Focusing on the Blue Oval
Tanya is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Ford (NYSE: F) North America sales numbers for June 2012 just came out last week and the results are interesting for Ford watchers. YTD sales are up by 7%, but what is more interesting is where those sales are coming in. Given that all the U.S. car companies are reporting positive sales results this month, there may be other macroeconomic forces at play with overall sales. General Motors (NYSE: GM) had a 16% increase in June sales and Chrysler (owned by privately held Cerberus Capital) had a 20% increase in U.S. June sales. However, when you dig down deep in the Ford numbers you can see some interesting trends going on within the sales numbers.
Results of deliberate restructuring
If you compare the June 2012 numbers with June 2011 by brand, you can see that the Mercury brand has been totally phased out. Within the Ford brand, the Crown Victoria is in the final phases of being phased out with YOY sales down 95.5% and only 241 vehicles sold. We see two other offerings starting to take the Crown Vic’s place: the Police Interceptor Sedan at 1,342 units and the Police Interceptor Utility at 603 units. We see a similar phasing out of the Ranger whose platform capacity can be used for certain of the more profitable sport utilities.
Return of interest in utility vehicles
A comparison of sales by type reveals that the Utilities are up a whopping 24.8% over last June and 9.2% YTD. Trucks are up a modest 1.2% over last June and up 8.6% YTD. In the 1990’s, Ford’s profits were derived primarily from their utilities and to a lesser extent trucks while simultaneously selling small cars at low margins to meet CAFE requirements and derive profit from the financing arm Ford Credit. Whether demand driven or deliberately planned, the return to the core bread & butter utilities in the U.S. is a good sign for Ford and likely to drive better profit margins.
Backing away from heavy trucks?
There is an interesting dynamic going on in heavy trucks. Although June sales are down 20.6% over June of last year, the heavy trucks are up 8.8% YTD over last year. It will be interesting to see what trend emerges in the upcoming months. Over time Ford has become much less competitive in this space versus market leaders like PACCAR (NASDAQ: PCAR) whose Q1 Truck & Other sales (excluding financial services) increased 48.4% YOY from $3,042.6M to $4,514.7M and Navistar (NYSE: NAV) which had a slight decrease of 1.3% from $3,298M to $3,255M in the same time frame. So Ford's 20.6% decline in sales could be be the deliberate result of less discounting or other incentives typically used to move vehicles at the end of a quarter. It could indicate less capital spending in general by fleets, or it might be the result of stiffer competition. Alternatively, the mild winter weather may have moved deliveries and sales forward to Q1 from Q2. The positive sign for Ford in the trucks segment is that the E-Series is up 13.9%-- these are typically purchased by small businesses and handymen, so it might be a good sign for small businesses in general. The very popular F-Series is up 10.9% for June and 14.0% YTD.
Clearly the details in the U.S. sales numbers indicate a shift toward the more popular and profitable vehicles which is a good sign that Mulally is continuing to move the company in the right direction. This month the company set the record for the best monthly sales on the Escape as well as a June record for the Fusion. As long as these sales were not hit at the expense of high discounting or dramatically increased costs, we should see some good Q2 numbers appearing soon.
Does this indicate that investors should go out and purchase Ford and other heavy manufacturing stocks? I think the automobile and truck industries are beginning to trend positively and pull out of their slump. However, due to the cyclical nature of the business, I have not put my money into the industry yet, although I am watching closely and will probably purchase some auto stock by year end, if the November election causes the market to rise.
TC118 has no positions in the stocks mentioned above. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford, General Motors Company, and PACCAR Inc. Try any of our Foolish newsletter services free for 30 days. 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.If you have questions about this post or the Fool’s blog network, click here for information.