Ford shortages hold back US auto sales

The car maker is expected to lag Toyota in market share in July for the first time in years.

By TheStreet Staff Jul 26, 2013 1:11PM

thestreet logoFord emblem at the Chicago Auto Show JEFF HAYNES, AFP, Getty ImagesBy Ted Reed

 

Experts are projecting that U.S. auto sales will show a double-digit increase in July, continuing a four-year trend of sales increases. The increase could be even more but it appears sales are being held back because Ford (F) can't make enough vehicles.

 

That is, of course, a good problem to have as Ford continues its turnaround story. Ford shares are up 31% this year, after closing Thursday at $16.96. One year ago Friday, shares traded around $9 as sagging European sales spooked investors.

 

"Ford at $9: A Second Chance to Buy Alan Mulally's Crisis Management," proclaimed a headline on TheStreet.

 

On Wednesday, Ford reported that its second-quarter results (TheStreet) improved in every region including Europe. In North America, Ford produced profits of $2.3 billion and a 10.4% profit margin, leading major automakers.

 

July U.S. light-vehicle sales are due to be reported next Thursday. Deutsche Bank analyst Rod Lache said the pace of sales will likely slow from June's seasonally adjusted annual sales rate of 15.9 million.

 

"The driver of the slowdown appears to be almost entirely Ford, whose inventory of Focus, Fusion, Explorer and Escape has become extremely tight ahead of additional shifts coming on line in Q3," Lache wrote in a recent report.

 

Lache estimated that the SAAR would be 400,000 units higher "if Ford achieved the same proportion of sales that it has been achieving year-to-date." He said Ford's market share could decline to 14.3%, compared with 16.2% year-to-date.

 

On Ford's earning calls Wednesday, Chief Financial Officer Bob Shanks declared, "Our retail market share declined from first quarter reflecting primarily lower dealer inventory of some products including Fusion and Explorer.

 

"We expect to address these constraints in the second half with the launch of Fusion at our Flat Rock assembly plant and an increase in Explorer capacity at our Chicago facility," Shanks said. Additionally, Ford is putting on a third crew at its Kansas City pickup truck plant.

 

Later, CEO Alan Mulally was asked about the impact of capacity constraints on first-half sales.

 

"Clearly as we say we're getting a little tight on inventories on vehicles like Fusion," Mulally said. "We're taking some actions around that ... We probably leave a few sales on the table, but we're rectifying that as we go into the second half of the year."

 

Edmunds.com data supports the view that Ford has lost sales this month. "In a bit of a surprise, Edmunds.com projects that Toyota (TM) will beat out Ford in total sales this month, the first time since March 2010," Edmunds said Thursday, in a prepared statement.

 

"The Japanese automaker will claim 15% of U.S. auto sales in July, its highest share since January 2013," the firm said. "Ford's share, meanwhile, is expected to fall 2.2 percentage points from June, the biggest month-to-month decrease of any automaker. Its projected 14.6% share this month will be the company's lowest single-month share since August 2009 (14.3 %)."

 

Edmunds projected that GM's (GM) market share will total 18.1%, down 0.8% from June. It said July industry light-vehicle sales will increase 15.2% to 1.3 million, the best July total since 2006.

 

Ford is racing to catch up to demand. J.D. Power reported that 2013 North American light-vehicle production is up 4% through June. "For the high-volume producers, Ford retains the strongest year-over-year increase at 14%, with robust demand continuing for the Fusion," the firm said.

 

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10Comments
Jul 26, 2013 3:25PM
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wow!!!! i am a ford dealer. go ford!!!!!
Jul 28, 2013 4:09PM
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Well as far as an investor's viewpoint; I think Ford(F) is doing quite nicely...Yes, very nicely.

Go Ford and go America....This even coming, from some Chebby people, that's what we drive.

No Fords at the time, except one old tractor..

 

Dexter....You seem to have an interest in a union person's hiney, why is that, maybe you need some help; eh?

Jul 30, 2013 12:03PM
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Have been driving Ford built work and pleasure vehicles since 1935.  Most recently a 1999 F-450 and a 2008 Taurus X .  The dealership service has mostly been for normal mileage requirements. oil change, tire rotation and etc.  I think Ford has been quite upfront with pleasing the customers and facing up to the needed recalls regardless of cost.  Our next automotive purchase will be ford built.
Jul 26, 2013 4:12PM
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What our Toyota fans fail to state is the number of people Toyota killed by not addressing the sudden acceleration problem, which I experienced.  My dealer said it didn't happen that stated at a later date it was floor mats, but what really came out it was a broad base software issue and they quietly developed software and hardware fixes.  The hardware fixes broke all records in prototyping and development, makes you think they new the problem all along.  I Don't like people or companies that LIE. Posting quality information that is statistically impossible.
Jul 26, 2013 5:29PM
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Where are all the Republicans complaining about how bad things are? Funny how whenever there's a report about how well an American company is doing, they are no where to be found.
Jul 26, 2013 3:45PM
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What this article failed to mention that Ford has the most recalls in vehicle history, due in part to the length of time they have been in business. Lest we not forget the (almost) criminal negligence charges that nearly stuck because of the Pinto fiasco of the 1970's (exploding gas tanks when hit from the rear).  I for one gave up on Ford, mainly because they started outsourcing their transmissions to China.  If you google any Ford car, you will see the same cars mentioned in this article have either active recalls or active bulletins.  In other words, Ford cars may sell, but what about service and support after the sale?  You will see a lot of unhappy Ford owners because of this cheap outsourcing by cheaply made Chinese parts.

Just about every new Ford sold needs to have work done in the first 5,000 miles, and the testament to that is the NHTSA website that lists recalls, complaints and service bulletins for every car made.  You will see that all of Ford's frontrunners all have problems and unhappy owners.  Mostly with the engine, transmission and other expensive parts.  Engines that have a mind of their own, transmissions that don't have second or third gears, steering problems, etc.

I drive a Chevy (1998) that is 100% American, save for the transmission that was built in Canada. I have absolutely no motivation to help these automakers by buying a new car made of junk when my car that was made 15 years ago will last twice as long. I have 147,000 miles and it runs like new.  Why would I want to get stuck in the car payment trap again?

Also, I cannot justify a new car when the price of gas is a comical $4.00 a gallon.  In Bahrain, it's about 78 cents a gallon, so I am going to punish both the automakers and the oil companies by driving the most fuel efficient car I can find (ergo, the one I have, 32 MPG in the city) and by not buying a new car. I have no obligation to pay for Ford retirees' pensions or to support CEO's that make 200 times my annual salary. I won't do it.  And I won't apologize, either, because I am sick of the rich getting richer while the poor stay poor.  Well, I won't help the rich any longer, because I'm on to them.
Jul 26, 2013 2:41PM
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what they did not tell you is overall Toyota in the whole world is number one still ......I love my Toyota screw big unions in the rear Toyota built in America strong and dependable and even after they had a sunami crush their country they still came back to number one impressive to all   ford is tanking overseas with big losses wait till your eco boost turbs start to go bad the next few years you wont be able to give a ford turbo ecoboost away   oh yea they flat out lied about their gas milege  ford found on road dead
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