Use access key #2 to skip to page content.

TMFPostOfTheDay (< 20)

Why is Ford Doing So Well?

Recs

3

August 05, 2014 – Comments (0) | RELATED TICKERS: F , GM , FIADF

Board: Ford Motor Company

Author: TMFBreakerRob

I am no car guy, but this seems rather unreal considering the "new" GM trucks, the F series going "out of style" and the new wonderful aluminum body F series redesign in the pipe at only $395 more... HOW? do you account for this? Speculation welcome, I am curious instead of my usual skeptical self….. -- Skepik

LOL I pointed it out because I thought it was so remarkable!

Upon your post, I dug into it a bit. My curiosity rose as I read GM's press release….which seemed carefully crafted to avoid mentioning pick-up truck sales by themselves. They repeatedly lumped them in with SUVs or crossovers.

There is a reason for that:

Chevy pick-ups flat @42k, and down slightly for the year.
GMC pick-ups up 5.5% @~17,500

Ford up 4.6% at 63k (with lower incentives and a much older truck)

Why is Ford doing so well?

I can only conclude that Ford meets the wants of their customers better. Or, given the relatively small differences here, maybe there are market nuances that are driving some overall gain for Ford. After all, certain areas of the country prefer Ford, some prefer GM, some prefer Dodge (go figure). ;)

I read trash talk on such topics at the Detroit News. "Ford is garbage", "Chevy rules" and "Dodge is toughest" and it's all noise. Again, the bottom line is the bottom line. But…..I'm missing some data points!

Who's making the most money per unit? I don't have the data.
Who's making the most return for the investment? Dunno.

However, given that Ford has the lion's share of the heavy pick-up truck market, I'm pretty confident that Ford is burying the other companies on most profit per unit, most overall profit and best return on investment.

Why?

Ford has biggest volume whereas GM supports two different brands, with heavy trucks for each. Dodge is way behind. Ford's investment is spread over far more units and they sell most of the highly profitable heavy pick-ups.

What about the new aluminum F-series?

This is a HUGE bet by Ford. My bet is they have been VERY diligent to deliver a tremendous product. Yeah, Ford's costs will rise with aluminum, but I think they'll do just fine. Remember, there are lots of games to be played to maximize transaction prices.

Biggest problems?

- As everyone realizes, it's a big marketing job to convince truck people that aluminum is the right way to go. Considering that there are Army, Navy, Marine and Air Force applications of aluminum in combat I think they can put together a compelling story. Along with the huge customer trial over the last year or so trying out these new pick-ups in highly demanding environments. Nevertheless, the pushback by GM and Dodge will be noisy and unrelenting….until they come out with their own aluminum trucks in a couple years. LOL

- Ramping up prototype production to big-time production ALWAYS has surprises. The "A" team will be all over it: Ford engineers, supplier engineers…and plenty of management empowered to make decisions immediately upon presentation of the data. That doesn't mean there won't be embarrassments, but I sure hope there aren't any! :)

- Sleeper issue: Ford doesn't have enough capacity to build a whole lot more pick-ups than they already sell. What are they going to do? Tweak bottlenecks to provide an incremental increase? Probably. Build another plant? Seems unlikely because going from 2+1 plants to 3+1 plants is a huge increase in fixed costs. (The +1 plant is the Super Duty plant). Just let the extra opportunity go by during a market peak? Depends. Is this a market peak or a long term trend to more big trucks? That's beyond my knowledge. Keep in mind that Ford serves the rest of the world with another large pick-up that is very successful. Import some of those to the US? That opens up a real hairball. I don't think it's a good choice.

Fortunately, there are a lot of bright folks at Ford….with more data than me…..who have worked out THE PLAN. We'll see what happens. Investors will probably be happy with the results. :)

Rob 

0 Comments – Post Your Own

Featured Broker Partners


Advertisement