -- and he said that Ford's average transaction prices were the highest, and its incentives were lowest, among full-sized pickups from the Detroit automakers.

Put that way, the drop in F-Series sales doesn't seem like that big a deal, even as General Motors' (GM -0.47%) new-for-2014 pickups posted a 9.5% gain and Fiat Chrysler's (NASDAQOTH: FIATY) well-regarded Ram gained 17%. Ford still sold significantly more pickups than either GM or Chrysler. And investors didn't seem concerned: Ford's stock was up 1% after the news broke on Tuesday.

But it's still worth some attention. Those pickups are Ford's most profitable product line, and any loss of market share is worthy of concern. And Ford did raise its pickup incentives in May as expected, though its total average per-truck spending still trailed the per-truck spending of both GM and Ram. But if Ford does manage to maintain overall profitability as it moves toward the changeover to the new 2015 F-150, investors will have good reason to be pleased.

Meanwhile, the news for other parts of Ford's product line was quite good.

A very good month for Ford's Focus and SUVs
It's rare for an automaker to post big increases across the board. Consumer preferences shift, competitors introduce strong new models, and generally with any given automaker's results we see some areas of strength and some that are relatively weak.

But while F-Series sales were off in May, and Focus sales were down (more on that in a moment), Ford had a lot to brag about across its product line. 

Retail sales of Ford's Fusion rose 27% in May. Source: Ford Motor Co.

Sales of the midsize Fusion were up 14.6% -- but the Fusion's retail sales were up 27%, Felice said on Tuesday, with big gains in West Coast markets where Toyota (TM -1.08%) and Honda (HMC -1.20%) are traditionally strong. 

Ford has been decreasing its sales to rental-car fleets, which tend to carry very low profit margins, in favor of higher-profit retail sales -- a sensible strategy when production capacity is constrained, as Ford's was at times last year. 

A big drop in Focus sales -- to rental-car fleets
That strategy also largely explains the drop we've seen with Ford's compact Focus. Focus sales fell 13% in May -- but again, Felice said, that's largely about fleet. Retail sales were down just 1%, while fleet sales of the Focus fell by more than a third.

Still, retail sales of the Focus have been relatively sluggish lately. Ford sales analyst Erich Merkle notes that there is an industrywide shift of buyers toward compact SUVs and away from small cars, as small SUVs have made significant gains in fuel-economy in recent years.

Ford has been able to capture some of that movement: Sales of the Escape were up 9.5%, with the model breaking 30,000 U.S. sales for the first month ever. And the larger Explorer SUV posted its best monthly sales total since the heyday of the SUV boom in 2005, as sales rose almost 21%.

The all-new 2015 Lincoln MKC began arriving at dealers in May. Source: Ford Motor Co.

Meanwhile, Lincoln sales rose 21%, paced by strong results for the MKZ sedan and MKX crossover. The new compact Lincoln MKC crossover began arriving at dealers in the last week of May; that is expected to generate significant sales in the next few months.

The upshot: A month that beat expectations
Analysts widely expected Ford's sales to be flat in May, or even slightly down, as the automaker's continued efforts to reduce fleet sales took a sizable bite out of its totals. 

And indeed, Ford's monthly sales gain did lag key rivals -- but key sales increases across its product line, and a strong month for F-Series prices if not for its sales, give us reason to be optimistic about Ford's second-quarter earnings.