Editor’s Note: Ford U.S. Sales Analyst Erich Merkle will be writing a regular column designed to provide employees with an insightful look behind the numbers posted in the company’s monthly U.S. sales report.
DEARBORN, Mich. - At first glance our August U.S. sales figures may seem a bit worrisome as we report an increase in total sales of only four-tenths of a percent over last year. But our August sales performance is much stronger than the headline number would suggest. Let me explain why. (And this isn’t meant to be some type of a cathartic response just to make everyone feel better.)
As I’ve said in recent months, there are two factors that will continue to place some drag on our sales figures through the end of the year. August was no exception. The first is our conscious effort to pull back on sales to daily rental companies, which were down 36 percent in August versus last year. Through the first eight months of this year are sales to daily rental fleet companies are down 16 percent. When the pricing gets too competitive in the daily rental segment, we don’t feel the need to chase volume for the sake of some additional sales. We have been and continue to be focused on “profitable” growth. Some businesses have never met a check they didn’t like; that’s not Ford.
The second factor is our management of F-Series. F-Series represents approximately 30 percent of our overall sales and we need to manage our inventory appropriately to ensure that our stock will carry us through the changeover that has just now begun at the Dearborn Truck Plant. Dearborn Truck can no longer make old model 2014 F-150s. To manage this inventory, we have pulled back on our incentive spend to curtail sales a bit as we move through our changeover, which will later include Kansas City Truck.
The interesting thing about F-Series is that even at the end of its product cycle our monthly sales were still above 60,000 – 68, 109 to be exact – and we are seeing the strongest average transaction prices in the industry at approximately $41,000 per truck. Our competitors would love to have a product that sells more than 60,000 vehicles a month, with an average transaction price pushing $41,000 per truck. For this reason it’s hard to look at F-Series and not smile. Did I mention that our competitors all have newer trucks already in plentiful supplies on dealer lots? My smile changes to a wide grin as I think about the all-new 2015 F-150.
If you take those two factors into consideration – the substantial decrease in daily rentals and the fact that we have had to curtail sales a little bit on F-Series to manage through the changeover – a year-over-year increase of four-tenths of a percent is really a solid result.
The real question we should be asking is, with those two components putting a drag on our macro sales, which products are picking up the slack? And the answer is: Fusion, Escape and Explorer.
Both Fusion and Escape had their best August sales ever and posted record year-to-date sales (both total and retail.) Explorer has been doing well all year long and August was no exception. Sales were up 25 percent over last year, and we had our best sales month for Explorer since 2004. That’s significant because back in 2004 the utility segment looked much different than it is today. It was largely dominated by three-row utilities, and small utilities hadn’t yet taken hold. Today, small utilities represent the lion’s share of the segment, more than 50 percent. So it’s a much different environment and yet Explorer is able to perform at levels consistent with 2004.
So as we look back on August sales, remember to keep your chin up and remain clear on our vision of delivering and executing on a record number of new vehicle launches this year. If we do this, we will undoubtedly be ready to leverage this action as we get the F-150 changeover under our belts and head through 2015. Our future sales and profit depend on the road that we pave today.
We are built Ford tough. The best is yet to come.