Ford Analyst Predicts 10% Sales Drop for Feb
With three selling days left in the year's shortest month, Ford Sales Analyst George Pipas is preparing the financial community (and the Ford family) for the worst: "The retail business is not that strong." You got that right. Pipas is predicting a ten percent drop in Ford sales relative to last Feb. That said, Pipas boasted that Ford will "hold our own" on retail sales relative to the rest of the industry. According to Automotive News [sub], Ford did so last month. FoMoCo sales "only" tumbled 3.9 percent, compared to the overall industry average of -4.1 percent. Excuse us for not believing Detroit's official retail sales numbers these days, what with reports filtering-in of increased fleet sales to government agencies and other commercial organizations. But we're good with Pipas' invitation to consensus: "I think we can all agree: '08 is getting off to a pretty low start."
More by Robert Farago
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Folks…it is rough all over in the car game. Even the new Accord isn’t rocketing off the lots as we would have expected.
Hyundai is unleashing the motherload of all incentives to keep their plant humming….
http://www.autoobserver.com/2008/02/hyundai-sonata.html
In all fairness the domestics created the negative concept/ impression of selling cars to rental fleets and in all honest the game is NOT the same for the japanese and other foreign brands in rental fleets as it is for the domestics. Rental fleet cars got a bad name not because the car could be rented but because the Doemstics made it a habit and built up a history of filling the rental fleets with half-a$$ piss-poor cars. If a company is building very good cars rental fleets are a very good thing. Case in point, I can attest to the fact that a Chysler Pacifica is a fine vehicle because I rented one and was rather impressed. On the other hand I KNOW that the majority of GM cars are total garabge because the cars GM send to the rental fleets just plain sucks; Malibu (last year), Impala, G6, Colbolt, etc. No one seem to complain when they are directed to a Toyota or Nissan product at the airport rental counter, but it is common to here costumers request something else when handed the keys to a GM POS. The paradox is that though the rental fleets in the USA a great deal of Americans became turned-off by domestic cars. It is like the big 2.8 did everything in their power to show the world just how crapy their cars are! The irony today is that the big 2.8 have successfully damaged a chanel by which they could have been using to get their "NEW" products into the hands of domestic customers. Renters are out driving around in new rental Camrys and Altimas and are getting very good impressions from them that will lead to sales. I would be nice to be able to spend some real time with a new Malibu to see if the hype lives up to reality.
The last point about getting products into the hands of consumers who otherwise would not drive a Ford or GM is interesting because it is exactly how Ford has transformed its strategy for rental business. Ford hasn't abondoned rental cars, but it's not going to "dump" a model either. You put new vehicles (or new model year initial runs) into fleets for exposure and durability testing. But striking the right balance for Ford means reducing their rental sales to 10% of total sales - still a bit high in my opinion, but much better than the 17-18% of 2006. However, dumped rental cars, no matter which supplier supplies them, will never be considered "high-quality." If Toyota started dumping Corollas, the Corolla's resale would drop even more than it has recently, and people would associate it with a banged up rental car instead of a high-quality, desirable (to some - not me) compact. That won't happen, but the effects of fleet dumping are the same for anyone. It's just that Ford and GM already did their dumping and have 10+ years of negative equity built up. My greater point with Toyota (Honda, Nissan) is not to criticize the business move - because frankly, I think they are making the right one by inching up their fleet sales ever so slightly - but to call attention to the fact that not all of Ford's losses are customers walking away from showrooms just as not all of Toyota's gains are from retail customers flocking to their showrooms. Ford's RETAIL sales were poor last year, but they only declined 8% - less than the 12% fall overall - and part of that was less incentive spending. Overall sales numbers don't lie, but there are many factors that drive them. I think it is important to factor both the increase in fleet sales from Toyota, Honda and Nissan, the massive decrease in fleet sales especially by Ford, and the change in relative incentive spending YOY of the automakers (I'll give you a hint: it's not in the Japanese makers' favor). The reality is that Ford's net pricing last year in NA jumped drastically. Almost all of that was caused by two things: 35% drop in rental fleet sales and something like 10% drop in incentive spending. Toyota grew 4% last year, but half of that was fleet (not all rental) and their incentive spending was significantly higher YOY almost every month last year. Ford can't escape its poor sales, but I want this to be an informed argument; the "truth," if you will. Ford would not have fallen to Toyota last year if they kept their rental sales and kept their incentive spending up or increased it with their Japanese competition. However, credit where credit is due. They did the right thing for their future business and continue to by all accounts so far in 2008.