Ford Motor Company December Sales Call Transcript

Ford Motor Company (F)

September Sales Call

January 5, 2008 1:00 PM ET

Executives

George Pipas - Ford Sales Analyst

Emily Kolinski Morris - Ford Senior US Economist

James D. Farley - Group Vice President - Marketing and Communications and US Marketing, Sales and Service

Analysts

John Murphy – Merrill Lynch

Rod Lache – Deutsche Bank Securities

Christopher Ceraso - Credit Suisse

Patrick Archambault - Goldman Sachs

Journalists

Jeff Bennett – Dow Jones

Bryce Hoffman - The Detroit News

Amy Wilson – Automotive News

Presentation

Operator

Good day Ladies and Gentlemen, and welcome to the Ford monthly sales conference call. My name is Katina and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will conduct a question and answer session towards the end of this presentation. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to our host for today’s call, Mr. George Pipas, Ford Sales Analyst.

George Pipas

Thanks for dialing in to Ford’s conference call. Joining me today is Jim Farley, Ford Group Vice President - Marketing and Communications, as well as Emily Kolinski Morris, Ford’s Senior US Economist.

Let’s just give you some high hard winds here on November sales and level status. From our standpoint, based upon what we know it looks like the industry sales rate including medium and heavy duty trucks was $10.5 million. That means sales unit volume is down 35%, 36% compared with the year ago.

Ford sales total almost 119,000. I’m talking about Ford, Lincoln, Mercury so sales are down 30%. For the second month in a row our decline has been less than the industry decline and therefore our market share has been higher now two months in a row. Let’s just talk briefly, get in to production which is a big piece of the announcement as well as inventories before I turn it over to Emily and then to Jim.

From a production standpoint, our fourth quarter schedule is pegged at 430,000 units. That’s unchanged from the level we were at, the level that we announced on November 7^th. For the first quarter 2009, and I want to emphasize 2009 because in the press release one of the bullet points at the top of the page says, “First quarter 2008.” So, let me just clarify that and correct that error.

But, for the first quarter we’re also at 430,000 units and there’s a little mix shift between cars and trucks as we move from the fourth quarter to the first quarter. You’ll notice that, or actually you won’t notice but let me just point out that in the fourth quarter our schedule of 430,000 is 175,000 cars and 255,000 trucks. Again, unchanged from the previously announced level.

In the first quarter, the 430,000 units is 125,000 cars, 50,000 fewer than the fourth quarter but 305,000 trucks and that would include full size trucks and vans, SUVs and CUVs. So, that’s 50,000 more and that’s consistent with the discussion that we’ve had in the last sales conference all in which I indicated that after the gyration, the breath taking segment shifts that we experienced this year, recall in June we slashed truck production in the second half of the year and moved increased car production.

Well, several things have happened, incentives, gas prices have gone down since that point but in effect, right now we need more trucks and we need fewer cars and cross overs, for that matter. So, the entire increase I’ll just point out to you, we’ll give you a little color, if you go from the fourth quarter to the first quarter, that entire 50,000 unit increase on the truck side is in the F series system.

Now, this is a very, very low level of first quarter production and it is going to tie in to the inventory discussion that I now want to present to you is that we continue to align very, very carefully, watching it carefully every week that goes by, our level of inventory with consumer demand. This is not only important to line up with consumer demand but it is also important from the standpoint of the willingness and the ability of our dealers to take this inventory.

We do not want to get in to a position where we’re paying our dealers to take our production. We want to pay our dealers and we want to direct our incentives to consumers. Not that our dealers don’t need help but, the way we can help them is to keep their inventories lined up with consumer demand because floor plan is such a big part of their operating expense.

So, we’ve taken another very difficult action, you can see the comparison with the year ago first quarter when we built 692,000 cars and trucks and all of this is consistent with our near term outlook which basically is that the conditions today, economic conditions, the credit conditions, the prospects for employment and consumer confidence certainly suggest to us that the sales rates we’ve seen in the last couple of months, that was 10.8 in October, probably a 10.5 in November, that kind of condition is going to persist as we enter 2009.

Emily, I’m going to hand it over to you for the update on the economic situation.

Emily Kolinski Morris

Well, I’m not sure whether to put this in the category of new news or old news but the big story on the economic front this week was yesterday’s announcement by the National Bureau of Economic Research of the official start date of the US recession. In light of that announcement I thought that this might be a good time to take a quick look at where we are today on a few key economic and industry indicators as compared with December of 2007 when US economic activity peaked.

In December 2007 consumer confidence was at 75.5. That was already 20 points down from its peak with consumers worried about rising food and energy prices and the emerging credit crunch. Today, confidence is at 55.3, a further 20 point drop with job and income security leading the list of concerns.

The unemployment rate was at 5% at the end of 2007 as compared with 6.5% today. The Federal Reserve had already started to lower interest rates with the Fed Funds rate at 4.25% at the end of the year. This rate has sense then been reduced to 1% with the potential to fall further. And, we’ve spoken in prior calls as well about the other fiscal and monetary stimulus that has been implemented to improve the financial market conditions and stimulate growth including more than 10 new lending facilities by the Federal Reserve over the course of this crisis.

Notably, new vehicle sales including medium and heavy trucks were running at a six month moving average of 16.3 million units through December of 2007. With the estimates of the November start at about 10.5 million units, that six month average will be in the 12.5 million unit range. In our sales call 12 months ago we were already highlighting the need to maintain production in line with demand due to the uncertain economic outlook.

That of course may have turned out to be the understatement of the year. I offer these start comparisons to highlight how quickly and severely the business environment has changed. Unfortunately, despite the aggressive policy efforts to date, we still do not see a near term resolution to the financial and economic crisis. Our assessment continues to be that consumers will reduce spending and increase saving as a precaution against further job and income losses and that this will extend the economic slowdown at least until the first half of next year.

That suggests vehicle sales running at or below the current sales pace in the coming months. Beyond that, we continue to monitor the policy environment and the market response to chart the path out of the current slowdown.

James D. Farley

Obviously we’re here to give you an update on November sales, before we do that you probably want to hear about today’s and this week’s really big story which is this morning we submitted our plan to the Senate Banking Committee and the House Financial Services Committee. Alan is now somewhere in Ohio traveling to DC in an Escape Hybrid.

We really welcome and appreciate the time and attention that Congress is devoting to this critical issue that confront all the domestic automotive industry in this incredibly interesting current environment. We feel that it’s a great opportunity for us at Ford because our story is unique and we know that the truth will get out.

We hope our submission and the company testimony later this week will address the valid concerns about Ford’s potential for future viability. I think many of you know that Ford is in a very different situation from our competitors because we believe our company has the necessary liquidity to weather this unprecedented economic downturn that Emily just finished talking about.

That’s assuming that it has limited duration. If the downturn is longer and deeper than we anticipated obviously, access to government financing even for Ford could be important for us as a backstop to implement our plan. We’ve been busy on our plan for many years now, we’re starting to see a lot of great success and that’s what we’ll highlight in DC that we’ve been busy for many years now transforming Ford Motor Company through our One Ford Plan.

We understand today’s sales discussion is a small but very vibrant part of the story that we’re all following. So, what’s the takeaway for November? Well, first as George and Emily had indicated, I really think that the takeaway is consumers. Consumers are under more and more pressure despite some positive news on retail, sales as a whole in the beginning of the holiday shopping seasons, the automotive sector seems to be really continuing under a lot of pressure because customers are just under so much pressure right now.

I can’t tell you how many times I’ve read, “Auto sales are down 12 months,” this makes 13 months and I’m often asked the question, “Where’s the bottom?” Well, we believe that auto sales will continue to be lower than a year ago at least through the first half of next year. And, as we said in last month’s call, we could see some strengthening the second half of next year or at least stabilization, albeit a much lower level.

But, I think the first quarter of next year will really be the truth point of the industry as the current merchandising we see in the market extinguishes to some extent. Well, how much lower? I think it’s pretty tough to say at this point as it is so tied to the economic situation and forget about calling next year, we’re working hard to call next month and next quarter as Emily said.

Case in point, we suggest that November sales rate may be a little higher than October, just 30 days ago. October was 10.8, well you just heard George say – and the reason why we were optimistic is because GM was starting their yearend sales event frankly at the moment that we were having our sales call and we start our yearend sales event in mid October and we saw so many automotive competitors come in the market in November with their own merchandising, much earlier than normal as their yearend sales event.

Well, it turns out now that November sales rate was actually lower than October despite all that merchandising and the oddest part for us was the cadence by week. November actually started very strong. The first week or so of the month we saw very high reporting and we were optimistic that the industry would be stronger than October, albeit a much lower rate than we hoped for.

At the end of the day middle of the month we saw a noticeable slowdown and that’s very unusual. Usually the third week is stronger than the second, that didn’t happen this time. It did by coincidence coincide with the Washington hearings and we have done a lot of research with customers around the impact of those but frankly, it’s very difficult to separate the fundamental impact they had on customer sentiment versus just all the other things going on so we don’t want to really overemphasize the impact those hearings had on the industry sales because it’s clearly across all brands.

In our view, we here this from our dealers, the talk of the bailouts and the bankruptcies and uncertainties and job loss has obviously done little to bolster consumer confidence and it’s not, as I said, just a brand like Ford.

I don’t want to leave you with the impression that the hearings and the report of the challenge faced by the automakers as a reason for slow sales in November. There were just so many other weak economic fundamentals that played a factor in that that it’s just unfair to characterize that factor so importantly.

But, despite all this, we did tough out our November and had another good share month largely on the back as George said of F series but we are really in the kind of sweet spot of any launch of F series where we have great merchandising opportunities for a carryover product and frankly the best in segment product with unsurpassed gas mileage and the most capability all in the show room at the same time.

Our dealers, especially through the Midwest from Southwest all the way up to the Canadian border are really making hay with that opportunity with the fewer number of dealer customers coming in. We see the truck market being a very stable volume part of the industry therefore, as the industry shrinks it is becoming a bigger part of the industry not just because of fuel price. We think our market share will be above 15%.

That’s one point higher than a year ago and higher than our plans. Frankly, when you look at October where we also were above 15% that will be two months in a row where we were above 15% and two months in a row where our share will actually be higher than last year. You can eat share but it’s consolation to us that our products are being well received. It’s encouraging for a couple of impacts, one is our yearend sales event is really targeting customers.

As George said, a lot of our competitors because of their manufacturing decisions are really having to spend a lot of time with their dealers having to talk about how they are going to get their wholesale – wholesale capacity is now becoming a very big issue for our industry because dealer profitability and the flooring expense George talked about is becoming frankly the capacity for wholesale now, not retail incentives.

Ford’s approach to continue to match supply to demand is really starting to pay off for us because we can focus our merchandising on consumers and not on our dealers. The second key point is segmentation. We saw Ford be adversely affected because of our high share in pick up trucks during the summer months, we’re seeing almost all of that reverse now. Segmentation because of gas prices and also customers are buying those trucks need that product, it’s a need based purchase.

We’re really encouraged with our sell down progress and especially the acceptance of our new F150. In November almost 20% of our sales of total F series were the new truck, almost 5,000 units. That’s a very strong performance for us in an introduction month. November was also a strong month for endorsements from third party. We saw the Insurance Institute for Highway Safety, Ford has more five star ratings than any other brand. We were on the cover of Consumer Reports with Fusion on the progress we’re making on quality.

We had a really exciting launch Fusion, Fusion Hybrid, Milan Hybrid and refreshed MKZ and plus a new Mustang at the LA auto show. It was really exciting for all of us at Ford to talk about our fuel economy leadership versus Accord and Camry so dramatically which now adds to the list of F series and Escape where we now have substantially better fuel economy than Toyota, Honda and those segments.

The new vehicles like Flex and MKS and F series are very well received. Even the new Fresh and Escape which really sets us up nicely for next year from a share standpoint as we look at launching the Fusion Milan Z, the new Hybrids, Mustang, Transit Connect. We really go in to a very launch cadence mode and we think that October and November really set us up from a share standpoint to continue to build momentum.

As I said from a marketing standpoint, I’m really optimistic that the truth will get out about Ford and our accomplishments and our new products but the market is incredibly challenging for now because of consumer pressure.

George Pipas

If you’ll start the Q&A session for us, we’d appreciate it.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from John Murphy – Merrill Lynch.

John Murphy – Merrill Lynch

Two questions for you real quick, first on your market share gains and Jim I love your statement, “You can’t eat market share,” but it is a good thing that it is moving in the positive direction. I’m just wondering how you’re winning that market share? Is it because of conquest business, is it because of the F150, is it because of the concern about bankruptcy at your domestic or the other Detroit three competitors? What’s going on there that you think you’re gaining some market share?

James D. Farley

There are a couple of factors. Good question. First one is these segmentation I think is really playing in to our hands with the sell down in new trucks at the same time and certainly the level of cross shopping between competitors in that segment is very high and so we’ve seen some good news there. We’ve also seen some positive news on our CV car Fusion. Fusion is really the highlight of our share gain in November and it’s really positive news for us that it’s not just isolated in F series.

I think those are the main drivers for our share increases so far. We are looking at what are the root causes in terms of customer interaction between the different brands because obviously this could be an opportunity for us. One thing I’d like to emphasize is the role that Ford Credit plays. The stability Ford Credit has provided our dealers really I think has been a difference maker for us in the last 60 days.

We’ve seen our competitive captives have all sorts of different strategies and our continues to be about 50% penetration for Ford Credit. I would say that’s probably the third key link for us, just the stability of Ford Credit.

John Murphy – Merrill Lynch

Then George or Jim, on the pricing in the market, do you believe that incentives have started to really lose their power or their elasticity here? And, might you potentially see a pull back on pricing? Is the consumer just so fatigued it doesn’t even matter what the pricing is on vehicles?

George Pipas

I think price is important John, continues to be important and obviously it continues to be a very competitive environment in that regard. But, I think to a certain extent, right now you are seeing an environment that might be characterized as pushing on a string. It’s not just our business but even that good Friday was accompanied by a softer Saturday and Sunday on the retail business. So, the price can get people’s attention but in terms of its ability to lift sales to a new level for some sustainable basis, I think it’s a little on the weak side.

Emily might comment, or may have commented just a little bit in her last paragraph that in a way you’re seeing this a little bit in the financial system that a lot of money and lower rates have been pushed out in to the financial system, the banking system but the question is what’s happening to it? What kind of an impact has it had to this point? So, there will be a point when pricing elasticity I think becomes greater but right now it’s a pretty reluctant, cautious consumer.

Emily Kolinski Morris

I think John just to add to that, in the latest [U of M] survey, they look at consumer price expectations for overall inflation in the year ahead and they had over 30% of consumers expected zero to negative inflation in the coming 12 months. Now, that’s not to say that we’re headed to deflation but obviously that’s a risk in this kind of environment but what it does suggest is to the degree that consumers expect prices to fall and the size of discounts that they’re coming to expect.

So, I think if you were to get a boost from pricing right now it would have to be much bigger than what we’ve seen and I’m not sure that as an industry anyone wants to go there.

Operator

Your next question comes from Rod Lache – Deutsche Bank Securities.

Rod Lache – Deutsche Bank Securities

A couple of things, one is just as gas prices are falling do you think that poses some risk to your product plan which is to some extent based on more fuel efficient products? And also, are you still assuming roughly 14% market share through this planning period which the document you published this morning goes out to 2011?

James D. Farley

First of all, the key message on our product strategy is a balanced portfolio with flexible manufacturing behind it including engine capacity. The key is that we want to fortify the parts of our product line up where we weren’t fully representative from B, C, upper body variations of C, fortified Lincoln more and that means a big investment in cars.

The key issue I think is really timing. All of us at Ford are convinced that ultimately fuel prices is going to escalate once the global economy comes back, whenever that is 10, 11 and that is the timing when we will be introducing a lot of our global products in to the market. In the short term the fuel price really helps Ford from Mustangs and Taurus, F series but over the next 36 months as we fill out and diversify our product range, it will give us a great insurance policy for wherever.

The one thing that we’ve learned in the last six months is that customers move at a lightning speed to whatever they think is the smartest buy and that’s the thinking behind our product strategy.

Rod Lache – Deutsche Bank Securities

And the market share going forward?

James D. Farley

At this point I think it’s too early to relook at our base assumption on market share. Obviously you can imagine Ron the last 60 days we’ve been spending a lot of time on our market share going forward but we don’t see a dramatic difference versus the third quarter guidance we gave but we obviously are seeing a little something going on now the last 60 days and we’re really spending a lot of time understanding the root cause. When we change our forecast we’ll let everyone know.

Rod Lache – Deutsche Bank Securities

Lastly, it looks like you are planning a little bit of an inventory increase in the first quarter and there’s some color on the number of dealers that you’re consolidating here in this document. So, just give us some color on what you think ultimately where this dealer count goes and how does that interplay with the inventory that you’ve got to maintain in the field?

George Pipas

Actually Rod, let me just give you some insight in to the industry assumption that’s behind our production plan and where we think that’s going to put US inventories. As I indicated at the end of November, we’ve got 482,000 cars and trucks in inventory. I just want to remind people that includes units that are in transit to our dealers as well as what’s actually on the ground.

With the 430,000 that’s plan plus the 430,000 for the first quarter, we think by the middle, end of January, in to February the 482,000 units of stock is going to be reduced to 400,000. So, we’ve got about another 70,000, 75,000 or so to go before we get to where we think we’ll probably be and maintain through the first half. Now, along the way of course we can take a reading. As I indicated, we’ve been pretty diligent about doing that and persistent about maintaining that discipline.

But, we’re targeting for a level at the end of January that’s roughly about 400,000. With regard to dealer count, Jim?

James D. Farley

Just quickly, since 2006 Ford has really worked very hard working with our dealers actually to consolidate our network so the number that you’re seeing in there is a result of that. It’s been pretty steady although we are starting to see a lot more distress in our dealer network. I would say that we find a more challenging wholesale environment but no big surprises. We’re not having any difficulties because of the proactive nature of our production cuts in the fourth quarter and first quarter.

We feel that we’ll be able to get through the first quarter with our dealer count with the right amount of wholesale. Frankly, a lot of our regions now and dealers in those regions are really concerned about their truck inventory. We’re starting to see quite a few regions where they’re trading trucks across state now because we’ve run out of ‘08s and the ’09 shipment isn’t as fast as they would want so there are some opportunities for more truck but we put that in the production but not very aggressively frankly. We’re still pretty conservative on our call.

As far as the dealer count, it’s not so much the dealer count that’s really driving the let’s say wholesale capacity with our dealers, it’s more the financial pressure that each of the dealers that we do have is under. That conservatism is a new factor that I’m seeing in the wholesale capacity.

Operator

Our next question comes from Christopher Ceraso - Credit Suisse.

Christopher Ceraso - Credit Suisse

A couple of things, have you seen a change in the demand for power trains? Have you seen a shift back to six cylinders away from four cylinders?

James D. Farley

That’s a great question, something we’ve been watching very carefully. We, like everyone else saw a huge escalation to four cylinder in the CV segment, the Fusion segment. It’s been pretty interesting because as of yet we have seen people move back to full size truck segments for example, SUVs and mid size crossovers but we haven’t really seen a huge demand shift in the power trains where there are two power trains available.

For example, on Fusion the Fusion four cylinder continues to be our most popular fastest turning fusion and that wasn’t the case a year ago. The Escape, we’re seeing a 50/50 mix. We aren’t seeing the dramatic sales turn difference between four and six probably because we’ve kind of caught up on the production. We were chasing the production for many, many months but now I think we have a pretty good balance. We don’t see big turn differences and we haven’t seen six or eights suddenly become a lot more popular.

Christopher Ceraso - Credit Suisse

One clarification if I could on the documents to Congress, the breakeven or better in 2011 is that on the $15.5 million 2011 sales forecast that’s under your, “Slightly improved rate,” base case?

George Pipas

I think Chris that we’d like to defer specific questions about our submission for this week’s testimony and subsequent to discussions with Lewis Booth at [inaudible], okay. Come back to the sales situation here currently.

Christopher Ceraso - Credit Suisse

I had just a couple of housekeeping items George. Can you give us the retail fleet details? The year-to-date [inaudible].

George Pipas

Sure thing Chris.

Christopher Ceraso - Credit Suisse

[Inaudible] on the inventory.

George Pipas

On the car truck split of inventory, I’ve got that right in front of me so let’s handle that. In the 482,000 total vehicles in inventory, passenger cars were 193,000, actually let’s call it 194,000 and 288,000 on the truck side and on the retail and fleet split it was pretty steady actually on both ends 30% reduction in total as I mentioned earlier. Retail was down to 29% but very close to the total and fleet was down 31%. The fleet mix in the month was 31%, I think it was 31.5% last year. It was about a one percentage point difference in fleet mix from one year to the next.

Operator

Our next question comes from Patrick Archambault - Goldman Sachs.

Patrick Archambault - Goldman Sachs

I guess a quick one on financing, am I am right in understand that your financing shares remained stable which in the face of a lot of non-captives reducing their auto loans by levels of 50% would mean that potentially people are buying more in cash? How does that work? It seems that just given what we’ve seen from Capital One and I think Americredit, how does that reconcile with kind of a stable share? Why isn’t your share I guess increasing as you guys become the only source of financing?

James D. Farley

Well, it’s interesting, I know in the media there’s been a lot made about the reducing of consumer capacity for retail financing for automotive. Frankly speaking, we still see quite a bit of alternative financing available, for example, credit unions which in many parts of the country, especially where Ford is strongest are really very vibrant and actually are using this opportunity to build their share.

Our cash buyers are in the 40% for us and we’re seeing our captive share as I said, in the 50% range. We haven’t seen a lot of big changes, actually the last two months have been kind of a stabilizing period for us in terms of lease retail financing versus cash. So, it’s not a lot of changes for us.

I agree with you, I think popular perception would be that our Ford Credit share would increase as the other alternatives decrease but frankly, that’s not what we’re seeing because there are still alternatives and the credit unions being I would say, and of course some local banks, are still very vibrant in the market place.

Patrick Archambault - Goldman Sachs

And if I may, just one follow up, just on the dealer floor plan side. I didn’t quite understand, I guess you had said that incentives to dealers, a lot of competitors were focusing on incentives to dealers, can you just clarify a little bit what that means?

James D. Farley

Yes. Right now third party entities that report on consumer incentives, they don’t really incorporate dealer cash or wholesale incentives. We’re seeing as our competitors manufacturing footprint or their ground stock growing very quickly what they’re doing, and the dealers being so sensitive about their interest expense on whole sale – what they’re doing is they’re taking some of their incentives and moving it towards incentivizing their dealers to take the inventory so they can get the revenue for their balance sheet instead of directing those incentives to the customer.

Now, what we’ve seen growing in the last 60 days is the combination of both where, “If you take my wholesale Mr. Dealer, I’ll give you some cash that you can put in to a consumer deal or you can just keep for yourself.” Obviously, with the dealer situation right now, we’re seeing most of that cash being retained by the dealer just to keep the lights on and pay their sales people.

So, we’re seeing an escalation in dealer cash, we’re seeing more wholesale incentives by competitors. Ford continues to believe in our strategy of building the right demand so that we can put our incentives where customers will notice them.

Patrick Archambault - Goldman Sachs

That kind of incentive isn’t really fully captured by things like Auto Data and stuff like that?

James D. Farley

Absolutely, it is not captured.

George Pipas

Let’s take our first question from the journalist.

Media Question-and-Answer Session

Operator

Our first question from the media comes from Jeff Bennett – Dow Jones.

Jeff Bennett – Dow Jones

Just a quick one, the 50,000 fewer cars, is that from the same time period in the first quarter of ’08?

George Pipas

No, that 50,000 variance was fourth quarter to first quarter. What I was pointing out was the shift towards truck now as we try to balance our car and truck inventories with where the consumers are taking us. So, remember last month Jeff I indicated as a result of changes made this summer we really got to a point as it turned out where we had more car and cross over inventory than what the sales were and less trucks.

So, now we’re making that adjustment. If you compare it to a year ago and the comparative total vehicle number is 589,000, you may recall me saying that our inventories were down at the end of November by 107,000 units, last year we had 183,000 cars so we’ve actually got 10,000 more cars on the ground than at the same time last year and we had 406,000 trucks. So, 117,000 fewer trucks. That’s not where the business is taking us right now at least.

Jeff Bennett – Dow Jones

Jim, I’m just wondering on that, do you think it’s just the incentives and the low gas prices that are driving this or do you think it’s again you’re getting back in to the sweet spot of those who really want are now shopping and you’re going to see this continue?

James D. Farley

That’s a great question. We really hesitated to look at the truck business, the pick up truck business as a percent of the industry anymore. We look at it as raw volume. You would be surprised at how consistent it has been over the last 120 days as a raw volume. As the industry has fluctuated up and down its percent, now the industry is so low it’s up in the 14%, 15% of industry but it’s always 90,000 to 100,000 units pretty consistently month in month out.

The drivers that we see, the customers we talk to, they are customers that need a truck. Fuel price, is that stimulating demand? No, because the volume is staying about the same, the industry is just coming down so the percent of industry is going up.

Operator

Our next question comes from Bryce Hoffman - The Detroit News.

Bryce Hoffman - The Detroit News

A couple of questions, the first one, if I understood you correctly, Jim you said that most of the gain in market share that you saw was a result of F series and Fusion sales, is that correct?

James D. Farley

Yes.

Bryce Hoffman - The Detroit News

What’s happening with the crossovers and the flex in particular?

James D. Farley

Well, let me start out by saying the cross over segment obviously has been down sharply ever since sales started falling. Take last month for example, industry wide sales of cross overs were off 33% which was consistent with the industry. The flex Bryce has been steady but at a lower volume that partly reflects the lower industry volume.

I’d just point out that actually the retail piece, not that there’s been a lot of fleet sales, hardly any at all since we launched the product but, this was the highest level of retail sales in the month of November which is kind of odd because the total industry volume we believe is less than 800,000 in the month of November so industry volume has trended lower but flex has just gradually increased its retail sales each month and its share of the segments.

Not as much as what we thought last January and February when we were on the cusp of launching the product, building the product but nonetheless, it continues to gain.

George Pipas

And it’s retail sales are pretty similar to a lot of other new cross overs, etc.

James D. Farley

The other issue and opportunity we have obviously is Edge and of course the Escape, we’ve seen the Escape share wise do fine. In fact, despite not a lot of advertising behind the new model we continue to do well with Escape. Edge has been more challenging because it’s very dependent on lease. We’ve been a lot more carefully to direct our lease capacity to Lincoln just because we have new products like MKS to support and as a result when you combine that with some of the cross shopping in the showroom with flex, Edge is really the product in our line up cross over wise that’s suffered share wise.

Bryce Hoffman - The Detroit News

The second question, on the production cuts in the first quarter, are you going to be able to accomplish those production levels with the actions you’ve already talked about in terms of shift reductions and cutting overtime, etc. or is there going to have to be additional actions taken?

George Pipas

Well, what do you mean by additional actions?

Bryce Hoffman - The Detroit News

Additional actions beyond the type you’ve already announced?

George Pipas

No, no additional actions to accomplish that.

Bryce Hoffman - The Detroit News

And are you still going to be adding a third shift at Dearborn Truck?

George Pipas

Yes. In the first quarter some time.

Operator

The next question comes from Amy Wilson – Automotive News.

Amy Wilson – Automotive News

I wanted to ask you specifically, you were talking about the plan you’re talking about to Congress later this week. When we talk about the vulnerability that Ford has to a failure by its domestic competitors I’m just wondering if you could talk a little bit on where is Ford vulnerable on the retail or sales side of the business? Is it the shared dealers failing that you have with GM and Chrysler or is it the mutual suppliers failing and limiting your ability to product certain vehicles? Or, is it just the bad news effect on consumers towards all domestic? I’m just kind of curious on which of those factors is the vulnerability?

James D. Farley

That’s a really good question and a very important one Amy. Since it’s a sales call I just want to limit our conversation to where we are in November. I will say from a dealer standpoint we obviously spend a lot of time looking at that and we don’t have a lot of dual dealers, especially with General Motors. We have a few with Chrysler but frankly they tend to be in smaller single point markets where they need to be dual to be viable. So, right now for us, the supplier situation is really the most significant.

George Pipas

Folks, it’s passed quarter till. Thanks for the lively discussion. There’s so much going on this month not only in Washington but with production announcements and a yet lower sales rate. I mean, as Jim alluded to we really thought when we started the month and even in to the middle of the month that November wasn’t going to set the world on fire but it looked like it was going to be higher than October. That proved not to be the case.

So, I guess the take away now is we started the year at a $15 million sales rate in the first quarter and it slide successfully down where in the last couple of months the sales rate for light vehicles is in the $10.5 million range, perhaps even just a little bit lighter than that. Something that is definitely going to keep our attention and all the more reason to keep focused on executing our plan so we can deliver the quality, the safety and the products that the customers will have confidence and trust in.

Talk to you soon. Look forward to the end of the year sales call.

Operator

Ladies and gentlemen thank you for your participation in today’s conference. This concludes your presentation. You may now disconnect.

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