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What's the Deal With the Decline in Ford Motor Company's Sales?

Source: Ford Motor Company

Today is sales data day in the automotive industry. But, beside making and selling cars, do you know what Ford's  (NYSE: F  ) second profession is? Juggling is the answer, and no, it's not as profitable as Ford's primary job.

As Ford embarks on its most aggressive vehicle launch schedule in company history, it must wind down sales and inventory of many outgoing designs, adjust assembly lines, and begin the production launch of the new design -- a complex juggling act indeed.

Let's look at Ford's latest sales numbers, a couple of important takeaways, and at whether its second profession of juggling affected sales results for June.

By the numbers estimated that Ford in June would deliver a year-over-year sales decline of 6.5%. The Blue Oval barely beat that estimate by recording a 5.8% decline to 222,064 vehicles sold last month, compared to last year's June.

Through the first half of 2014, sales of Ford's mainstream Blue Oval brand are down 2.4% compared to the same time frame last year. Its Lincoln brand sales are up 16.3%. Overall, that puts the entire company's year-over-year sales down 1.8% through June.

Ford's 5.8% sales decline last month leaves something to be desired, but the result is actually a little better than it appears.

Consider a couple of extra factors that Ford didn't mention. June 2013 had 26 selling days, compared to last month's 24. Adjusting Ford's sales figures for the two fewer selling days turns that 5.8% decline into a 2.1% gain. For context, adjusting General Motors' (NYSE: GM  ) sales results in June for the two fewer selling days moves GM's 1% year-over-year sales gain in June to a 9% spike. 

Here are a couple of other takeaways from Ford's June sales results.

Retail sales of Ford's Escape are surging. Source: Ford.

Popular vehicles
Both the Fusion and Escape are on pace to accomplish something no Ford vehicle besides the F-Series has done in nearly a decade: top 300,000 sales for the full year. The Fusion last month posted a 13.5% sales gain compared to last year, and that's not adjusted for the fewer selling days.

Ford's Escape couldn't match the Fusions solid sales gain, but there's more to the story, too. While sales declined 12.5% on an unadjusted basis compared to last June, it's because the crossover utility vehicle is driving so much demand at retail -- a more profitable sale, compared to fleet sales -- that Ford is pushing its Escape inventory to that market.

Doing so caused the Escape's fleet sales to decline 57%, while its retail sales drove 9% higher year over year during June. While the strategic move may have negatively affected overall Escape sales, it does mean that each one is more profitable for Ford and its investors. 

Ford's juggling act
Vehicle launches can be a very difficult juggling act for automakers. Excessive inventory of outgoing vehicle models could demand heavy incentives to move the older-model vehicle off dealer lots. That means each older model driven off the dealership lot is cannibalizing a more profitable sale of the incoming model. This situation is exacerbated when the incoming model is an all-new design.

On the flip side, if too little inventory of the older model remains, automakers stand to lose incremental sales before the incoming model arrives at the dealership at full strength. Ford finds itself at some point of this juggling process for multiple models, including the all-new 2015 Mustang, F-150, and Edge.

On a good note, Ford said it's exactly where it wants to be and appears to be balancing inventory to maximize profitability with its outgoing models, perhaps risking a slight decline in sales. Proof that Ford is succeeding with its strategy exists with the F-Series' numbers.

Ford's launch of the 2015 F-150 will be critical for profits. Source: Ford.

While sales of the F-Series were down 11% in June, on an unadjusted basis compared to last year, Ford commented that its full-size truck has the lowest incentives among the major players in the segment. That's a huge victory, and something that doesn't often happen, for one of the industry's oldest full-size truck models. The F-Series may be losing a little market share so far this year, but it could be quickly made up with its next-generation 2015 F-150 due to hit dealerships shortly.

The takeaway
Ford has lost a bit of market share to competitors to date in 2014, but it's focusing on making each sale as profitable as possible. If the Blue Oval can continue launching the slew of vehicles without any problems, Ford will be set up for market share gains in the years ahead. 

What technological shift did Ford call "fantastic"?
A major technological shift is happening in the automotive industry. Most people are skeptical about its impact. Warren Buffett isn't one of them. He recently called it a "real threat" to one of his favorite businesses. An executive at Ford called the technology "fantastic." The beauty for investors is that there is an easy way to invest in this megatrend. Click here to access our exclusive report on this stock.

Read/Post Comments (9) | Recommend This Article (12)

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  • Report this Comment On July 01, 2014, at 7:46 PM, Bryanbeachboy197 wrote:

    This one is pretty easy to figure out really. The article even mentions it: no new F150, no new Mustang. Admittedly, the Mustang isn't exactly a huge seller, but the outgoing model has (I think) been selling a bit poorly as everyone waits for the new one. But that F150 is the best selling vehicle in America and while the new model is in the wings both Dodge and Chevy/GMC have been selling. We'll see how things go when the new truck hits...

  • Report this Comment On July 01, 2014, at 10:45 PM, ScamuelJones wrote:

    The deal with the decline is that Ford is making a bunch of POS cars and trucks, and former customers have finally figured it out (like me!). I'll never buy another Ford in my lifetime, and I've bought thirteen news ones in my life! But NO MORE!

  • Report this Comment On July 02, 2014, at 1:25 AM, TMFSymington wrote:

    Nice article, thanks Daniel.

  • Report this Comment On July 02, 2014, at 4:18 AM, McSniperliger wrote:

    I'm willing to bet that the nearly 30 million GM vehicles being recalled so far this year will put a huge damper on GM sales. I bleed FoMoCo blue and have been wearing the blue Oval for the last several years. My current ride is a 1999 F150 with just under 250,000 miles on the original drivetrain. My next truck I'll buy will be the OBS 1996 F150...back when they still rocked the Dana Corp. 44 TTB axle and drop in a Sterling 10.25" rear end.

    The last GM I owned was a 1990 GMC Sierra K1500 and the transmission blew at 212K miles.

  • Report this Comment On July 02, 2014, at 7:29 AM, Jason87467 wrote:

    The deal with Ford is they exaggerate a lot about their products and people are finding out they are not as good as they say. They boast about Ecoboost when all it is is and engine with direct injection/turbo who Ford was late in getting in the game with that. They brag about their gas mileage and for the second time are force to reduce the gas mileage by as much as seven miles per gallon.

    I'll buy a GM over a Ford any day, because they are superior over Ford in many ways.

  • Report this Comment On July 02, 2014, at 8:15 AM, ohiodale wrote:

    Ford cars are some of the best looking and most innovative cars on the road. Fords are mechancially sound. This year they added knobs to their hands free systems and their rating went back up. I take issue with cars being rated for quailty based on the use of high tech equipment. It goes to prove that all cars are about equal mechanically when the ratings start including use of the radios.

    I completely agree with the article that the new models are driving down sales due to peole waiting for the new models and decreased production of the current models. Its easy to sell cars when you give them away as Chrysler does. Its all about profit margins when is comes to investments.

  • Report this Comment On July 02, 2014, at 10:51 AM, cityperson wrote:

    i would like to own a Ford F-150, but he parking spaces keep getting smaller in most places..

  • Report this Comment On July 02, 2014, at 12:27 PM, Hankypanky wrote:

    It is time to stop and see. Why is the parking lots filled (80%) with car's from other countries? Just say could it be the price???? Another Idea is their care are made here but the profits go their it is not enough that the vehicles put together here that just put people to work. Maybe those that know are right taxes on profits (the highest in the world) are forcing our Auto and almost all other industries to leave the USA. And last but not least it is time for those of us in America to wake up Our government may be great and Capitalism The greatest Idea ever the one thing are government should be doing is working for the people and not the betterment for them selves REMEMBER THE GOVERNMENT IS A NOT PROFFIT ORGANIZATION and should have to answer to the people not the people have to answer (Bow) to them perfect example IRS but their not the only ones.

  • Report this Comment On July 02, 2014, at 2:28 PM, middleclass07 wrote:

    most parkin lots are filled with vehicles from other countries because they are cheaper why?Because of everything handed to those automakers,free land, plants built supported and maintained by local,state and the federal government(shocker),not to mention the tax BREAKS they receive.They receive all this continuously to keep the work here,take all that away and those low paying,working poor won't be able to pay their bills again being the cost of living is always goin up.If those companies had to pay all their own bills to build,maintain+support their factories it is only commonsense that they would pass that cost onto the customers,and those vehicles wouldn't be so cheap,or they would cut their workers pay+or benefits guaranteed.Now for the Big 3,Ford never borrowed a dime,Fiat has pretty much bailed out Chrysler afta we did and they are back on track,and GM has had to work with the UAW to cut all the excess fat,cut employees,benefits etc.,they were just too big and careless,the changes had to be made to survive after the Government assistance.Their turn around is gnna take the longest but it is happening whether we like it or not.Between what the Governments have given thee outside companies through the years is extremely more than what the Feds gave Chrysler+GM,that is commonsense+if you would have given the Big 3 the same as their competiers the market would be a lot closer because+it would be an even field+no bailouts folks,but that didn't happen.The UAW really doesn't play any factor in the price of any of thee auto prices,not because of Right to Work(Foolish,Ignorance,a Waste+Corp.Greed…not needed) but because of all the cuts the Big 3 had to

    make and negotiate with the UAW,it costs jobs etc.but it was a matter of survival or not.Also THEE FACT is the U.S.are thee LEAST taxed in thee WORLD,hummmmm.The more you make the more ya should pay,everybody no matter where your from.Then no deficits hummmmm.Instead of continuous loop holes in the tax system+the silent breaks for shippn jobs outta here….still,just at a slower rate.With thee middle class shrinking at a steady pace and thee working poor growing at a rapid pace,come on AMERICA,WAKE UP!!!….Not to mention why are we robbing our College Students,who could fix this whole thing in the blink of an eye+give us a hellva lot better future then these matter where they are from.Now that is robbing our Future……out,

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Daniel Miller

As a Motley Fool Industrial Specialist, I use my marketing and business background in the automotive industry to evaluate major automakers and other large industrial corporations. Follow me on twitter for tweets about stocks, cars, sports, and anything I find amusing.

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