Are Ford's Sales Improving?

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Are auto sales picking up?

It's a question that many have been asking for a while, but recent signs suggest that an upturn may be under way. That would be a good economic sign, and not just for well-positioned automakers like Ford (NYS: F) : A rise in spending on big-ticket durable goods like autos is generally seen as a sign that consumers are feeling more optimistic about their prospects -- and likely to start spending more on other things besides new cars.

Auto sales in the U.S. (and in many other parts of the world) have been well below recent historical norms ever since the economic crisis of 2008. A trend back toward those levels would be a strong sign that household "deleveraging" had run its course and that consumers were ready to start spending -- and taking on debt -- once again.

That would be welcome. So is it happening?

A strong result -- but with an asterisk
Auto sales were up 11% in January versus year-ago numbers, enough to put the "SAAR" -- for Seasonally Adjusted Annualized Rate, a widely watched indicator of the pace of auto sales -- at 14.1 million. That's the highest monthly level seen since August 2009, when auto sales boomed briefly as a result of the government's "Cash for Clunkers" stimulus program.

That number came with a big caveat, though. Fleet sales were up significantly, at 24.1% of total sales (versus a more typical 20%-21%). Fleet numbers were quite high for many automakers, including both General Motors (NYS: GM) and Ford, at 30% and 29% of their January totals, respectively. That's a concern: Historically, fleet sales were a way for the Detroit automakers to keep production running at artificially high levels. Sales to fleets -- governments, businesses, and (most often) rental-car companies -- tend to be seen as low-margin sales to somewhat captive audiences, and thus less desirable (and a less-reliable indicator of competitiveness) than retail sales.

Ford and GM have both said that their long-term goal is to keep fleet sales below 25%, and both said that they expect fleet sales to return to that level as the year goes on. But other automakers saw high fleet numbers in January as well: Nissan's (OTC: NSANY.PK) were 35% of its U.S. total, and normally fleet-averse Toyota (NYS: TM) saw fleet sales rise to nearly 20%.

It's not uncommon for fleet sales to rise early in the year, say analysts. But that raises an obvious question: If January's sales gains were driven by a blip in fleet sales, does that say anything good about the prospects for sales going forward?

But retail sales may be gathering strength
Edmunds' Jeremy Anwyl thinks there might be cause for (cautious) optimism. Reports collected by Edmunds analysts suggest that the retail SAAR -- the annualized total of cars and light trucks sold at retail, versus to fleets -- is on track to finish February at 11.2 million, up from January's 10.7 million. According to Anwyl, even if we assume a "normal" fleet number around 21%, that's high enough to put the total SAAR around 14.2 million.

That would represent a significant upturn. Last year's sales total came in 12.8 million, though the pace increased significantly toward the end of the year -- the SAAR was 13.56 million in December. While still short of the 16-million-plus pace seen routinely before the economic crisis, a SAAR above 14 million would still represent good news for economy-watchers.

Anwyl's numbers also have some potential good news for Ford shareholders -- Edmunds sees the Blue Oval's retail market share up about 4% so far in February. Ford's sales were up about 7% in January, trailing the overall market's gains a bit as a resurgent Toyota pushed hard to make up ground lost in 2011, and as I mentioned, a good chunk of that gain was attributable to fleet business.

Edmunds says Toyota's retail market share is so far essentially flat in February, and Honda's (NYS: HMC) may actually be declining. If that holds, and Ford does show a gain, that will be a very positive result for the Blue Oval. We'll know more when numbers are released next week. Stay tuned.

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At the time this article was published Fool contributorJohn Rosevearowns shares of Ford and General Motors. You can follow his auto-related musings on Twitter, where he goes by@jrosevear. The Motley Fool owns shares of Ford.Motley Fool newsletter serviceshave recommended buying shares of Ford and General Motors, as well as creating a synthetic long position in Ford. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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