Still not sure if Ford's (NYSE: F) aluminum F-150 was a good bet for the Blue Oval?
With Ford's inventories of the new trucks finally back to "normal" after months of shortages, we're starting to get a pretty good read on how the market feels about the new high-tech F-150.
If sales numbers are any indication, those feelings seem to be quite positive.
Analysts: The new F-150 had a great October
The analyst team at Kelley Blue Book expects Ford to post a 16.6% year-over-year sales increase when it reports its results for October on Tuesday. That's well ahead of the 11.9% increase it expects for the overall market, and they think the F-150 has a lot to do with it.
"The new F-150 is pushing the overall F-Series volume to new levels of growth this year," the group said in a statement. ("F-Series" includes the new F-150 and Ford's Super Duty pickups. Ford doesn't break out F-150 sales, but on average, about 70% of total F-Series sales are F-150s. That percentage may be a little bit higher right now.)
CEO Mark Fields was enthusiastic about the truck's recent success during a conference call on Tuesday. "The bottom line is that we are seeing very strong demand [for the F-150]," he said. "We're continuing to see a rich mix, we see fast turn rates -- much faster than the segment average. Transaction prices are up $2,800 year over year, higher than our two main competitors."
"Turn rate" refers to how quickly a vehicle sells after being delivered to a dealership, on average. A "fast turn rate" usually means supply is tight, demand is very strong -- or both. And "higher transaction prices" typically translate to fatter profits over time.
For the F-150, those fatter profits have already begun to arrive.
The new F-150 already helped Ford to a fat third-quarter profit
Over the last three months, through the end of September, sales of Ford's F-Series rose 8.4%. That may not sound like a lot, but for Ford, it was a big deal. Those strong F-150 sales helped Ford's North America unit post a $2.7 billion pre-tax profit for the third quarter.
Ford's SUVs helped boost profits earlier in the year, but that was still a big change from the first two quarters of 2015. Through the first half of 2015, F-Series sales were down 2.4% -- while sales of its arch-rival, General Motors' (NYSE: GM) Chevrolet Silverado, were up 14.6%.
GM, in other words, was eating Ford's lunch. That wasn't because the new F-150 wasn't selling, it's because Ford's dealers didn't have enough of them to sell. Making the new aluminum-bodied trucks required big changes to the two factories that make the F-150, and those changes required weeks of downtime. The upshot: a lot of lost production.
Both factories have been up and running since the end of March, but it took them a while to catch up, to get dealers' inventories of F-150s back up to what Ford considers a normal level. Given the number of different configurations and trim options available on the F-150, and given that it sells in huge numbers, dealers like to have a big variety of F-150s in inventory. If they don't, they can (and did) lose sales.
The success of the F-150 is happy news for Ford executives and shareholders. But for those executives, at least, I don't think it's a surprise.
Ford may have known all along that this wasn't much of a "gamble"
Way back in January of 2014, just hours after the all-new F-150 was revealed, I spent some time talking to Fields about the thinking behind the new truck.
Fields, who was then Ford's chief operating officer, told me a bit about Ford's market research and testing efforts, and the long-term thinking behind the decision. He didn't say anything that would surprise you at this point, but his attitude was striking. He was really confident about the new truck.
All auto executives talk up their latest products, but this was a little different. A lot of analysts at that moment were saying that the aluminum-bodied truck was a risky bet for Ford. But it was clear to me in that conversation that Fields was certain Ford held a winning hand. He knew.
Even if it really was a gamble, it's looking like a good one now.