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Strong Sales Continue for Ford's Hot New Models

By John Rosevear – Apr 2, 2013 at 12:54PM

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Ford's new Fusion and Escape are big hits -- so big, in fact, that making enough of them is becoming a challenge.

March was another solid month for Ford (F -3.46%), as the automaker once again posted U.S. sales gains well above analysts' sales estimates.

Ford said on Tuesday that its March U.S. sales were up 6% over strong year-ago totals, well ahead of the 4.4% consensus expectation from analysts.

Solid sales of Ford's F-Series pickups, which were up 16% over year-ago numbers, were a big contributor to the good results.

But the highlights were the exceptionally strong results for the automakers two newest models, the Escape SUV and the Fusion sedan.

In fact, Ford may be having trouble keeping up with demand for these hot models.

Ford's latest models are becoming big sales hits...
"We are working harder than ever to keep pace with demand" for the Fusion and Escape, Ford's U.S. sales chief Ken Czubay said in a statement on Tuesday. That demand has been torrid, as both models hit all-time highs for monthly U.S. sales in March.

Sales of the Escape were up more than 27% over year-ago totals, a strong sign that the redesigned model is finding its stride with customers.

Fusion sales were up just 6% over year-ago numbers, but that's a more impressive amount than it might seem. Last March was another "best month ever" for the Fusion, as Ford was beginning the process of selling down inventories of the outgoing last-generation model.

It has been clear in recent months that the new Fusion, a visually striking car with many luxury features, has significantly elevated Ford's game in this segment. The Fusion appears to be stealing sales from well-entrenched rivals like Toyota's (TM -2.28%) Camry and Honda's (HMC -1.57%) Accord, the longtime class leaders.

Those strong March results capped the best-ever quarter for the two nameplates, Ford's newest U.S. models. It's a sign that the company's "One Ford" product strategy is continuing to find favor with American customers.

But as Czubay's comment on Tuesday suggested, the automaker is facing an interesting challenge: Building enough of these well-regarded vehicles to meet demand.

...but keeping up with demand will be a challenge
After years of painful restructuring, Ford is facing an interesting challenge in North America: Many of its factories are running at or near maximum capacity, but demand for its strong new products continues to increase.

In a way, this is a classic "good problem to have". An industry rule of thumb is that auto factories break even at 80% of "full capacity", generally defined as two eight-hour shifts. The further you get above that 80%, the more profitable your factory.

Ford said last fall that its North American plants were running at 114% of capacity, the automaker's highest level in over 30 years. That means that some are already running around the clock, which is a big part of why Ford's North American division has been so profitable recently.

But that also means that increasing production will require some expensive investments in new assembly lines.

Ford is already committed to making some of those investments. A new assembly line at the automaker's plant in Flat Rock, Mich. – where the Mustang is currently made – will begin producing additional Fusions this fall. That could help boost sales of the sedan closer to those of the Camry – currently America's best-selling car.

But it's clear that if Ford to increase sales significantly from here, more investments may be necessary.

Fool contributor John Rosevear owns shares of Ford. The Motley Fool recommends Ford. The Motley Fool owns shares of Ford. 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.

Stocks Mentioned

Ford Motor Stock Quote
Ford Motor
$13.38 (-3.46%) $0.48
Toyota Motor Stock Quote
Toyota Motor
$143.19 (-2.28%) $-3.34
Honda Motor Stock Quote
Honda Motor
$23.79 (-1.57%) $0.38

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