2007 sales-without the Taurus???

[waymondospiff]

Just was thinking about the doom & gloom headlines for Ford & GM this year posting large year-over-year sales drops. And I thought that the Taurus, even though it sells virtually ZERO retail sales, is still the best-selling Ford car this year (As of July 31, 111,922 sold vs. 2nd best Focus at 111,108.)

 

As an example, July 2006, Ford's sales were down 35.7%, with cars down 5.6%. Without the Taurus selling its 8,217 units, total sales would be down 38.3%, with cars sales down 21.7%.

 

Even without last year's "Employee Sales" screwing with the numbers, here's March 2006's sales:

With Taurus - total sales 4.4% down, car sales 2.0% up. Without Taurus's 20,262 units - total sales 12.4% down, car sales 25.0% down.

 

If Ford doesn't step up other vehicle fleet sales and production, 2007 will leave the blood stains all over Ford's monthly reports. So, what's Ford to do? Increase fleet sales on Fusion & Five Hundred? Can Chicago and Hermosillo even produce an "extra" 150K+ cars next year to pick up the slack? Eat the sales losses? Drop the price on Crown Vics to pick up the slack? Escape/Fusion/500/CV/Focus/Explorer/Freestyle/Edge joint sales programs? While fleet sales are seen as "bad" sales you can't deny they make money and keep volume up.

 

Any thoughts?

 

Scott

[Noah Harbinger]

Likely what will happen is that Ford press reports will stress retail sales or some measure of how profitability has improved now that the taurus is gone... or report how the percentage of FOrds that is going to fleets precipitously dropped...

[ZanatWork]

Well, let's see...

 

1. The Taurus is basically a jobs program right now. Is it making more than it costs to keep the plant running? Doubtful.

 

2. The Five Hundred and Fusion will likely increase their fleet sales somewhat, though not enough to replace the Tauri.

 

3. With the updates coming to the CD3 and D3 cars, the sales may very well be a pleasant surprise.

[RichardJensen]

IF the Taurus made money, Atlanta would not be scheduled for close this fall. It would be postponed into the indefinite future, like STAP. The Crown Vic makes money.

 

Look for the Edge to pick up most of the slack from the Taurus, but not all. Ford appears to be set against using the Five Hundred to pickup the Taurus' slack. They have not kept Chicago idled, and will slow the line in November, instead of running full tilt to generate more fleet volume to replace the Taurus

 

Which gets to another point: many have commented on the surprising increase in RAV4 sales. Last year there was a similarly large jump in Avalon sales. Why? Because the outgoing RAV4 and Avalon were PATHETIC.

 

Toyota's response, as these never competitive vehicles neared the ends of their respective lives (both were, kid yourselves not, disappointments to Toyota, as was the Echo), Toyota did not prop up their volume by either a) incentives or b) excessive fleet volume.

 

Ford is pursuing a similar strategy with the Five Hundred/Freestyle--sales are not as high as the company optimistically predicted, but Ford could easily schedule another 30k units of Five Hundred/Freestyle volume, crank Chicago up to about 100%, and throw on the incentives (and call it a success). That they are not doing so suggests that they are learning from Toyota that it is worthwhile sometimes to simply ride out your mistakes instead of trying to turn them into 'successes' through massive incentives and fleet movement.

 

Toyota, when it comes to managing production is one of the best companies out there. Their mistakes, when they make them, are such that the company can afford to let them burn themselves out, often because the company has other successful vehicles that subsidize the unsuccessful ones, or they have other product in the same plant that can be built in place of the unsuccessful product.

 

Toyota also never abandoned either the RAV4 segment or the large car segment. With the RAV4 global demand offset weak US demand, and with the Avalon, its Camry and ES330 underpinnings allowed it to take a smaller share of total production without compromising plant efficiency.

 

----

 

But yeah Ford's fleet volume will fall through the floor next year, the Taurus representing about a quarter of all Ford's fleet volume, and most of its 'bad' fleet volume. With the Edge, Ford also looks poised to make a dramatic move into the retail segment. Ford will, essentially, replace 4 fleet Taurus sale with 3 retail Edge sales.

Edited August 18, 2006 by RichardJensen

[waymondospiff]

Toyota's response, as these never competitive vehicles neared the ends of their respective lives (both were, kid yourselves not, disappointments to Toyota, as was the Echo), Toyota did not prop up their volume by either a) incentives or B) excessive fleet volume.

 

I'll give you A. even though Toyota did have incentives on both the Rav4 & Avalon, they just didn't advertise fire sales on the TV & radio. And the Rav4 was well built, but too light & small for the US market...the Avalon, while boring, was a nice piece. But I don't agree with B. because neither the Rav4 nor the Avalon were suitable for heavy fleet sales. Most government & private fleets spec 4-door midsize sedans which the Rav4 just isn't and the Avalon is just too expensive (Taurus/Stratus/Malibu vs. Avalon?) and the rental fleets are heavily weighted towards the three biggies: Compact, Intermediate, & Full-Size. The IFAR (Intermediate Utility-Rav4) and PCAR (Premium Car-Avalon) fleets are miniscule in comparison.

 

What is interesting is in the several responses so far, most people just assume that Ford will give up the fleet business. It's not as though Merck isn't going to need cars for their sales reps next year. Nor will the government not need to update their fleets. And Avis & Hertz need a constant flow of vehicles. If Ford doesn't want to play, then we'll see a spike in Malibu & Sebring sales next year I guess.

 

Scott

[RichardJensen]

What is interesting is in the several responses so far, most people just assume that Ford will give up the fleet business.

An aside on (a), Toyota's incentive spending has gone up, as their footprint has gone up. However, I would guess that at any given moment last year, you would get a higher transaction price on a RAV4 than a comparably equipped Escape. Ditto the old Avalon vs. a comparably equipped Impala, and on (b), Toyota could've made a play for fleet volume on the RAV4, even if it's a small segment of the market, Toyota could've pushed for a bigger slice of it, and also the base model of the previous Avalon had cloth seats, a front bench with column shifter, and an asking price of $23-24k. This is prime fleet country. Assuming they're willing to knock like, what? $3-4k off that price, minimum? Toyota wasn't willing, and the Avalon kind of trailed off to a shadow of its former self (I think they sold like 30k units in 2005).

 

But to your quoted point above:

 

1) Fusion is selling remarkably well to retail customers.

 

2) Chicago capacity is not being ramped up as Atlanta is being closed (in fact Chicago is slowed for November, even after Atlanta closes in October).

 

3) Ford has nowhere to build more D3s or CD3s. STAP? Not likely, and every other plant that's underutilized is being closed.

 

I think we will see a spike in sales of Sebrings and Malibus, and if GM and Chrysler can make money off them, well more power to them. Ford absolutely is not making money off the Taurus.

[NickF1011]

3) Ford has nowhere to build more D3s or CD3s. STAP? Not likely, and every other plant that's underutilized is being closed.

 

But are they REALLY near capacity at Hermosillo or Chicago? How many shifts are they running? I'm sure the D3's will see a nice little bump with the refresh next year as well which might pick up at least SOME of the Taurus slack.

[RichardJensen]

But are they REALLY near capacity at Hermosillo or Chicago? How many shifts are they running? I'm sure the D3's will see a nice little bump with the refresh next year as well which might pick up at least SOME of the Taurus slack.

Hermosillo's running on three shifts.

 

Chicago will be idled for part of the 4th quarter (Ford had originally scheduled slowing the line--apparently now they are going to stop it entirely).

[igor]

^^the rease stated: Hermosillo will be running on straight time or overtime as needed ....

 

with 20k units a month in US, plus Canada, Mexico and Latin America, Hermosillo is puffing away at 100%

 

Igor

[2005Explorer]

Ford will loose some fleet sales after the Taurus is gone. D3 and CD3 models will see a small bump up in fleet sales after the Taurus is gone, not enough to cover the lost Taurus numbers, but enough to help their production numbers. If Hermosillo is having a hard time keeping up with demand, which appears to be the case, you might see a few more D3's take up the fleet slack then CD3's. I don't think Ford is going to completely get out of fleet sales, they are just going to do everything to avoid their new models turning into fleet specials like the Taurus did.

[Edgey]

This is Fords' last and best chance to rid itself of its fleet dependency so even if it means sacrificing a big chunk of marketshare and falling down the marketshare totem poll, so be it! They need to protect their investments, something that analysts should better appreciate than they have been! Indeed you can't cut your way to success, but Ford needs to stablize at a healtheir size/operation before it can grow again. No Detroit auto company has been this willing to sacrifice so much in order to cure its problems. Hopefully this works out in the end, but only time will tell. If it doesn't work, Ford will be in a much better position to partnership with other companies than they are now.

Edited August 18, 2006 by Edgey

[igor]

Focus, Taurus, CV, TC, and Explorer were the only FoMoCo cars that sold to fleet over 20% in 2005 ...

Taurus, TC will be Gone

Focus redesigned

Explorer was redesigned since - so this might have changed

and will leave only the (likely profitable) CV with high fleet sales.

 

Igor

[goblue93]

Where will the fleets get the 100,000 plus cars they need if they can't buy a Taurus? I doubt GM wants to sell that many more to fleets and the Japanese won't either. Everyone wants to decrease their dependency on fleet sales, but there hasn't been any decrease in fleet demand. Something has to give. I'm very interested to see what fills the vacuum when the Taurus is gone.

[igor]

^^Well there are several things happening .. First, as late aslast year, Rental agencies would get 6 months leases on their new cars ... not the standard is moveing to a more normal 1-2 years ... that decreased the demand quite a bit - especially the bad demand.

 

Second, The automakers will offer the cars for Fleets, but for higher price at which they do not loos momeny, or maybe even make some - and at that price, many covernment agencies and private fleet managers, will simly again prolong the time a car is in their fleet, because their cost/benefit equation will shift..

 

There will be fleets, but they will be more evenly distributed among all brands, and will be more profitable to all the manufacturers...

 

Igor

[RichardJensen]

Where will the fleets get the 100,000 plus cars they need if they can't buy a Taurus? I doubt GM wants to sell that many more to fleets and the Japanese won't either. Everyone wants to decrease their dependency on fleet sales, but there hasn't been any decrease in fleet demand. Something has to give. I'm very interested to see what fills the vacuum when the Taurus is gone.

Well, the gov't purchases are going to be spead among the domestics. Rest will probably go to the Koreans and domestics depending on who wants it more.

 

I figure the death of the Taurus means at a minimum 150k fleet sales that will have to come from elsewhere in the market. Divide that up among the Sebring, 300, Grand Prix, Lacrosse, Charger, Malibu, Impala, Camry, Sonata, Optima, and you get an average of 15k units per year, or about 1250 units per month extra, for each model. However, that volume will inevitably take down ASPs, and reduce profit per unit. If the Koreans and Toyota can make money selling at Taurus prices, more power to 'em. Seems likely Toyota will make a play for a lot of this volume. They appear to have lost a lot of sense over there.

 

Actually, the death of the Taurus may also increase costs for fleet buyers, as these other companies may not be willing to go as low pricewise as Ford was.

Edited August 18, 2006 by RichardJensen

[matthewq4b]

What makes the most sence is to drop the price on the CV to pick up the slack. The CV is already primarly a fleet vehical, you can not do any more damage to resale value than already has been to these units. Most of the other New models plants are at or near capacity. STAP is way under utilized and could more than easily pick up all of the Taurus fleet sales. With using the CV as the fleet car you are not hurting the new models or Fords Image. Even at current prices for CV In Fleet big profits are made. Increase the out put of STAP and profits will rise even further.

 

Currently the only sensible option is for Ford Fleet is to push former Taurus buyers in to the CV.

 

It is the most cost effective, will do the least amount of damage to ford's image, and puts fleet buyers in to a proven reliable trust worthy vehical.

 

Then only down side is the fuel milage reduction in the CV. If the new diesel can be fitted in to the panther platform that will even become a non issue. I,m sure ford would happly take the near 250k sales off one body and platform that the tooling has been paid for, for the better part of a decade and half even if they are just fleet sales.

 

 

Matthew

[RichardJensen]

Don't know that you see a dramatic drop-off in fuel economy from the Panthers to the Vulcan Taurus...

 

Combined, difference in fuel economy comes to 1.3¢ per mile, or $204/year in extra gas costs (at 15k miles per year).

 

Both are flex-fuel capable, too, which should play well with gov't fleet purchasers.

[silvrsvt]

I think the most interesting thing to watch is the Focus sales when the car is redesigned...It sells alot to Fleets, but yet its increasing retail sales since gas prices are so high (but coming down till the next hurricane hits the gulf coast or someone farts in the mid-east) so it might be possible that the Focus will grow market share for a change instead of losing it

[2b2]

...the CV to pick up the slack... ...Increase the out put of STAP and profits will rise even further...

 

Then only down side is the fuel milage reduction in the CV. If the new diesel can be fitted in to the panther platform that will even become a non issue. I,m sure ford would happly take the near 250k sales off one body and platform that the tooling has been paid for, for the better part of a decade and half even if they are just fleet sales.

Matthew

 

Something like if Lincoln had made 2 versions of the Panther - limo & retail...

if they lobbed off some overhang to make an XR8/Marauder, the plain jane (ie CommercialVehicle) version, minus the cop-car 300hp+ v8, could work for rep-car/gov't fleets?

[matthewq4b]

Don't know that you see a dramatic drop-off in fuel economy from the Panthers to the Vulcan Taurus...

 

Combined, difference in fuel economy comes to 1.3¢ per mile, or $204/year in extra gas costs (at 15k miles per year).

 

Both are flex-fuel capable, too, which should play well with gov't fleet purchasers.

 

 

If that is the differance in milage that means Ford would have to do some thing they have not done in a decade, and that is actually promote advertize and push the CV to potential Buyers.

 

Do not see that happening any time soon. The awnswer to taurus fleet sales is staring Ford in the face. Lets see if they are on the ball enough to actually pick up on it.

 

Any one wanna bet that do lol.

 

 

Matthew

[Nels Nelson]

"Ford is pursuing a similar strategy with the Five Hundred/Freestyle--sales are not as high as the company optimistically predicted"

 

So Richard, are you willing to concede that Peter DeLorenzo was right about the 500.

[thirdmust]

Am I correct to understand that rental units are leased and not purchased? If they are thats insane. Ford Motor Company should not be in the used car business IMHO. They would be stuck with thousands of used cars to sell all the time.

[igor]

Am I correct to understand that rental units are leased and not purchased? If they are thats insane. Ford Motor Company should not be in the used car business IMHO. They would be stuck with thousands of used cars to sell all the time.

yes ... that was the standard procedure at least last year - and not only at Ford. For example, GM stil lsometimes counts "delivery" as shiping to dealers ... not actualy selling the vehicle to a non-GM company, or a living breathing human being ...

 

Igor

[waymondospiff]

Am I correct to understand that rental units are leased and not purchased? If they are thats insane. Ford Motor Company should not be in the used car business IMHO. They would be stuck with thousands of used cars to sell all the time.

 

Yup. I don't think it's actually called a "lease," I think it's termed as a buy-back program. But it essentially spells out time & mileage requirements for the vehicle, often between 25-30,000 miles and 9-12 months. And yes, the manufacturers take them back and sell them to dealers at auctions afterwards. So, if you see an ad for a current year or one year old car with 25K miles at a dealer at a really low price it is probably an off-rent car.

 

And not all rental cars are "program" cars. The companies do purchase outright some vehicles and then turn around and sell them at the end of their useful rental careers. These are called "risk" cars, because of the risk in reselling them. I'm not sure what the ratio of program to risk cars may be.

 

All of the volume manufacturers, save Honda and perhaps VW I believe, do some buyback programs. It is "annoying" for the manufacturer having to resell the cars, but often the contracts stipulate a certain volume and therefore guarantees busy factories for the the manufacturer so it goes both ways.

 

Scott

[630land]

Well, the 500 is set for an update, in less than a year. Some forget.

The Fusion should have came out first, and then the bigger car. The 500 was compared to the Taurus as its 'replacement', since it was made in the same plant. Then it was paned since it didn't look like a Mopar 300.

 

Once the plain eggrate grille is gone, and maybe the car is promoted as a true family sized car and not a 'mid size'? Also, the 3.5L is a boost. If Toyota can promote full sized cars, why can't Ford?

 

 

Anyway, the losing unprofitable sales is not 'blood'. Some want to see the fake fleet proped sales #'s to 'feel good', but isn't long term profitability more important? And the darn rental companies should pay a profitable price, or go away.