Ford to build current and next-gen F-150 models
Demand for trucks is surging and the company can't afford any disruption to production.
Detroit has had its share of financial woes recently, but that hasn't kept Ford Motor Co. (F) out of the fast lane.
The company has gained substantial market share through the first half of 2013, and if the latest news about its top-selling F-150 is any indication, demand won't slow down anytime soon.
Ford is set to build both the current and next generation F-150 models simultaneously, according to a Reuters report.
According to the story, the Detroit auto giant will continue to build the current model for the first six months of the new model's launch. Production of the latter is expected to begin around July of 2014, per the report.
Reuters reported that the new F-150 will rely on more aluminum and lightweight materials to meet future fuel economy standards that cut at least 700 pounds off the model.
However, different factory equipment is required to manipulate aluminum versus steel, as noted the report.
That makes Ford's move unusual, given it will have to make some upgrades while leaving enough capacity to manufacture the existing F-150. (Benzinga).
The news comes as U.S. demand for trucks rapidly surges. Reuters noted that U.S. sales of full-size pickups are growing at nearly three times the rate of the overall industry. As Reuters discussed, the company cannot afford any disruption to production with the rapidly rising demand.
And, according to the report, Ford's motives also involve hedging against potential problems with the overhaul. As such, the 110-year old firm should be able to keep dealerships well-supplied with America's top-selling vehicle, even if the upgrade doesn't go as planned.
Overall, 90% of Ford's global profit relies on the F-series and SUV derivatives, so the ability to churn out the existing model may be crucial in maintaining positive momentum while revamping its prized product.
Meanwhile, the report comes at an interesting time, as Ford released second-quarter earnings (Benzinga) Wednesday with mixed results. The headlines were largely positive since it gained market share in every region, raised guidance and comfortably topped revenue expectations by nearly $3 billion.
However, it came in significantly below EPS projections, finishing at $0.30 versus the $0.37 analysts expected. While Ford officially declined to comment on the Reuters story, the information helps tilt the news scale in a positive direction and could ease investors' concerns about potential snags with the new F-150.
Despite mixed earnings, Ford has reached a two and a half year high (Benzinga). The stock rests at around $17.50 in the morning hours of trading, likely in response to its elevated guidance.
However, Ford's intentions to build the current and new F-150 at the same time may be contributing to the gain, as the move signals strong demand and reduces the risks involved with overhauling this top-selling model.
Ford was up almost 4% Wednesday, but pared its gains later in the day.
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