General Motors Is Still Crushing Ford

[BlackGTP]

General Motors Is Still Crushing Ford
http://www.fool.com/investing/genera...mpaign=article
February 6, 2016
Adam Levine-Weinberg



In the sales battle between America's top two automakers, there has been a clear winner for the past year or so. General Motors (NYSE:GM) has bounced back strongly from the ignition switch recall scandal that emerged two years ago, gaining ground against top rival Ford Motor (NYSE:F).

This trend continued in January. While the overall sales growth numbers for GM and Ford didn't look that different, the underlying trends are far more favorable for the General.

GM has a strong start
In January, General Motors posted a 0.5% year over year gain in U.S. deliveries. This masked a strong performance on the retail side. Retail sales actually rose 8.9% year over year, but this was offset by a decline in daily rental sales.

GM has been deliberately cutting back on sales to rental car companies in the past year or two. Not only do automakers earn low margins on most rental car sales, the result is a steady flow of used cars that will drive down residual values for those models. That in turn impacts retail sales by increasing leasing costs and reducing trade-in values.

General Motors cut back on sales to daily rental companies by nearly 13,000 vehicles last month. If GM had kept daily rental sales flat, it would have generated a roughly 7% increase in vehicle deliveries, rather than the 0.5% gain it reported.

Article continues at link

[BlackGTP]

I pretty much swore off posting Motley Fool articles as I've decided they are generally pointless trash. But this one seems to have interesting numbers in it in regards to daily rental companies so I thought I'd post it. So ignoring the sensationalist title (being that Ford's 2015 profit it pretty similar to GM's, and Ford sells less cars, I don't think GM is exactly crushing Ford).

Not to drag FCA into this, but it did come to mind when reading the article. I thought I read before that a lot of Chrysler's sales are to the rental fleets. So if FCA needs more production capacity for Jeep, why not cut off rental sales of the Chrysler vehicles and focus only on more profitable retail? Assuming the rental fleet percentages are high, that would free up a lot of room to make more Jeeps and have the added benefit of keeping the vehicles produced in house. There has to be a way to sell lower volumes and still make a profit - Mazda does it.

[vanshmack]

Fool knows nothing about the auto industry and is the National Enquirer of finance.

[analogbubbles]

I'd like to see the fleet breakdown for Camaro vs Mustang. Historically the Mustangs been quite a bit higher and I suspect that's never been truer than it is right now.

[SKH]

They endlessly post puff pieces about Tesla. I think they must be on Elon's payroll.

[jpd80]

That 14% daily Rental figure is plucked out of total fleet sales for January:
Commercial - 13%, Government - 6% and Daly Rental - 14%.

The issue I have is that the Fool assumes that daily Rentals are low or no profit sales
when in fact these days, the sales mix to those companies is now more aligned with
retail trm levels, meaning far less impact on those vehicles residual value.

Fleet business is valuable and important to all companies and I wouldn't consider
a 14% figure for daily rentals as anything to panic about, it's pretty indicative of
January when a lot more of the fleet sales are done.

One thing to remember about fleet business, Ford and GM sell roughly about the same numbers
to fleet customers but Ford's retail volume is less than GM so the percentages always look worse
than they do for GM. That does not mean that Ford is fleet dumping, just the nature of its business
and if anything, it shows just how tight Ford is running its plant and manufacturing to keep those
Average transaction prices higher.

With regards Ford's sales being down 3% compared to Jan 2015, the sales cal
mentioned that Jan 2015 was a very strong january and that by comparison,
Jan 2016 had four selling wekends compared to five the year before, they
really didn't get going with sales until Jan 5 and then we had snow storms
but the last five days were much stronger.

On sales numbers, Ford's cars were down about 7K, the Utilities wer up about 3.5K and trucks were flat.
The interesting part not mentioned by the fool was that Average Transaction prices at Ford were up $1800
compared to same time last year, F Series in particular were up an average $2,500 per truck while incentives
were down $500 compared to same time last year..Any January with over 50K of F-Series is a good sign.

[roy219]

The issue I have is that the Fool assumes that daily Rentals are low or no profit sales
when in fact these days, the sales mix to those companies is now more aligned with
retail trm levels, meaning far less impact on those vehicles residual value.

Fleet business is valuable and important...

+1
Thank you jpd80, well said! The oft repeated myth about sales of passenger cars and light trucks to rental fleets (or government or commercial fleets, for that matter) being unprofitable refuses to die in the media, unfortunately.

[cbennie2]

That 14% daily Rental figure is plucked out of total fleet sales for January:
Commercial - 13%, Government - 6% and Daly Rental - 14%.

The issue I have is that the Fool assumes that daily Rentals are low or no profit sales
when in fact these days, the sales mix to those companies is now more aligned with
retail trm levels, meaning far less impact on those vehicles residual value.

Fleet business is valuable and important to all companies and I wouldn't consider
a 14% figure for daily rentals as anything to panic about, it's pretty indicative of
January when a lot more of the fleet sales are done.

One thing to remember about fleet business, Ford and GM sell roughly about the same numbers
to fleet customers but Ford's retail volume is less than GM so the percentages always look worse
than they do for GM. That does not mean that Ford is fleet dumping, just the nature of its business
and if anything, it shows just how tight Ford is running its plant and manufacturing to keep those
Average transaction prices higher.

With regards Ford's sales being down 3% compared to Jan 2015, the sales cal
mentioned that Jan 2015 was a very strong january and that by comparison,
Jan 2016 had four selling wekends compared to five the year before, they
really didn't get going with sales until Jan 5 and then we had snow storms
but the last five days were much stronger.

On sales numbers, Ford's cars were down about 7K, the Utilities wer up about 3.5K and trucks were flat.
The interesting part not mentioned by the fool was that Average Transaction prices at Ford were up $1800
compared to same time last year, F Series in particular were up an average $2,500 per truck while incentives
were down $500 compared to same time last year..Any January with over 50K of F-Series is a good sign.

I'm not so sure I agree with the Ford spin. GM was up 18% last January and still posted a gain this month. I also wonder how much the weekend sales help....when a lot of dealers are closed Sunday's and most dealers close early on Saturday.

[megeebee]

I'd like to see the fleet breakdown for Camaro vs Mustang. Historically the Mustangs been quite a bit higher and I suspect that's never been truer than it is right now.

We may never know. Ford swore off officially reporting fleet-percentages a few years ago.

[63GrandSport001]

This article seems to be pretty much on point, all of the numbers suggest that for 2016 we will see a growing gap between GM and Ford profit wise (unless something falls off the new Malibu).

jpd80 nowhere in this article did he say that fleet sales or commercial/government fleet was a bad thing, they were just looking at the numbers for Ford and GM. Besides profit margins on vehicles sold to rental fleet being lower then retail customers there is an impact on resale value. Also looking at the numbers GM shrunk fleet sales and Ford grew fleet sales last month....

[63GrandSport001]

I'd like to see the fleet breakdown for Camaro vs Mustang. Historically the Mustangs been quite a bit higher and I suspect that's never been truer than it is right now.

I remember seeing 2013 fleet numbers for the Camaro, Mustang, and Challenger and the Mustang was higher then both. I believe the Camaro had something like 11% fleet while the Mustang had something like 24% fleet, with the 2015 Mustang fleet percentage is going to be down (even if volume stayed the same sales were higher). Though I suspect that if they couldn't produce enough Mustangs that they will skip on fleet sales in favor of retail sales instead.

[jpd80]

I'm not so sure I agree with the Ford spin. GM was up 18% last January and still posted a gain this month. I also wonder how much the weekend sales help....when a lot of dealers are closed Sunday's and most dealers close early on Saturday.

OK last point first, they do a lot of business on the weekends when people are out and about,
so getting those five selling days adds to the figures but by Ford admission, they didn't get rolling
until Jan 5 and then ther was weather but LaNeve said that sales really picked up in the last 5 days.

Bottom line is that even with sales slightly off, there were a lot of positives there in terms of increased revenue..

The devil is in the detail, Ford pulled back on incentive spending on F Series by $500 and saw the
ATP increase $2,500 YOY and averaged $1,800 across all its vehicles - you can't do that year on
year and not expect flat or negative sales.

GM by their own admission got out the check book and increased sales, good on them for doing that
but please understand the subtle difference there, Ford definitly kept its hands in its pockets in January.

Last year GM sold 3 million vehicles in the US to Ford's 2.6 Million, that 400K difference is an example of
the difference between the two in both sales and production capacity. Ford has done that for years,
traded higher on tighter inventory and sales but I think it's past time that they start to grow again.
Giving your chief competitor an average 30K vehicles a month head start is not good.

[jpd80]

I remember seeing 2013 fleet numbers for the Camaro, Mustang, and Challenger and the Mustang was higher then both. I believe the Camaro had something like 11% fleet while the Mustang had something like 24% fleet, with the 2015 Mustang fleet percentage is going to be down (even if volume stayed the same sales were higher). Though I suspect that if they couldn't produce enough Mustangs that they will skip on fleet sales in favor of retail sales instead.

Mustang Inventory is pretty good now, last time I looked a month ago it was around 33,700 so no excuses there.
A base V6 was kept purposefully for fleet sales and for Retail where those buyers want a V6 + appearance pack.
The production and sales volume of the V6 fluctuate but I suspect settling around 25% or slightly less.

long term, I don't see the V6 remaining much past the first few years.

[dslay04]

I pretty much swore off posting Motley Fool articles as I've decided they are generally pointless trash. But this one seems to have interesting numbers in it in regards to daily rental companies so I thought I'd post it. So ignoring the sensationalist title (being that Ford's 2015 profit it pretty similar to GM's, and Ford sells less cars, I don't think GM is exactly crushing Ford).

Not to drag FCA into this, but it did come to mind when reading the article. I thought I read before that a lot of Chrysler's sales are to the rental fleets. So if FCA needs more production capacity for Jeep, why not cut off rental sales of the Chrysler vehicles and focus only on more profitable retail? Assuming the rental fleet percentages are high, that would free up a lot of room to make more Jeeps and have the added benefit of keeping the vehicles produced in house. There has to be a way to sell lower volumes and still make a profit - Mazda does it.

Because rental car companies are mainly the only ones buying the Dart, Sebring, & 200. That's why it makes all the sense in the world to write them off and let someone else make them.

There's much more profit in fleet sales than Rental

[cbennie2]

GM by their own admission got out the check book and increased sales, good on them for doing that
but please understand the subtle difference there, Ford definitly kept its hands in its pockets in January.

But when GM was holding the line on discounts...people complained they were leaving sales on the table. Now Ford holds the line on incentives and it's a good move?

Still sounds to me like some spin...