Last month, Ford Motor Company reported a slight increase in U.S. sales. Although the increase was less than 1%, it marked the fourth increase in the past five months in what was expected to be a strong sales month without the aid of the federal Cash-for-Clunkers initiative.
Buoyed by recent gains, Ford plans to produce 550,000 vehicles in its North American facilities during the first quarter of next year – over twice the number produced during the first quarter of this year. In a research note released last week, Barclays Capital analyst, Brian Johnson, stated that he expects General Motors Company to announce a similar increase in production during Q1 of 2010. He also noted that production for both GM and Ford was “very depressed” during the first quarter of 2009.
Other automakers have also seen significant increases in sales. Porsche saw its sales increase by 18% and Daimler sales rose by 9%. Subaru also saw its sales increase by an impressive 24%. It was the sixth straight increase for Subaru, which posted a year-to-year increase through October. South Korean automaker Hyundai-Kia was the only other major automaker to report a year-to-year increase for the period.
For November, overall demand decreased slightly from October’s seasonally adjusted annual rate of 11.2 million units sold. Bloomberg News, Reuters and Automotive News all placed the sales rate for November at 10.5 million units.
Excluding the July and August numbers, which were inflated by the Cash-for-Clunkers program, October was the first month in 2009 to see demand exceed the 10 million unit mark.
Ford sales analyst George Pipas said, “We seem to have stabilized at a level that is higher than the pre-clunkers level but still not setting the world on fire. The absence of negative news is positive news in this environment. It can’t get better unless it stops getting worse.”
U.S. light-vehicle sales for the decade averaged 16.4 million units annually. In 2008, sales fell to 13.2 million units and reached a 25-year low by last November, which means the current comparisons are being drawn against the worst November sales numbers in decades.
Ford’s improved sales numbers included a 5% increase from its Volvo brand which it is aggressively attempting to sell. Among the Ford nameplates to see increased sales were the Fusion sedan – with a 55% increase, Taurus sedan – up 54% and Escape crossover – posting a 51% increase in sales.
Last November, Ford saw its sales slip by 33% while GM’s numbers fell 41% and Chrysler’s sales plummeted 47%. Overall, domestic sales dropped 37%.
According to Edmunds.com, Ford’s incentives average about $1,000 less than those offered by GM and Chrysler, at $3,124, which has helped improve its bottom line. GM’s average incentive is estimated at $4,270 while cash on the hood from Chrysler averages $3,298. Industry-wide the average incentive is $2,713 according to Edmunds.com which factored lease programs, customer and dealer incentives and reduced interest rates in calculating its results.
Credit Suisse analyst Christopher Ceraso said, “We are seeing just how unfair it is for Ford to have to behave like a rational business in an irrational pricing environment. The levels of incentive spending we see in the month of November will help frame the challenges Ford still faces in North America as long as the government has its hands in GM and Chrysler.”
However Pipas does not consider Ford’s lower incentives to be a disadvantage. Pipas said, “Others might be spending more, but even in that environment, we’re continuing to see higher market share.”
Ford Motor Company’s year-to-year market share through October increased 0.8% while GM saw its share decrease by 2.4%. Pipas also points out that over 90% of Ford’s November sales were for 2010 model-year vehicles and adds that less than half of GM’s sales were to individual consumers.