Seeking Alpha
Growth, value, special situations, momentum
Profile| Send Message|
( followers)  

We all saw the news this morning, and while widely anticipated, the street sometimes waits for the headlines to react. With the March earthquake and tsunami in Japan, it was simply a matter of time before the existing inventory prior to the disaster was gone and auto sales figures would see the impacts. Now, two months later, we are seeing headlines proclaiming May to be the worst month in 2011 and that auto makers are reporting declines in year over year comparisons.

Certainly given the numbers released it would seem natural that there is a cause for concern. The big question is whether the dynamic we saw in May will continue into June. Overall, despite the poor sales pace in May, analysts following the auto sector still predict that 2011 will see auto sales in the neighborhood of 13 million.

Is Ford taking an "unjust" hit on news that impacts makers such as Toyota (NYSE:TM), Honda (NYSE:HMC) and Nissan (OTCPK:NSANF) more than themselves? I think the answer to that is yes. So far this year Ford has sold over 877,000 cars, an average of over 175,000 cars per month. Last year Ford had sold 782,000 cars at this point for a monthly average of about 156,000. Ford is selling about 12.5% more cars per month in 2011 than it did in 2010. This is wonderful news, but it seems to be getting overshadowed by the poor sales of some of the Japanese brands that are still suffering the impacts of the quake. On a month over month basis Ford actually increased sales. April sales were at 189,788 and May saw sales of 192,102. For comparison GM sales declined month over month from 232,538 to 221,192.

If anything Ford stands to increase market share over the coming months given that it is not as heavily impacted by the supply issues plaguing some Japanese makers. Ford, GM and others have already upped production to meet demand. Tighter inventory has allowed Ford and others to increase prices slightly and reduce consumer incentives. This is part of the reason for weaker sales, as consumer deals were not as rich as in previous months. Higher profit margins is good news for Ford investors, and as long as sales continue to climb the street will eventually appreciate this. Ford, with month over month gains, seems to have found a decent mix of incentives and pricing.

The bottom line is that sometimes overall news overshadows good business practice. All of the headlines right point to poor May auto sales, and ignore some of the silver linings within. Ford is on strong pace to have a good 2011, and the overall industry setbacks are impacting Ford less than some other companies.

Disclosure: I am long F.

Source: Is Ford's May Auto Sales Drop Overblown?