Ford Sales Increase Due To Bankruptcies

Here is an interesting article on the American psyche.....it is interesting to see people's perceptions. Based on a survey released today from Rasmussen Reports....46% of Americans are more likely to by a Ford than vehicles from GM or Chrysler. The reason is that Ford did not take bailout money from the government. Apparently, there is a lot of resentment against the bailout.

The latest sales report for June substantiates the survey. Ford sales were down only 11% and GM sales were down 33% and Chrysler down 42% respectively. GM was in the midst of the bankruptcy during June so that may have had an impact on the survey. Chrysler had already come out of the bankruptcy.

One issue not addressed in the survey is that Ford quality has been continually improving over the last few years. In addition, they have brought out some very competitive cars like the Fusion Hybrid, Taurus and the Mustang. So, both quality and competitive cars could be part of the increase sales.

Personally, I was incensed the way that Chrysler closed 789 dealers giving them a minimum of notice...whereas GM gave their dealers that they were closing over a year to wind down the business. Closing that many dealers in the month of June may have impacted Chrysler sales in that month.....so we will see how this trend continues.

In fact, there were a number of people and organizations that were burned by the bankruptcies. The worst were people that had been severely hurt by vehicle malfunctions that now do not have much recourse since GM and Chrysler have gone into bankruptcy. I will be doing a future post on the damages inflicted due to the bankruptcies.

Another interesting fact is that 41% of Americans expect the quality of GM cars to get worse now that the government is the majority owner.


SUMMARY:

I don't necessarily agree with all the perceptions that have been outlined by the Rasmussen survey. I did not like the fact that GM and Chrysler had to be bailed out...but I viewed it as the only scenario that would work to save a number of jobs and deepening an extremely severe recession.

I hope that the government will stay out of GM and Chrysler management. In two or three years, the economy will be rebounding and auto sales will be increasing materially. I suspect that the GM will prepare a stock offering and the government will be out within a couple of years after that.

Auto Sales for May

U.S. auto sales are still down 39% versus a year ago, which is still a substantial decline. It appears that the U.S. based automakers are having a rebound in sales with the exception of Chrysler. Sales were the best they have been since the summer of 2008....with a annual run rate of 1.1 million cars.

Ford and GM sold more cars in May and cut the downward spiral sales for the month. During April, Ford and GM sales were down 32% and 35% respectively. An interesting fact is that GM declared bankruptcy during May but their sales were up from the prior month. Meanwhile, Chrysler stayed down 47% for both months.

Mitsubishi down 58%
Chrysler down 47%
Honda down 42%
Toyota down 41%
Mazda down 40%
Nissan down 33%
Mercedes down 31%
General Motors down 29%
BMW down 28%
Ford down 24%

Volvo down 23%

Hyundai down 20%
Volkswagen down 16%
Kia down 16%
Subaru down 5%

It appears that new products were the reason behind the twenty percent increase in sales over April. The Ford Fusion, Ford Flex and the company's hybrids set sales records. In addition, two new Lincoln sedans the MKZ and the MKS helped Lincoln post a 2% increase.

Ford's Fusion set a record of 18,321 cars breaking into the top three mid-size sedan market for the first time since July 2002. The Ford Fusion and Mercury Milan have the best predicted reliability among all mid-size sedans. The Japanese brands have dominated the mid-size segment with the Toyota Camry and the Honda Accord.

May sales were up at a fairly decent run rate of 1.1 million cars annually. So, it appears that consumers had more faith in the future to spend money on high ticket items.

An interesting anomaly is that sales of Japanese brands continue with the downward spiral meanwhile U.S. manufacturers seem to be improving. We will have to monitor to see if that is a trend that will continue!

Can Chyrsler Be Saved?

The talks between the Chrysler and some of the lenders broke off yesterday! Chrysler will go into a government sponsored bankrupcy probably on Friday. Apparently, the government had worked out a deal with the largest banks, which they have given billions of loans in support. But, some of the hedge funds were balking at taking a hair cut! Obviously, no one wants to lose money on their investment, but the current situation is dire.

One of the difficulties for Chrysler in the negotiations is that are a number of different parties involved.....Fiat, four major banks, forty hedge funds, the United Auto Workers (UAW) and the Chrysler dealers. Apparently, for this restructuring to work all the parties involved would have to cooperate. Most if not all would have to take a substantial haircut...that is the million dollar question. Apparently, the hedge funds were the creditors that would not accept what they were offered in negotiations.

The Chrysler production plans are to produce Fiat designed vehicles in the U.S. for sale here and abroad. Car & Driver has an excellent flowchart that shows which vehicles will be produced going forward.

My take is that Chrysler will be put into a government sponsored bankruptcy! If Chrysler survives, the government will have saved Chrysler! So here are a couple of the autos that probably be produced!

Chrysler executives said the day is coming when the whole Chrysler fleet has electric powertrains. "The goal is to achieve fundamental technology, get economies of scale, improve our ability to make the future generations more robust, less cost, smaller, more powerful, better performance," according to Bill Press V.P & President. "Ultimately it will lead to a transformation of our entire fleet that will be in some manner electric drive."

The Dodge EV development vehicle, also called Dodge Circuit EV sports car, is a two-passenger, rear-wheel-drive, all electric sports car that combines a lithium-ion battery pack with a 200-kilowatt motor, capable of generating 268 horsepower. That's enough to propel the vehicle to 60 miles per hour (mph) in less than 5 seconds and to reach a top speed exceeding 120 mph (190 km/h). This car would be in build in cooperation with Lotus Motors and is almost identical to the Tesla Roadster.

The Dodge Zeo is a concept car, which is a four passenger sport wagon, powered by a single 268 hp. electric motor in coordination with a lithium-ion battery pack. It is a rear wheel drive 2+2 that can go 0-60 in 5.7 seconds. It has an effective range of 250 miles (400 km). between charges.

Ford Posts $1.4 Billion Loss

Prior posts have brought up the precarious state of the auto industry in the the U.S. and the world. Ford announced yesterday that it lost $1.4 billion dollars for the first quarter of 2009. OK, that is a huge number for any corporation!

Ford stock was up 11% percent yesterday on the news. Wall street had been expecting a larger loss based on the first quarter severe downturn of 37% in sales from 2008. So, Wall street voted with their pocketbooks and purchased the stock based on perceived positive news.

Ford CEO Alan Mulally has turned around the company since joining in the company in 2006. One of his first major moves was to obtain $23 billion bank loans in 2006. He had to mortgage every asset the company owned including the Ford blue oval.

Since Ford was able to obtain financing in 2006, they have been able to weather the financial crisis much better than GM and Chrysler. Mulally had the vision to know that if times were tough that cash is king. His financial acumen is paying huge dividends now...Ford has not needed a government bailout. Ford currently over $21 billion dollars in cash! They project that they have sufficient funds to go thru 2010 without any additional government support.

My take on this is that Mulally has done a superb job at Ford! They have not had to beg for government money...instead they can focus on getting to profitability.

There are two potential problems! First, if GM or Chrysler file for a chapter 11, that may negatively impact some of the automobile suppliers which could possibly disrupt Ford's ability to produce cars. A Chrysler bankruptcy appears eminent at this time! Second, if sales continue at this negative pace or get worse then they would require governmental assistance in 2011.

Check out the article written by Ken Bensinger of the LA times!