Looks Like the Aluminum Ford F-150 Wasn’t a Mistake After All
A few months ago, Bloomberg ran a story on Ford’s redesigned F-150 pointing to a local discount of more than $10,000 and used it as proof the sky was falling. It went on to highlight that F-150 sales had fallen 8.9% since the previous year and that its market share had dropped from 33% to 28%. Supposedly, that was enough to prove that buyers weren’t interested in an aluminum pickup truck.
It even included scary quotes from an analyst saying things like, “The truck hasn’t sold up to expectations for the most part. This may be a hint that in certain parts of the country, the issue might just be more than supply.”
At the time, we were skeptical. Overall incentive spending was down for the year, the average transaction price was at a record high, and units were selling faster than the competition. In addition, Ford had reduced how much money it spent on marketing. Considering that the trucks were selling quickly and for record high prices, we had a hard time buying the idea that customers were rejecting the F-150’s aluminum architecture.
It seemed more plausible to us that the reason the F-150’s sales were down was because, as Ford had admitted, production and supplier issues had left it with limited inventory to send to dealers, and dealer supply was at about half the level it would eventually reach. With production expected to be up to full capacity by September, that would be the time to evaluate how much of a success or a failure the new F-150 was.
Now it’s September, though, and as the Detroit Free Press reports, in the month of August dealer inventory levels approached full capacity. In the same month, Ford saw a 5% increase in F-Series sales and a 6% increase in sales across the board.
Perhaps most impressively, sales of 71,332 trucks made it the best August Ford has had since 2006, and the company has only sold more than 70,000 units in one month seven times in the last eight or nine years. In case you aren’t sure, that’s very good news for the company.
Sales for the rest of the year will still be incredibly important, but at least for now, the evidence is there to suggest that Bloomberg jumped the gun and Ford’s decision to invest in an aluminum F-150 wasn’t such a mistake after all.
With full inventory for the month of September, that means Ford will have four months to show the industry how many F-150s it can sell when it’s not crippled by production issues.
According to Ford CEO Mark Fields, the company’s pre-tax profit should grow more than 50% thanks to the F-150 finally being assembled at full capacity. As extreme as that estimate sounds, it shows how important F-Series pickup truck sales are to Ford’s profits. According to Morgan Stanley’s estimate, the F-Series is so important, it accounts for 90% of Ford’s profits.
For a company that depends so heavily on one line of vehicles to drive its profitability, it’s important to make sure all the metaphorical ducks are in a row. According to Ford CFO Bob Shanks, if the company hadn’t lost 60,000 trucks and 15,000 Edge SUVs due to the time it took to retool its plant, first quarter revenue would have been increased by $1 billion, and its 6.7% operating margin would have increased to more than 10%.
As things sit right now, though, Ford has about 90,000 trucks in stock – a 55-day supply – which means means Ford can offer incentives where they’re needed and can begin filling fleet orders it had to postpone.
It’s still too early to tell exactly how popular the new F-150 will be, but as good as the situation looks right now, it’s probably not wise to bet against Ford on this one.
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