What's the Deal With the Decline in Ford Motor Company's Sales?
Today is sales data day in the automotive industry. But, beside making and selling cars, do you know what Ford's second profession is? Juggling is the answer, and no, it's not as profitable as Ford's primary job.
As Ford embarks on its most aggressive vehicle launch schedule in company history, it must wind down sales and inventory of many outgoing designs, adjust assembly lines, and begin the production launch of the new design -- a complex juggling act indeed.
Let's look at Ford's latest sales numbers, a couple of important takeaways, and at whether its second profession of juggling affected sales results for June.
By the numbers
Edmunds.com estimated that Ford in June would deliver a year-over-year sales decline of 6.5%. The Blue Oval barely beat that estimate by recording a 5.8% decline to 222,064 vehicles sold last month, compared to last year's June.
Through the first half of 2014, sales of Ford's mainstream Blue Oval brand are down 2.4% compared to the same time frame last year. Its Lincoln brand sales are up 16.3%. Overall, that puts the entire company's year-over-year sales down 1.8% through June.
Ford's 5.8% sales decline last month leaves something to be desired, but the result is actually a little better than it appears.
Consider a couple of extra factors that Ford didn't mention. June 2013 had 26 selling days, compared to last month's 24. Adjusting Ford's sales figures for the two fewer selling days turns that 5.8% decline into a 2.1% gain. For context, adjusting General Motors' sales results in June for the two fewer selling days moves GM's 1% year-over-year sales gain in June to a 9% spike.
Here are a couple of other takeaways from Ford's June sales results.
Both the Fusion and Escape are on pace to accomplish something no Ford vehicle besides the F-Series has done in nearly a decade: top 300,000 sales for the full year. The Fusion last month posted a 13.5% sales gain compared to last year, and that's not adjusted for the fewer selling days.
Ford's Escape couldn't match the Fusions solid sales gain, but there's more to the story, too. While sales declined 12.5% on an unadjusted basis compared to last June, it's because the crossover utility vehicle is driving so much demand at retail -- a more profitable sale, compared to fleet sales -- that Ford is pushing its Escape inventory to that market.
Doing so caused the Escape's fleet sales to decline 57%, while its retail sales drove 9% higher year over year during June. While the strategic move may have negatively affected overall Escape sales, it does mean that each one is more profitable for Ford and its investors.
Ford's juggling act
Vehicle launches can be a very difficult juggling act for automakers. Excessive inventory of outgoing vehicle models could demand heavy incentives to move the older-model vehicle off dealer lots. That means each older model driven off the dealership lot is cannibalizing a more profitable sale of the incoming model. This situation is exacerbated when the incoming model is an all-new design.
On the flip side, if too little inventory of the older model remains, automakers stand to lose incremental sales before the incoming model arrives at the dealership at full strength. Ford finds itself at some point of this juggling process for multiple models, including the all-new 2015 Mustang, F-150, and Edge.
On a good note, Ford said it's exactly where it wants to be and appears to be balancing inventory to maximize profitability with its outgoing models, perhaps risking a slight decline in sales. Proof that Ford is succeeding with its strategy exists with the F-Series' numbers.
While sales of the F-Series were down 11% in June, on an unadjusted basis compared to last year, Ford commented that its full-size truck has the lowest incentives among the major players in the segment. That's a huge victory, and something that doesn't often happen, for one of the industry's oldest full-size truck models. The F-Series may be losing a little market share so far this year, but it could be quickly made up with its next-generation 2015 F-150 due to hit dealerships shortly.
Ford has lost a bit of market share to competitors to date in 2014, but it's focusing on making each sale as profitable as possible. If the Blue Oval can continue launching the slew of vehicles without any problems, Ford will be set up for market share gains in the years ahead.
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The article What's the Deal With the Decline in Ford Motor Company's Sales? originally appeared on Fool.com.Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. 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.
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