On a Friday when the economic news (and stocks) all seemed to be turning south, Ford (NYS: F) posted monthly sales numbers that were downright respectable, if not quite glowing.
The Blue Oval's May sales were up almost 13% over unspectacular year-ago numbers, but the bigger story was Ford's trucks, which had a very impressive month.
Ford's trucks led the way
Ford's overall truck sales were up 21%, a strong result that suggests that, whatever might be happening in the larger economy, consumers and businesses are increasingly willing to spend to replace aging light trucks. "The age of the [overall] pickup population is the highest we've ever seen it," Ford sales analyst Erich Merkle said on Friday, and he and other Ford executives suggested that already-strong truck sales might have room to grow further in coming months.
Trucks were definitely a big theme for Ford in May, but it wasn't the only one:
- F-series strong. Sales of the F-series of full-size pickup trucks were up 29% to 54,836 -- over 10,000 a week, a huge number. The F-series, which includes the ubiquitous F-150 as well as its heavier-duty siblings, is America's single best-selling vehicle -- a title it has now held for 30 years, Ford's PR crew hastened to point out. Four-dollar gas notwithstanding, it's arguably Ford's most important vehicle, and its continued success is a sign that Ford's efforts to improve its fuel economy are being well-received in the marketplace.
- Vans, vans, vans. Sales of Ford's E-series vans, better known by the old "Econoline" nameplate, were up 31% over year-ago totals. Nearly all of the E-series are sold to commercial customers, making this increase another sign that businesses are investing to replace aging vehicles. The smaller Transit Connect commercial van also did well, with sales up 53% over last May's totals.
- Fusion sales continued strong. The midsize Fusion sedan, an outgoing model set to be replaced this fall, had its strongest-ever retail sales month and its best May ever, with sales up 9%. Ford has posted somewhat generous incentives on the Fusion -- currently running well over $1,000 per car -- as it sells down its remaining inventory in preparation for the launch of the all-new 2013 model. That's a standard industry practice, and shouldn't be a concern for shareholders -- in fact, the good news is that consumers are happy to take advantage of the deals.
- More gains for the Focus. Ford's acclaimed compact car continued its sales gains in May, with sales up 11%. Ford executives were eager to tout the model's success in California, traditionally a stronghold of import brands Toyota (NYS: TM) and Honda (NYS: HMC) . Ford Vice President Ken Czubay said on Friday that Focus sales were up 39% in the Los Angeles market and about 50% in the San Francisco area. Ford has doubled its small-car market share in California over the last two years thanks to the strength of the Focus and Fiesta, he said.
Long story short: In a month where the economy seemed to slip and all observers expected Toyota and Honda to come on strong, Ford posted some solid gains.
But there are still some concerns that shareholders would be wise to watch carefully.
A good month, but a few concerns to watch
Various media reports have noted that Ford increased its incentives spending in May versus April. That raised some eyebrows: With CEO Alan Mulally saying this week that Ford was struggling to increase production of its hot-selling models, why would the company feel the need to resort to incentives?
There may be a couple of factors at work here. First, Ford is offering heavy incentives on its outgoing models -- the Escape SUV and the Fusion sedan, both of which are in the process of being replaced by all-new models. Czubay suggested on Friday that the reported increase was largely attributable to a planned effort to clear out the last of the old Escapes as new models have begun to arrive at dealers.
Second, while Ford's leaders have made the reduction of incentives spending a priority, and its levels have fallen well below spending by rivals such as General Motors (NYS: GM) , there were suggestions that the company might have cut too much in April -- leading to higher inventories and a so-so month for sales in April. Ford's inventories did come down significantly in May, from 66 days' supply in April to a more comfortable 54 days' supply in May, according to Merkle. Fleet sales were also down a bit, from 37% of the total in April to 35% in May, roughly in line with year-ago numbers.
Czubay did say on Friday that supplies were constraining sales of Ford's hottest models to some extent. "But we're working on that," he said, and Ford did announce that its planned third-quarter production would be 5% ahead of year-ago totals.
But all things considered, it was a solid month for the Blue Oval.
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