Even though it looks like Europe is attempting to build a foundation and economically turn itself around, Ford still has not changed its position that this year, in Europe, it expects to lose $2 billion. In its regional sales forecast, they don't expect consumer spending to pick up and they should be at the low end of its estimates. I believe this is what has started Ford's (F) recent bearish run. With Ford's "Customer Retention" program here in 2013, it may have the opportunity to turn itself around if sales in the first quarter continue to perform like they have.
As an investor, if you were Ford, how would you try to make up the revenue challenges of Europe? If it was me I would be looking to try to gain market share where sales are going good - North America. It appears this is what Ford is trying to do.
Focused on Customer Retention
Ford is focused on the concept of customer retention and loyalty as we move through 2013. So far this had both good and (not so good) results. One of the things that it is doing is working with its dealers on renovating stores to make them more customer-friendly. When customers come into the store or service area, they want them to have a good experience so what they're doing is matching, dollar for dollar, up to $750,000 per dealership on renovations which include exterior and interior. Many of the big manufacturers (including Ford) have wanted their outlets to do some renovation but the retailers have been questioning the return on investments, therefore Ford has put together this agreement with its dealers.
Not only is it working with dealers on updating outlets, but it is also focused on creating a high quality brand for customers to identify with so that they remain loyal to the company. Evidently, this has caused some frustration with the Lincoln division.
Even though Ford had a good sales month in January (year over year), its Lincoln division had its worst sales month in 32 years. The Lincoln product is in demand but it's not being delivered at a reasonable time according to dealers. There has been a shortage of the recently introduced Lincoln MKC sedan and Ford attributes the poor sales to the shortage. "Patience," this is what the dealers need according to the company because they say there will be adequate inventory for Lincoln dealers by the end of the first quarter. Will sales increase? Jim Farley, executive vice president of global marketing and service had this to say:
"We'd love to have year-over-year sales gains, and that's great for our dealers and great for us, but that's not the priority. We're building a brand. That's why we are taking so much time to get the quality just right."
We will see how right Mr. Farley's assumptions are as the year progresses. If Ford can see productivity like it did in January, it should have a very good year and hopefully redeem some of the loss it is going to experience in Europe.
January sales were good for Ford as the company increased its numbers by 22% year over year (34% increase in cars; 23% increase in utilities; 11% increase in trucks). Even though February brought large snowstorms to the northeast, Ford does not believe there should be any significant sales impact like there was with super storm Sandy. No serious impact is expected like last October when Sandy took 200,000 cars off the market. February is expected to reveal good sales numbers.
Since mid-January Ford has been on the bearish run that I believe started with the forecast of poor sales for 2013 in Europe. It is definitely in a bearish channel and as I observe the recent highs, they are using the middle Bollinger band as resistance. This signifies that the two-month old trend is a strong one and I am not sure that it's ready to end yet. The RSI indicator continues to just touch the 50 line and I really need to see the stock to push above that before I would give it any strength. At the same time, the MACD indicator is well below its zero line supporting the weakness in the stock and its inability to move up.
Ford is a good company and they are working on brand recognition as one way to retain customer and loyalty. January was a good month. February is also expected to be good, and if March turns out to be good look at the company to turn itself around as it reports its first quarter earnings.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.