Ford Chicago Trio Limps Out of Gate

[cincygoblue]

Ford Sees January ‘Payback’; Chicago Trio Limps Out of Gate

By John D. Stoll

WardsAuto.com, Feb 1 2005

SUVs lose major ground to start the new year, while three new vehicles built in Chicago have yet to meet the 200,000 annual-unit sales-rate expectation.
If January is any indication, Ford Motor Co. could be headed for a brutal 2005, with SUV sales slipping, inventories swelling and three significant new products under-performing.

The auto maker posted a 5.1% loss on a daily sales rate basis vs. like-2004 during the year’s opening month, with high-profit trucks and SUVs taking double-digit hits as buyers increasingly seem to be turning to cross/utility vehicles and moving away from gas-guzzlers in the face of escalating fuel prices, U.S. Sales Analysis Manager George Pipas says.

“There is no point in sugarcoating the results,” he says, referring to the January numbers. He blames much of the performance on “payback” from a strong December, in which the industry set a sizzling 18.3 million seasonally adjusted annual rate and Ford was able to generate some momentum following a weak 2004. (See related story: Ford Surpasses Chevy for 18th Straight Year; Cars Hot in December)

“Whenever we have a strong month, we have a weak month,” he says. “We call that payback.”

The payback helped add 80,000 units worth of inventory vs. December’s level. The auto maker now carries 873,000 vehicles in stock (226,000 cars, 647,000 trucks), which also is an increase of more than 20,000 units vs. the previous January level.

Ford does not anticipate the same sort of inventory increase it saw during the first quarter of 2004, when stocks rose 137,000 units from the Dec. 31, 2003, level.

“I’d expect to see substantially less stock growth this year in the first quarter,” Pipas says.

The auto maker will provide a production update later in February, but for now it is mum on whether the first-quarter build schedule will be revised. Pipas does indicate whether incentive spending likely will rise as the industry inches toward the spring selling season. (See related story: Ford Trims Q1 Product Plan)

While fleet sales spiked in January, Ford took a significant blow in retail sales, Pipas says, with deliveries shrinking 21% vs. like-2004 on a straight month-over-month comparison. Key retail magnets, including the F-Series, Explorer, Expedition and Mercury Mountaineer, lost significant ground compared with January 2004, registering declines of between 13.4% (F-Series) and 36.1% (Explorer).

Says Pipas: “If you look at last year, total SUVs expanded vs. 2003 by 5%. But within that, crossovers increased 17% and traditional truck-based SUVs declined 2%. A relatively small decline, but the decline picked up steam in the second half of the year.”

He is not as pessimistic on F-Series prospects, pointing to a strong December as a potential catalyst for the sluggish performance last month.

Although Pipas admits the Chicago-built trio of products – the Five Hundred sedan, Freestyle CUV and Mercury Montego sedan – are not performing up to the company’s initial expectation of 200,000 units annually, he says the vehicles are catching steam.

In December, the annual sales pace for the trio was estimated at 124,000. That number ballooned to 167,000 in January on a slight increase in actual volume vs. December and minimal dealer incentives, Pipas says.

“We’re on a path to exceed our expectations,” Pipas says, although sales are not forecast to hit the predicted pace until at least spring. Even then, the auto maker may only be “close” to its targeted annual rate.

Among the positives for Ford’s U.S. performance in January were the Escape and Mercury Mariner CUVs. The Escape, coming off a record performance in 2004, registered a 26.6% gain during the month, while the all-new Mariner lifted the Mercury brand to a 26.8% improvement vs. like-2004.

Mercury’s domestic counterpart, Lincoln, didn’t fare as well. Its aging product lineup fell 16.8%, with truck deliveries declining 12.7%.

Jaguar continued its tailspin in January, dropping off 33.2%. The brand hopes to stabilize in coming months, with the addition of the X-Type Sportwagon and special-edition XK sports cars entering the lineup. (See related story: Jag Wagon Could Stem U.S. Decline)

Full article: http://subscribers.wardsauto.com/mic...1004&siteid=26

[awalbert88]

January is typically the slowest month for sales of any kind, so that doesn't much surprise me.

[Jay]

Boring cars don't typically sell well, so that doesn't much surprise me either...or does it?

[slowinthefastlane]

Originally Posted by Jay

Boring cars don't typically sell well, so that doesn't much surprise me either...or does it?

Especially since dealer lots are still clogged with dirt-cheap Taurses. The usual target audience for conservatively-styled cars are the budget and value crowd and fleet customers. If they're shopping Ford, which one do you think they'll go for? The more expensive Five Hundred with no incentives or the cheaper Taurus? Throw in the $2000 or $3500 cash back for an '05 or a leftover '04 Taurus and you've got a no-brainer for most of these folks.

[ponchoman49]

Originally Posted by slowinthefastlane

Especially since dealer lots are still clogged with dirt-cheap Taurses. The usual target audience for conservatively-styled cars are the budget and value crowd and fleet customers. If they're shopping Ford, which one do you think they'll go for? The more expensive Five Hundred with no incentives or the cheaper Taurus? Throw in the $2000 or $3500 cash back for an '05 or a leftover '04 Taurus and you've got a no-brainer for most of these folks.

The only problem here is that the Five Hundred is twice the car as the Taurus. Most Tauruses are the regular SE models with 153hp, lackluster interior quality with poor fit and finish and corner cutting, sloppier handling, uncomfortable hard front seats, an old 4 speed auto trans, less interior space and trunk room and the same styling it had sinse 2000. The Five Hundred has fresh styling, a choice of CVT or 6 speed auto trans, nicer interior with far more room and comfort, more standard features like ABS, keyless entry, rear disk brakes, 203 hp, alloy wheels, power seat etc. These items are optional or part of packages on the Taurus. And the Five Hundred could almost fit a Taurus in it's trunk!

[gmsickofan]

People don't go to Ford dealerships to buy cars anymore. Ford is no longer the trusted household name in passenger cars. It's where you go when you have a rebate or you are a die-hard blue oval buyer. Toyota has stolen the mantle of "obvious choice" from Ford - that happened when they gave up putting real R&D dollars into the Taurus.

[dav305z]

I wouldn't really worry about the Five Hundred/Montego, as most new models take a couple of months to catch on. I think the same will prove true for the LaCrosse and the G6, which both had somewhat dissapointing months.
I do however, see serious porblems with Ford when viewing the decline in SUV sales and the hughe slip at Jag and Lincoln. SUV's have held this company up over the past 5-10 years, so in the bottom falls out of that, they could really be screwed. Jaguar and Lincoln also concern me because I still don't see a great amount of product in the pipeline for either. A sportwagon version of an underperforming model will not translate to to many US sales, and the Lincoln Zephyr, while semi-promising looking, is not nearly enough to make up for an entire lineup dated cars and trucks.

[TiburonJT]

Originally Posted by dav305z

I wouldn't really worry about the Five Hundred/Montego, as most new models take a couple of months to catch on. I think the same will prove true for the LaCrosse and the G6, which both had somewhat dissapointing months.
I do however, see serious porblems with Ford when viewing the decline in SUV sales and the hughe slip at Jag and Lincoln. SUV's have held this company up over the past 5-10 years, so in the bottom falls out of that, they could really be screwed. Jaguar and Lincoln also concern me because I still don't see a great amount of product in the pipeline for either. A sportwagon version of an underperforming model will not translate to to many US sales, and the Lincoln Zephyr, while semi-promising looking, is not nearly enough to make up for an entire lineup dated cars and trucks.

I think you are right on. Ford needs new products faster than they can bring them out.

[HEMI300C]

Originally Posted by dav305z

I wouldn't really worry about the Five Hundred/Montego, as most new models take a couple of months to catch on. I think the same will prove true for the LaCrosse and the G6, which both had somewhat dissapointing months.

I don't know...the Chrysler 300 "officially" went on sale in April 2004, and it sold over 9,500 units that month. I say officially because in February and March, they sold a few during the production ramp up...about 5,000, but they didn't have a full month of availability until April. It still currently sells between 10,000 and 12,000 each month (13,000 in december)

The Five Hundred has been on sale since September, and full production was up and running by October and November and it still hasn't seen much of an increase.

[Swahili]

Ford's PAG needs new vehicles faster than they can bring them out. The Ford brand of cars is almost all brand new. After going through this article and some of the other ones found in the other forums, I'm starting to ask myself "Can we really expect anything different?" No one can expect to have record breaking years all the time. Ford arguably sells more trucks and SUVs than anyone else, so how can they expect to keep that up? No one NEEDS or WANTS another one yet since theirs is probably only a few years old. Cars on average last for a fairly long time in the current day. The second hand car market is flooded, it's almost impossible to sell your car privately and even attempt to break even. There's a big difference right now between book value and street value. Plain and simple, I think vehicles are being over produced.

[VivienM]

Originally Posted by Swahili

No one NEEDS or WANTS another one yet since theirs is probably only a few years old. Cars on average last for a fairly long time in the current day. The second hand car market is flooded, it's almost impossible to sell your car privately and even attempt to break even. There's a big difference right now between book value and street value. Plain and simple, I think vehicles are being over produced.

And don't forget the role of 0% financing-type incentives in this. If I bought a new F*rd or GM last year with 0% financing for 60 or 72 months, I'm basically stuck with that car for 5-6 years, even if I might want to buy a new one after 36 or 48 months, because getting a new car would implicitly mean losing part of that incentive.

Let me give you an example with numbers. Let's I buy a $30000 car, and 0% for 5 years is equivalent to a $5000 discount (IOW, monthly payments for the 5 years are equal either way). And let's say I want to sell the car the day I bought it, just to make this a little more blatant.
If I buy the car for $25000 financed at a normal interest rate, I can sell the car for say $24000, pay the bank back $2500, and I've only lost $1000 on the deal.
If I buy the car for $30000 financed at 0%, I can sell the car for $24000, and owe GMAC or Ford Credit $30000. I've lost $6000 on the deal, including the entire $5000 incentive.

Now, obviously this is an extreme case, but the same logic applies if I wanted to sell the car after 3 years. GM, Ford, and friends made a HUGE mistake, if they care about sales numbers, to use 0% financing to encourage sales now.

[jd4548]

I never knew that Jag was doing so bad, but I guess when Ford is putting out all these boring products your sales are going to fall anyways. Also January is usually a weak sales month anyways.

[dindak]

I think the price on these cars is a little high. I looked at the Ford 500 at the mall and was expecting a MSRP that was about $2-3 K less. Sticker shock to say the least.

[paul8488]

Originally Posted by cincygoblue

Jaguar continued its tailspin in January, dropping off 33.2%. The brand hopes to stabilize in coming months, with the addition of the X-Type Sportwagon and special-edition XK sports cars entering the lineup.

Stabilizing after such a drop is really encouraging! "We aim to sink very low, and then maintain that level"! Hahaha! Nah, I guess they have to stop sliding before they start climbing again... but it still sounds kinda rough!

I thought the 500 and Freestyle were selling like kray-zeeee! There were like 50,000 orders for the 500 right near the start. Guess they were the only people who wanted the car!

[VivienM]

Originally Posted by paul8488

I thought the 500 and Freestyle were selling like kray-zeeee! There were like 50,000 orders for the 500 right near the start. Guess they were the only people who wanted the car!

Were they retail sold orders or dealer inventory orders? If the latter, it could just be overzealous dealers desperate to have new product on their lots overestimating the demand for those cars...