By on October 31, 2016

2015 Ford Mustang Flat Rock production

General Motors and the Ford Motor Company both saw U.S. sales declines in the third quarter, but GM was the only one achieving earnings that widely beat expectations. Still, which company is playing the game better is up for debate.

This could turn out to be an Ant and the Grasshopper situation if there is another economic downturn on the horizon. The ant-like Ford could be more ready for an economic winter, while the improvident Grasshopper Motors is left out in the cold with acres of unsellable vehicles — forced to eat its own legs for sustenance.

Of course, if there isn’t an economic downturn, Ford is going to look like a lame duck next to GM’s golden goose.

At the moment, the Detroit Three automakers are on completely different paths with wildly different outlooks on the future. Automotive News reports GM enjoying record third-quarter profits while Ford had its worst quarter in almost two years. GM launched more fresh product in showrooms this year and has plenty of redesigns coming for next year. Meanwhile Ford doesn’t have any exciting lineup changes scheduled until 2018.

This has translated into more retail volume for GM while Ford was left with a slowly growing dependence on fleet sales. Ford also suffered a nasty recall and spent quite a bit of money on fuel-saving technology. And, with gasoline prices relatively low right now, it’s hard to recover the costs of that tech from consumers when they aren’t all that impressed by a few extra miles per gallon.

We also have the ever-cautious Ford stalling production at six assembly plants to reduce inventory surpluses while General Motors has decided to ramp up overall production in North America for the next quarter.

“I would call our approach realism. Not optimism, not pessimism; it’s realism,” said Ford CEO Mark Fields in a conference call with analysts last week. “We don’t see a recession on the horizon, but we do see a marketplace that, from a cycle standpoint, it’s matured.”

But parts suppliers do see a downturn on the horizon and they aren’t alone. This year was littered with little hints and warnings that might signifiy impending economic doom. However, General Motors remains unfettered.

“We’re running a different play, and it’s generating different results,” GM CFO Chuck Stevens informed analysts on an earnings call. “We’re very focused on retail in a very disciplined way. Our retail market share is up; we’re less reliant on less profitable daily rental, and that’s showing up in our results.” Stevens thinks that — even if U.S. sales flatten out — GM will continue to yield strong margins in North America.

Whether Ford is actually preparing itself for a future market catastrophe or genuinely screwing things up by being so conservative will only be evident in hindsight. There are some similarities to the pre-recession days, where Ford soaked up some early hits and made some fairly unpopular decisions, resulting in saved face and money. We’ll have to wait and see if this all ends with Mark Fields giving America a pre-mic-drop “I told you so,” or just more underwhelming quarterly reports from the Blue Oval.

[Image: Ford Motor Company]

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59 Comments on “Ford is Either Playing the Long Game Well or the Short Game Poorly...”


  • avatar
    DC Bruce

    Ford is not investing in new product, and its still losing sales. That sound like a bug not a feature to me. The biggest new Ford product that I’ve heard about is the aluminum-body F-150 and now, F-250. A significant rise in fuel prices will certainly dent the sales of these monsters; and their monstrous size means they have little attraction outside North America. So, what else does Ford have? A Focus that drives nicely but has a cramped back seat . . . and a wonky automatic transmission. Three SUVs in all sizes that are not particularly fresh, and what happens if the SUV craze falls? A full-size car that is really long in the tooth and has a stunning lack of interior room for its interior size? What’s the inventory situation with Ford? If their inventories are piling up, then cutting back on production makes sense, but indicates a bigger problem that needs to be addressed.

    There’s nothing wrong with GM making money while the sun shines, so long as it manages its inventory.

    I see a lot of new Hyundais running around, in all sizes and types . . . except full-size pickup. That’s what the Detroit 3 should be worried about.

    • 0 avatar
      JimZ

      “Ford is not investing in new product,”

      O RLY?

      “and its still losing sales. That sound like a bug not a feature to me. The biggest new Ford product that I’ve heard about is the aluminum-body F-150 and now, F-250.”

      It’s a global company. The Super Duty just launched. The next launches (small and compact-car platforms) are being led by other regions.

  • avatar
    Big Al from Oz

    I do believe Ford’s current and future issues amount to more than just recalls. I pointed what’s occurring at Ford now last year.

    The development costs for the aluminium wonder trux is very high. People tend to only look at vehicle costs and disregard plant and equipment. Then the cost of developing the EcoThirsts.

    To bolster full size trucks Ford threw introducing the Ranger out the window. The Ranger is probably Ford’s best pickup at the moment. Ford lost billions with this one move, along with the unnecessary use and cost incurred with the aluminium wonder trux.

    I’ve heard the B&B attempt to justify Ford’s aluminium decision, claiming it’s good for the future. This future is still a couple of decades away.

    • 0 avatar
      JimZ

      “I pointed what’s occurring at Ford now last year.”

      no, you just blather on.

      • 0 avatar
        Big Al from Oz

        Nah JimZ, I’m really thinking you made a poor assessment here.

        Let’s face reality, Ford could be performing if better judgment was made on their part.

        • 0 avatar
          JimZ

          yeah, well, too bad for them they don’t realize some guy who comments on internet blogs has all of the answers.

          • 0 avatar
            Big Al from Oz

            I was correct. Simple. This might be hard for a Ford fan to swallow.

          • 0 avatar
            JimZ

            well, you and your compadre RobertRyan love to act like what’s going on in Australia has any relevance to the rest of the world, yet neither of you have actually demonstrated such. So there’s nothing for me to “swallow.”

          • 0 avatar
            Big Al from Oz

            I detect deflect and immature dialogue in your retorts. You obviously don’t have much to go on. Thanks for your stimulating interaction. Good day.

          • 0 avatar
            DenverMike

            @BAFO – What exactly were you correct about? It’s your opinion,’it was unnecessary. Even ‘short term’ the aluminum decision is already paying dividens. A billion “loss” might be a lot for you or I to swallow but the F-series generates tens of billions of pure taxable profits per generation. Of course the more that’s put back, and invested into them (losses), the less the taxes.

          • 0 avatar
            DenverMike

            And aren’t you the same BAFO that rattled on ad nauseam how “Ford is hurting!!!” because of the yet to be released aluminum F-150? And how no one would be able to afford it, before prices were released?? And how Ford would be dead in a short time frame???

    • 0 avatar
      Big Al From 'Murica

      Strong is the Cheese Dickery in this thread!

      • 0 avatar
        Lou_BC

        Ford has said that they were predicting a drop in profits short term due to rolling out new vehicles globally. For those who think Ford made a mistake with aluminum trucks, they are selling plenty of them. In USA, Ford F series September year to date has outsold GM full sized pickups. One has to add the smaller trucks in the mix then to say GM is coming out ahead in sales. In Canada Ford full sized pickups are killing GM even when small trucks are factored in.

        I do have to agree to a degree with JimZ when he said this, “no, you just blather on.”

        I’d like to see some evidence that Ford made a mistake with their best seller.

        I do believe that they should have introduced the Ranger. At that time it did look like the small truck market was functionally extinct.

        • 0 avatar
          Mandalorian

          I used to live in the upper midwest aka ground zero for rusty cars with the combination of snow and road salt. An aluminum truck is IDEAL there.

          During the winter/spring, I was going through the carwash at least 2x per week.

          • 0 avatar
            EBFlex

            You should see the corrosion on older Ford aluminum panels. Mustang hoods and Expedition rear tailgates.

            Ford has had some colossal failures over the past 10 years or so. Economist, the PowerShift DCT, My Ford Touchy, and this aluminum will be a colossal failure as well.

            There are emergency vehicle equipment manufactures that dont make lightbar brackets for the “military grade” F 150 because the aluminum is so weak.

            Aluminum will be a disaster. Ford did not do their homework and right outside the warranty period, the sheep that bought that pathetic truck will soon realize what a mistake they made.

          • 0 avatar
            dal20402

            This comment could have been replaced in its entirety by a sticker of Calvin peeing on the Ford logo, with no loss of information.

          • 0 avatar
            DenverMike

            @EBFLEX – Ford has put a mere tens of millions of vehicles on the road with aluminum body panels, so if corroding aluminum was a true, widespread problem it’s all they would be known for. Word travels fast nowadays.

    • 0 avatar
      DenverMike

      @BAFO – You say the Ranger is probably Ford’s “best current pickup” but you must mean for taking off road, since it’s nowhere near as profitable, no Ford comes close. The Ranger is probably in the same range as the Everest, as far as profit go, even if the Ranger can outsell it 2:1, being that it’s so much more expensive to build, with so many variations/trim/options/etc.

      Profits and payback in the midsize pickup class must take years into an all-new generation/platform, when we’re talking mere months for fullsize pickups of the Big 3 variety.

  • avatar
    dash riprock

    Finding it hard to understand the Author’s point in concern to GM and future profitability. The only negative he seems to bring up is the ramping up of production in Q4. Would have been nice if to support the concerns a breakdown on inventory was provided along with a turn rate. Even then, future production can be modified to readjust inventory relatively quickly compared to the introduction of new models. What I have seen from GM is increased profitability, increased ATP, reduced daily rental fleet sales, a good pipeline of new models, and even positive PR from corners of US media usually hostile concerning the Volt/Bolt.

    Looking at buying shares in GM and Ford but anticipate further share weakness. They both can be good long term holds. They are such different companies than they were 10-12 years ago.

    • 0 avatar
      Big Al from Oz

      dash riprock,
      I think you are correct. The problem I have with the future is how far is this future.

      I do believe the biggest impact on the Big Three is their reliance on large SUVs and pickups. Regulatary influences and protective controls offered to these vehicle need to be gradually wound back to force the manufacturers to become competitive producing smaller vehicles.

      The above measures I mentioned has made the US market into a Jurassic Park. The US manufacturers are at a greater risk of failure. Will this be the future?

      EVs will be extremely competitive globally as the current IC market. Full size EVs are not viable even into the mid term.

      • 0 avatar
        dash riprock

        My investment concerns include EV’s and their forced adoption through gov’t regulations. Fear that margins on those will really suck compared to trucks, suv’s, etc.

      • 0 avatar
        Lorenzo

        “Regulatary influences and protective controls offered to these vehicle need to be gradually wound back to force the manufacturers to become competitive producing smaller vehicles.”

        What if Americans don’t want smaller vehicles? What if Americans, unlike Australians, no longer trust government regulators, and don’t want to be told what’s good for us? There’s another article on TTAC highlighting the abysmal resale value of small and midsize sedans. That should tell you something.

        • 0 avatar
          Lou_BC

          @Lorenzo – I agree. BAFO is assuming that people want smaller vehicles. Smaller vehicles suck when it comes to resale. Why?

          Why the boom in CUV’s and SUV’s of all sizes?
          They are bigger than comparable cars.

          Why are pickups routinely top sellers?

          People want big vehicles. Even with record high fuel prices larger vehicles sat at the top of the sales board.
          Year to date September 2016 the top 3 brands are F Series(1), Silverado(2), Ram (3).
          If we look at 2013 USA year to date sales:
          F Series(1), Silverado(2), Camry(3), Ram was 8th.

          We did not get the chance to find out at what price fuel has to become to drastically alter purchase habits.

          It isn’t some sort of regulatory conspiracy if most people will chose a F150 over a Prius or a Silverado over a Colorado.

          • 0 avatar
            Kenmore

            “BAFO is assuming that people want smaller vehicles.”

            Let’s reduce that to Most Significant Phonemes by deleting the “u” and everything after it.

          • 0 avatar
            RobertRyan

            @Lou_BC
            Supersize me has become the mantra of many manufacturers. Even the Europeans now think Pickups have a Global future.
            Will be very interesting to see how the intense competition between the Europeans versus the Japanese/Other Asian manufacturers pans out.

        • 0 avatar
          DenverMike

          Even before there was any thought of introducing regulations to steer consumers one way or another, Americans wholeheartedly preferred bigger vehicles, preferably from the Big 3 automakers.

          End of day, regulations in this area are mere suggestions. The tail doesn’t wag the Dingo!

      • 0 avatar
        George B

        Big Al, market size matters. The population of just my home state of Texas is about 27 million vs. 23 million for all of Australia. The general vehicle preferences of Texas are replicated in a much larger interior region of North America extending from the Rio Grande to the interior of Canada. That large market strongly prefers relatively large vehicles so long as fuel costs don’t exceed the costs for the vehicle it replaces. Big with somewhat improved fuel economy beats small with excellent fuel economy. The only size limitation I see is that US full size pickup trucks have become a little too big to fit easily inside typical garage dimensions and height has become a little too tall to throw stuff in the bed from the side. All other passenger vehicle types fit available parking spaces easily.

      • 0 avatar
        DenverMike

        @BAFO – We can thank current regulations for many of our EV, hybrid and smaller car choices. Regulation cut both ways, but we’ll mostly buy what ever we want, and carmakers are just along for the ride.

  • avatar
    SoCalMikester

    i made decent money last recession buying F at $2.xx and selling it a year or so later at $12.xx. wish i woulda invested more.

    Not a big fan of their cars/trucks, but i think theyre pretty well run. Next downturn theyll still have the focus and fiesta around, while im sure GM will snatch defeat from the jaws of victory once again

    and FCA will probably finally disappear.

  • avatar
    bd2

    Having fresh new product is exactly what will help sustain market-share in a stalling/declining auto market.

    It’s not like GM is expanding production by building new plants; they are, however, expanding production of certain models of their trucks, SUVs and crossovers that are in demand by adding a 3rd shift.

  • avatar
    April S

    My friend who works in the service department of a nearby Ford dealership told me sales have taken a big hit, apparently due to the upcoming Presidential election. It seems no matter who is elected people are fearful of the future when it comes in making a big ticket purchase.

    Oh, concerning the much-hyped, lighter weight aluminum bed pickups. People are complaining that gas milage is not as good as expected.

    P.S. Last year when I was in the market for a new car and told him I was considering the Ford Fiesta he told me to not buy one. They were still having serious problems with their automatic transmissions.

    • 0 avatar
      DenverMike

      The entire body is aluminum, but marketing did exactly what they’re hired to do. And it’s not really weight that’s the biggest killer of pickup’s fuel economy, it’s their poor aerodynamics, over, under, behind, and especially the bed.

      • 0 avatar
        April S

        Ah, I didn’t know that.

        Speaking of aluminum, another unexpected issue is when body work is needed. Pricy specialize equipment is required plus paint prep and application is complicated.

        • 0 avatar
          DenverMike

          In just the same way, don’t believe the hype. I work in the collision industry and techs are paid the exact same hours, aluminum, steel or ‘glass. Parts/materials cost the same and tech have always had to provide their own tools/equipment, including aluminum specific. Aluminum is nothing new for the industry.

          • 0 avatar
            DenverMike

            There’s been no insurance rate hikes for the aluminum F-150 that I’ve heard of, except some are reporting lowered premiums thanks to their new, class leading Five Star crash rating.

          • 0 avatar

            Here in CT most of the body shops have a separate charge for aluminum (in some shops the hourly rate jumps as much as 40%) and the parts cost more, but yeah so far it hasn’t been a big issue.

          • 0 avatar
            DenverMike

            Mostly it’s a hassle switching tools back and forth, aluminum & steel, throughout the day and keeping everything separate, including work areas. Otherwise it’s the same deal for both for the most part.

    • 0 avatar
      JimZ

      my sister’s 2012 Fiesta is on its original transaxle, and when I drove it a couple of weeks ago it seemed like any other DPS6 I’ve been in.

    • 0 avatar
      28-Cars-Later

      I remember looking at the EPA figures and not being impressed with the roughly 2mpg savings after losing something like 800lb. I realize 2mpg for something under 20mpg avg is a bigger deal, but still in the grand scheme its not much IMO for losing almost 1,000lb.

    • 0 avatar
      Lou_BC

      @April S – in relation to mpg, I do believe that Ford is a victim of their overzealous advertising campaigns. The F150 is markedly lighter than the past F150. It isn’t much lighter than the past or current GM pickups. IIRC the Ram and Tundra are the heaviest trucks right now.
      The EB engines fell victim to the same hype. I’ve driven a EB 3.5 and it was better than my 5.4. Is it better than the Gm trucks who are ford’s primary competitor? The EB engines are very sensitive to driver input.

  • avatar
    Tumbling-Dice

    Ford has a car problem – their production cycles are getting really long. While their trucks and SUVs have a more mixed average age, their passenger cars are old, save for the Mustang. For 2017, the Taurus is entering its eighth model year; Fiesta, seventh; Focus, sixth; Fusion, fifth.

    Ford keeps hemming and hawing over whether or not the Taurus will be replaced. After all the hullabaloo Mulally had about the car being cancelled and then resurrected, it seems dumb to just let it whither again when there’s a perfectly good Taurus ready to go in the Chinese market. Yes, I know the fullsize market is way down. But again, there is a Taurus ready to go in China.

    The Fiesta finally has a replacement on track for 2018 and I’ve heard the next Focus will be ready for 2018 or 2019. The Fusion won’t be replaced until 2019 at least, and six year design cycles in the cutthroat midsize market without a major refresh* (like what the Camry received in 2015, its fourth model year) is a problem. *The Fusion’s refresh for 2017 is very minor and should have happened for 2016.

    But are six year design cycles that bad? Other carmakers have had six year cycles without it hurting their products much. Well, it does seem to be bad when you’re Ford. Firstly, because other leading carmakers only let one or two of their models in an entire decade get that old before replacement. With Ford, it’s nearly everything. Secondly, because their cars seem to start strongly out of the gate, sales wise, but fade badly into the third or fourth model year. Appealing styling and features drew people in initially, but reliability problems catch up to them later.

    I don’t mean to crap all over Ford, I like their offerings a lot, but they have some issues going on.

  • avatar
    86er

    Now, I’m not some big-city analyst, but it seems to me that while Ford is more of a domestic-market darling, GM is better situated in the global context.

    • 0 avatar

      I always wonder why Ford seems to have a sacred place in auto Journo hearts. I mean obviously some prefer other brands but since the late 90’s Ford seems to do no wrong in main stream auto writing.

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