Ford takes market share as sales fall "only" 11 percent

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For the automobile industry, things are getting worse -- but they're getting worse more slowly than they were, so some think it's time to celebrate. Some carmakers are doing less badly than others: market share shifting to Ford Motor Co. (F) -- the only U.S. automaker that didn't take a government bailout.

Last month, Ford reported the smallest sales drop in a year -- down just 10.7 percent from June 2008. Executives noted the emergence of regional variations in U.S. sales -- central regions outperformed both coasts, giving Ford a gain of three market-share percentage points.
Ford's competitors suffered more. General Motors Corp. sales tumbled 33.4 percent, despite incentives and discounts on Pontiacs, while Toyota Motor Corp. (TM) sales slumped 32 percent. Honda Motor Co. (HMC) sales declined 30 percent, compared with extremely strong small-car sales in June 2008, when gasoline was above $4 per gallon. Nissan Motor Co.'s (NSANY) sales slump of 23 percent was smaller than that of previous months. And Chrysler sales fell the most -- 42 percent.

GM has experienced enormous sales growth in China and Brazil. June sales in China climbed 62 percent from a year earlier, to 143,294 units; in Brazil, GM sold 55,629 vehicles, breaking its record for the month thanks to continued government tax breaks for automakers. Too bad GM can't IPO its Chinese and Brazilian operations.

Many of those who are working, or looking for work, need cars and trucks, and old vehicles eventually cost so much to repair that owners need new ones. But two big unknowns affect that replacement demand: where gasoline prices will be when owners have to buy new vehicles, and whether those owners can get financing.

If gas prices are near $4 and no financing is available, then demand for the smallest, most fuel-efficient cars will grow the most. If gas prices are in the $2.50-per-gallon range and consumers can borrow money, they'll probably end up buying lots of minivans and mid-sized sedans.

At $5.91, Ford stock is up 313 percent since its recent low of $1.43 last November. I wonder whether it will gain even more market share and thus see a 100 percent rise in the next year.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book isYou Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He has no financial interest in the securities mentioned.

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