Ford Motor's Management Presents at November 2013 U.S. Sales Conference (Transcript)

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Ford Motor Company (F) November 2013 U.S. Sales Conference Call December 3, 2013 10:00 AM ET

Executives

Erich Merkle – U.S. Sales Analyst

John Felice – VP, U.S. Marketing, Sales and Service

Emily Kolinski Morris – Senior Economist

Analysts

Brian Johnson – Barclays

John Murphy – Bank of America Merrill Lynch

Adam Jonas – Morgan Stanley

Rod Lache – Deutsche Bank

Colin Langan – UBS

Tom Krisher – Associated Press

Deepa Seetharaman – Reuters

Christina Rogers – Wall Street Journal

Keith Naughton – Bloomberg

Operator

Good day ladies and gentlemen and welcome to the Ford Monthly Sales Conference Call. My name is Cilia and I’ll be your operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today Mr. Erich Merkle, U.S. Sales Analyst. Please proceed sir.

Erich Merkle

Thank you Cilia and good morning everyone. Welcome to Ford’s November 2013 sales call. Based on our early morning read of November data, we estimate the month finished at approximately 1.25 million total vehicles translating into a solid mid 16 million vehicles SAAR for the month, of course including medium and heavy trucks. If this holds, November sales would be up approximately 7% over levels from a year ago.

Looking at the retail side, we estimate a SAAR in the high 30 million vehicle range which would comprise of about 84% of the industry for the month. November was fairly typical producing a strong sales lift towards the end of the month around the Thanksgiving holiday weekend. It should be noted the month continued to show a market that is experiencing a good deal of resilience particularly as we compare to October.

Taking a look at some of the segment level details, full sized pickups continue to perform representing about 12.5% of the industry in November this compares to 11.8% for November 2012 and is consistent with the October levels. Small cars showed some weakness to operating at approximately 20% of the industry for the month this is slightly lower than last year’s 21% of the industry. The mid-sized car segment represented approximately 14.5% of the industry for the months which is a 1 point less than 2012.

Small utilities continued extending gains as the segment represents just over 15.5% of the industry for November, November’s percent of the industry is approximately 2 fold points higher than the 13.5% of industry reported last November. Small utilities are now operating at their highest levels ever accounting for approximately half of all utility vehicles sold in America. We believe again that this trend will continue as empty-nester baby boomers continue shifting towards smaller utility vehicles.

Now here provide you with some more perspective as what happen for the month of November is John Felice.

John Felice

Well thank you Erich and good morning everyone. Ford Motor Company sales totaled 190,449 vehicles in November providing a 7% increase over a year ago November levels. Ford retail sales were particularly strong again in November with 147,021 vehicles sold making the months our best November retail performance since 2004. And as you may remember last month in October we had a similar strong retail result, again our best since 2004.

We continue to see strong performance on the past year car side of the business with retail car sales experiencing their best November performance since 2002. Passenger cars have been instrumental in growing our retail coastal share this year. In fact Ford brand retail share gains on the coast are greater than any other domestic or Japanese brand in the industry since 2008 with a 2 percentage point gain in retail share in the coastal regions around the country.

The refreshed Fiesta continues to gain market share posting record November sales with 4,642 vehicles sold, Fiestas continues to reach on buyers primarily on the West Coast. Fiestas largest sales regions in the country or region in the country is Los Angeles where retail sales were up 20% this past month while markets such as Phoenix and San Francisco were up 71% and 33% respectively. And importantly, our competitive conquest rate continues to be very high at over 60% for Fiesta with our strongest competitive conquest coming from Toyota in the LA region.

We also had another strong month for Fusion with a 51% year-over-year increase with 22,839 vehicles sold, this represents Fusion’s best ever November in the first time the car has surpassed the 20,000 vehicle mark in the month of November. Our dealers are seeing strong growth for Fusion on the Coast, retail sales of Fusions were up 103% in the Los Angeles region 96% in San Francisco and 72% in Seattle. In the Orlando and Atlantic regions Fusion retail sales were up 68% and 44% respectively.

Again our largest competitive conquest brand is Toyota and it’s happening in Los Angeles which is one of our fastest growing regions in the country.

Turning to trucks as we close our 2013, F-Series is on pace to be America’s best selling pick up with the 37th straight years. In November F-Series marked the seventh straight month of sales above the 60,000 truck level with 65,501 vehicles sold. A 16% increase over November a year ago. Ford averaged one F-Series sale every 40 second in the month of November.

As we look across the various markets, F-Series outsold its closer competitor in every region in the country. In fact based on total vehicle registrations through September of this year Ford has outsold the second best selling pick up in the central region in the country by 56%, in the east by 64% and in the Southwest by 74%. In the west, F-Series has outsold its closest competitor by almost a 100%. This outcome of F-Series averaged transaction price of this year January through November are up approximately $500 over last year, averaging close to $38,000 per truck, the strongest in the industry through the calendar year 2013. We continue to build our dominant position with F-Series pick-ups.

Looking at Lincoln, sales rose a solid 17% November led by another strong month of MKZ performance. MKZ sales increased a 114% with 2,854 vehicles sold. We continue to be encouraged by the November sales results and the great feedback received during the New York reveal event featuring the MKZ small crossovers. We are very excited to get this new product to market, but we realize the reinvention of Lincoln brand is a journey to be measured over the course of the next several years.

That’s a quick look at both Ford and Lincoln and now I’d like to turn things over to Emily for an update on our economic environment, Emily?

Emily Kolinski Morris

Great. Thank you John and good morning everyone. As we move toward your end, the incoming indicators have improved somewhat following the dislocations we observed earlier this fall. The November purchasing managers index rose to 57.3 with notable gains and the employment component and also in new orders offsetting the weak signal we saw in the October capital goods orders report. The November University of Michigan Consumer Sentiment Reading also improved nearly two-point from the prior months to 75.1, although there is still 10 points below the most recent peak in July of this year.

The gains were due primarily to an improved outlook among upper income households. Readings on vehicle buying conditions ease slightly from the prior month and negative references to government policies remained unfavorable although retreating from the record levels that we saw in October. This evolving consumer environment was reflected in holiday weekend retail sales estimates which were mixed with some additional difficulty and comparison due to the Thanksgiving Day openings. Weekend sales were estimated to decline slightly about 3% according to the National Retail Federation although early data from Cyber Monday sales indicate strong year over year growth in online purchases.

On the housing front these data continue to lag a bit due to shutdown effect, but seem to point to the maturing recovery. The pace of existing home sales growth declined for a second month in October, but remained up 6% compared with the year ago. We won’t see data on new home sales for September until December 4th, when it will be released with the October data. But it appears that the tight supply is keeping prices high and maybe contributing to the moderation in sale.

Our home prices represented by the Case-Shiller Home Price Index rose by 13.3% in September as compared to a year ago which was a seventh consecutive month of double-digit price increases leaving average prices now at mid 2004 levels or about 20% below the 2006 peak. Leasings and home values are an important for us to support for household well. The most recent four week moving average of initial jobless claims is at 331,750 in the week of November 23 and weekly claims came down again by 10,000 to 316,000. The pace of job gains is about 1.7% over a year ago, feeling stable but modest and we’ll get another read on this of course this Friday.

So, on net the data are consistent with the U.S. economy growing in a 1.5% to 2% range this year and on the industry, as Erich mentioned earlier, we estimate that November sales were in the mid 16 million unit range including medium and heavy trucks. Sleazing out some of the recent volatility and looking at these data on a six months moving average basis this monthly gain would contribute to a modest increase in the trajectory after having flattened out in the past few months.

So with that summary let me turn it back to Erich.

Erich Merkle

Thank you, Emily. We are going to go over a few housekeeping items at this point. So we will start off with our fleet data. So as we look at fleet as a percentage of our total sales and we look at the month of November fleet was 23% of our total sales, 13% for commercial, 4% for government and 6% for daily rental. Comparing to November of 2012 fleet was 24% of our total sales that would have been 14% for commercial, 4% for government and 6% for daily rental.

When we start looking at calendar year-to-date January through November fleet as a percentage of our total sales were 29% that would translate into 13% for commercial, 5% for government and 11% for daily rental. This compares to January through November last year of 30% for total, 14% for commercial, 5% for government and 11% for daily rental.

Taking a look at our stock situation, we start looking at gross stock inventory. For cars in the month of November we had 236,000 cars in stock, 268,000 trucks, 178,000 utilities, giving us a total of 682,000 vehicles in inventory for the month of November. This translates into a day supply of 89. Looking at October of 2013, the previous month cars were at 216,000, trucks were at 262,000, utilities at 166,000, giving us the total of 644,000 vehicles this translated into a day supply of 91. Looking at November of 2012, cars were at 142,000, trucks at 236,000 utilities at 139,000, giving us a total of 517,000 vehicles, that translated into a day supply of 73.

Taking a look at our production guidance for the first quarter of 2014, we are guiding to total North American vehicle production of 770,000 vehicles for the first quarter. Trucks are 275,000 our plans utilities 235,000 and cars at 260,000. For the first quarter of 2014 with 770,000 vehicles planned that would be a 2% decline from the first quarter of 2013.

So with that in mind Cilia now with the house keeping has taken care, let’s turn it over, we are going to start with the folks and the analyst community start taking questions. Thank you.

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