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Ford Motor Company (NYSE:F)

November 01, 2011 1:00 pm ET

Executives

Ken Czubay - Vice President of US Marketing Sales & Service

Jenny Lin -

Erich Merkle -

Analysts

DeeAnn Durbin

Mike Ramsey

Alisa Priddle

Keith Naughton - Bloomberg

Himanshu Patel - JP Morgan Chase & Co, Research Division

Rod Lache - Deutsche Bank AG, Research Division

Itay Michaeli - Citigroup Inc, Research Division

Bernard Woodall

Greg Gardner

John Murphy - BofA Merrill Lynch, Research Division

Brian Arthur Johnson - Barclays Capital, Research Division

Christopher J. Ceraso - Crédit Suisse AG, Research Division

Patrick Archambault - Goldman Sachs Group Inc., Research Division

Operator

Good day, ladies and gentlemen, and welcome to the Ford Monthly Sales Conference Call. My name is Jennifer and I'll be your operator for today. [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, Ford U.S. sales analyst. Please proceed.

Erich Merkle

Thank you, Jennifer and I just want to welcome -- we've got Ken Czubay on the line with us. Jenny Lin is here; and also joining us is George Pipas today. But good afternoon, and welcome to our sales -- to Ford's October sales call. I think the best way, or we think the best way that October's industry sales could be characterized would be solid with the sales building nicely off of what we saw in September. Our estimates indicate that October resulted in a mid-13 million total vehicle SAAR, which would include medium and heavy, compared with a 13.2 million total vehicle SAAR in September. These estimates place us roughly in line with the stronger sales pace that we experienced in February and March earlier this year prior to, as you remember, the events that created -- the awful events in Japan that created inventory issues following in the month of March. The industry started off strong in the first quarter, and would appear as though we will see strength as we finish the year out.

Industry inventory volumes have normalized to levels that are consistent with those of a year ago. Ford Motor Company's October vehicle sales totaled 167,803 vehicles, representing a 6% increase versus year ago volumes. Ford brand sales were up 13%. Retail sales were up 8%, while fleet posted a 1% increase over last year.

Ford's October fleet mix was 27% of sales with just 8% of total sales coming from daily rental. This was very consistent with September.

To add a little more color and give us more detail, Ken is here with me. And I'd like to turn it over to Ken. Ken?

Ken Czubay

Thank you, Erich. In October, we were pleased to see the industry SAAR sequentially improve, following an improved September. At Ford, October brought a very stable and consistent pace in our sales cadence with some additional strength in the final week and weekend of the month. We saw continued improvement in our passenger cars as we moved through the month, and utilities and pickups were especially strong as we noted in our release.

Let's talk about utilities for a moment, as they were up 38%. Historically, this is the time of year that utilities and pickups resonate well in the market. We are also hearing from our dealers that our customers are really beginning to cross-shop cars and utilities. It makes sense. After all, Ford utilities, powered almost exclusively with 4- and 6-cylinder engines, are achieving fuel economy approaching that of many passenger cars. We have seen it in our mix over the years. Just a few years ago, 70% of our retail sales were truck and truck-based utility sales. In 2011, almost 2/3 of our retail sales are now cars and car-based utilities, and only about 1/3 of our retail sales come from trucks and truck-based utility vehicles. That's a significant change in our mix.

On the car side, we saw increases in our 3 highest volume products: Fiesta, Focus and Fusion. As we discussed in last month's call, we expected Focus' performance to improve with inventories. That's exactly what happened. Although total Focus sales were equal to a year ago, retail sales of Focus were up 4% versus last year. Focus' retail market share of the compact segment was up almost 50% last month compared to the summer months.

In fact, retail share within this segment reached its highest point since November of 2010, almost a year ago. So we are extremely pleased with the year-over-year retail Focus sales results that we are seeing, especially in the coast. And I've been talking about that for the last few months. For example, California retail sales of Focus were almost double that of a year ago, while the New York region was up nearly 50%. Importantly, 1 of 6 Focus buyers are under the age of 25. So consumers are rewarding us for investing in more technology and fuel-efficient engines. This has resulted in Focus transaction prices being among the highest in the segment and the highest series, Focus Titanium, is our fastest turning model series within the Focus line up.

On utilities, Ford continues to be America's best-selling utility brand. Sales were up again in October. Last month, we saw 38% improvement versus a year ago with a total of 45,877 utilities sold. Year-to-date, Ford brand utilities totaled 471,787 and are up 31%. 93% of our total utility volume this year is coming from car-based crossover platforms. This reinforces what I said a few moments ago.

Explorer sales were up 225% with 11,987 Explorers sold last month. This is the highest sales volume month for the all-new Explorer since its introduction last year. Year-to-date, Explorer is up 134%. Retail sales of this SUV have tripled in every marketplace in the country. Now Escape sales of 19,046 were up 31% for the month. Year-to-date, Escape sales are up 31% through October, surpassing the 200,000 milestone for the first time since in its introduction in 2000. It's a record year for Escape.

And even with the outstanding performance of Explorer and Escape, sales of the Edge continue to grow. Year-to-date, Edge sales are up 3%. So all 3 of these vehicles are really performing well as evidenced by the terrific fuel economy message.

Finally, on the truck side, as some of you may have heard, the Ford team was down in Texas last month, participating in the Annual Texas Auto Writers Association Texas Truck Rodeo. Ford not only won the Truck of Texas with its F-150 in the country's largest truck market, that's Texas, but we were also named Truck Line of Texas for the 12th consecutive year in recognition of best-in-class capability and fuel economy.

EcoBoost was named the best vehicle feature. Now F-Series posted back-to-back monthly sales of more than 50,000 vehicles in October, an achievement that was last made in February and March of 2008. F-Series totaled 54,410 in September and 52,251 in October. That's a 7% increase over last year. The EcoBoost retail sales rate, and I talk about this a lot because EcoBoost and fuel economy is so important to us, was over 40% of the retail sales rate in October, continuing to make it our highest volume Powertrain on the F-150.

The F-150, along with our new line of EcoBoost, Explorers and Edges, helped to propel our total sales of EcoBoost Powertrains to over 15,000 in October. This is the second month in a row that EcoBoost has exceeded this number. The great fuel efficiency advantages of EcoBoost, equipped with Explorers and Edges, that's 28 miles per gallon on Explorer and 30 miles per gallon highway on the Edge, is really playing out well in the sunshine states. So overall, we were pleased with our performance in October. Our well-balanced product portfolio, cars, crossover utilities and trucks continues to resonate with the customers in a very competitive market. It's especially gratifying to see Ford's performance strengthening, especially on the coast.

In fact, Ford's retail market share, outside of its traditional Great Lakes and Central Regions, which are our strength, is at its highest level since 2006. So now let's get into the economic data with Jenny. Jenny?

Jenny Lin

Thank you, Ken. Since our last call, economic indicators are showing some signs of improvement. September job gains of 103,000 jobs and a 1.1% growth rate over last year was very encouraging. This was followed by the October readings on the jobless claims, which are trending lower towards 400,000.

During the third quarter of this year, the economy grew an annual rate of 2.5%, led by growth in consumer spending and business investment in equipment and software. Consumer sentiment edged up by 1.5 points to 60.9 in October with 54% of those surveyed saying, "It was a good time to buy a vehicle." In addition, the interest rate environment remains supportive of vehicle and house purchases with the federal reserve expected to keep rates low.

Forward-looking indicators such as capital goods orders were up 8% over a year ago, suggesting ongoing solid business investment spending. October manufacturing Purchasing Managers Index, so called PMI, edged down 28 points to 50.8 with 8 out of 18 manufacturing industries reporting growth. Encouragingly though, the new orders subindex increased by nearly 3 points, indicating a return to growth after 3 months of contraction. U.S. gasoline prices have remained stable over the past few months at around $3.50 per gallon, which is providing relief for many consumers.

To recap, as Erich pointed out earlier, new vehicle sales in October are estimated in mid-13 million units range at a seasonally adjusted annual rate. This is including medium and heavy-duty trucks. Given the October industry performance, the full year industry is projected at 13 million units, as it was shared in our third quarter earnings release last week. With this summary, let me turn it back to Erich. Erich?

Erich Merkle

Thank you, Jenny. Just wanted to take care of a few housekeeping items here, and give you -- some of the folks out there some important and critical numbers that you look for every month. October of 2001, when we look at our inventories, cars totaled 141,000 vehicles, trucks were at 313,000 vehicles, giving us a total for the month of October of 454,000 vehicles, representing 70 days on hand. When we look at the fleet mix, we're looking at -- we have total fleet for the month of October that came in about 27% of our total sales.

Rental, as I said earlier, was very low at 8%; commercial represented 14% and government represented 5%. Year-to-date, we're running the total fleet it's about -- running about 33%, very consistent again. So with that, Jennifer, we'd like to -- let's open up the lines, and we'll start with our -- the folks in the analyst community and start taking a few questions. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Chris Ceraso from Credit Suisse.

Christopher J. Ceraso - Crédit Suisse AG, Research Division

It looks like maybe you're falling a little bit short in capturing Mercury owners. Maybe you can comment on how you would grade yourself in terms of success at capturing Mercury owners, what's the strategy and is there any need to step-up efforts there to keep these people in the Ford family?

Ken Czubay

Chris, this is Ken. No, I don't think so. I think when we look at how they would change their buying patterns, the new MKZ is doing well and the new MKX is doing well, as well as where they would be going into the Ford products. And we have a very active program to keep them in the Ford family and, frankly, we're pleased. It's on our plan for retaining those owners. We're engaged and our dealers are engaged.

Erich Merkle

The thing too, Chris, also, when you look at our share performance, our share year-to-date is in line with guidance, which was equal to or maybe slightly above. We, knowingly, we lost about 0.7% to 0.8% when we ended the Mercury brand. So I think we've been able to pick that up over the course through year-to-date through our share efforts with Ford, so...

Operator

Your next question comes from the line of John Murphy from Bank of America.

John Murphy - BofA Merrill Lynch, Research Division

Two questions for you. First on inventory, just curious if you feel like you might be still inventory constrained on the car side, and maybe that's holding back sales there a little bit. And sort of second question about mix as we go forward, really, in October and as we go forward, as we think about the Explorer potentially cannibalizing some Edge sales, it looks like that's kind of going on. And also can the F-150 capture the Ranger buyers as that truck is ended in the next couple of months. Just curious on those 2 sides, first, on inventory on the cars and then on the mix issue.

Erich Merkle

Sure. Let me -- I'll take the first 2, John. In terms of the car, in terms of inventory, I think we're very adequate, and we're well-positioned going forward. As it relates to the Edge, we have felt throughout the year that the Edge is co-existing with Explorer and with Escape very nicely. In fact, when you look at Edge sales, they're actually up calendar year-to-date. So when we look at Edge sales being up and in conjunction with the fact that we're on record pace with Escape and we're actually, we're performing, as you know, very well with Explorer, we're very pleased with where we are at with Edge at this point in time.

Ken Czubay

Let me throw in a comment. Actually, as highlighted by the strength of the entire utility offering that we have on the showroom, we're very pleased. The Escape is #1 in its segment. And the Edge and Explorer and the Explorer is growing, are each in the top 3. So collectively, of course, we're going to see some cross shopping as the consumer matches the perfect vehicle. But we're very pleased that with the 3 of them, we have an incredible show room. And the consumers are voting with their wallet and they're placing us in the top of the segment for each of them. So we're well-positioned on the showroom. Relative to inventory, we're in a good place. We have a good mix and we have the appropriate amount of inventory out there to manage our business.

John Murphy - BofA Merrill Lynch, Research Division

And the Ranger buyer going up to the F-150 or capturing the Ranger buyer with the F-150...

Ken Czubay

The Ranger is doing well right now, but the F-Series continues to grow. What our dealers and consumers are telling us is that the F-Series with the EcoBoost Powertrain is attracting those consumers who want better fuel economy and get the capability of the vehicle. So the F-Series is clearly -- the 6 cylinders on the F-150 are over half the mix. And as I mentioned, the EcoBoost is over 40% of the total mix. So Ranger buyers are getting the fuel economy they want with the 6-cylinder F-Series.

Operator

Your next question comes from the line of Rod Lache with Deutsche Bank.

Rod Lache - Deutsche Bank AG, Research Division

Just -- I guess the first question maybe for Jenny. Have you done any work to try to estimate kind of the underlying SAAR if you were take out some of the noise from the retiming of sales from the summer when we dipped down to the 11s? I would imagine that there was some pent-up demand from that, that got retimed into maybe the fourth quarter. And also, have you done any work to try to bracket the effect of this accelerated depreciation on trucks? How significant in effect is that in terms of pickup truck sales for this year? I presume we're going to see that maybe in November and December.

Jenny Lin

Yes. Thanks, Rod. To your first question, this is a hypothetical question, of course, that given that the tragic event did happen. But if you look at the first quarter run rate, we were at about 13.4 or mid-13 million units at the total industry level. That was going in to the year. So without the Japan effect, we were expecting that the industry continue to gather strength. Of course, that with the tragic event, that changed everything. So I would say that the underlying strength is it was around mid-13 million units. To your second question and then going forward in the fourth quarter, we expect it to continue a steady increase, given that our inventory position has become normalized. To your second question is that in terms of the truck, the tax credit or the truck extension or may not be an extension, we have not yet coming up with the estimates because this is coming a little closer to December. We will wait and see what happen in December. And Ken, anything to add?

Ken Czubay

Yes, Jenny, what I would add is after 2 terrific months, truck season, September and October, we anticipate as the small businesses have greater awareness of the tax incentive, that our truck business will stay strong in November and December. So we haven't seen it yet. But that's a phenomenon in my career that all of a sudden, right around Thanksgiving, the accountants kind of wake up and say, "Oh man, we better act on this fairly quickly." So it's not a long planned out event.

John Murphy - BofA Merrill Lynch, Research Division

Okay. And then for Jenny, Ken or Erich, very quickly, do you have any estimate of what's happening to industry and Ford retail average transaction prices maybe on a year-over-year basis? And related to that, I know that you and others had some production constraints in some of the higher-end vehicles, nav systems and things like that through the summer. Is that having any effect at all on that sales mix?

Erich Merkle

Yes, I think in terms of the transaction prices, Rod, they're healthy. We're up a few $100 over the overall industry, and the industry is up a bit year-over-year as well. So we're very pleased with the overall state of the industry and also our transaction prices as it relates to the industry.

Ken Czubay

Rod, what I'd throw in is we're beyond any constraints relative to fallout from an impact of the tsunami in Japan. So the issues of navs, those are -- those have been behind us for a while. Basically, as Erich pointed out with the transaction, prices rising, it's a matter that consumers are saying, "We're voting for Ford and the advances in technology and fuel economy."

Operator

Your next question comes from the line of Itay Michaeli.

Itay Michaeli - Citigroup Inc, Research Division

Just hoping if you could share what your estimate is for the retail SAAR and also your retail share for the month?

Erich Merkle

Our retail share, I can respond...

Ken Czubay

Yes, we don't -- all the data isn't in, so we don't have that. We'll have to wait until all the data comes in.

Itay Michaeli - Citigroup Inc, Research Division

Okay. And then just on the -- back to the transaction prices. Do you have an estimate too of -- or if the final data on your incentive spending per unit on, perhaps, a year-over-year or sequential basis?

Ken Czubay

Yes, it was about the same as last year. It's flat.

Operator

Your next question comes from the line of Patrick Archambault from Goldman Sachs.

Patrick Archambault - Goldman Sachs Group Inc., Research Division

This is more of an economics question. How do you see the trend? Like what do you see the impact of Europe potentially being on auto demand next year? How -- what are the transition, the rather transmission mechanisms that a European recession can have on the U.S. and can have on your outlook for auto sales?

Jenny Lin

I would say that, well, as we expect the U.S. economy continue to grow at a 1.5% to 2% range and that's going for this year and next year, so we will see some growth. Of course, the European crisis continues to play, weighting down on maybe consumer confidence. And that is one phenomenon that we have to watch out for.

Ken Czubay

And what I -- Patrick, this is Ken. What I would add to that is I think the evidence of September and October is that there's a strong foundation in the U.S.-based automobile industry. And our dealers are telling us that consumers are coming in with some of the oldest aged and the highest mileaged trade and, basically, the scrappage rate has been very low over the last couple of years. And consumers are just saying, "It's time to get a new vehicle." We're seeing that more and more everyday from our dealers.

Operator

Your next question comes from the line of Himanshu Patel from JPMorgan.

Himanshu Patel - JP Morgan Chase & Co, Research Division

I just have 2 questions. I wonder if you could share with us your model year mix for October sales and dealer inventory stock? And then second question for Jenny. Just remind us again what Ford's SAAR forecast is for next year? And I'm curious if you could sort of underpin that with a labor market scorecard that you'd sort of need to see to feel comfortable with, whether it's unemployment or payrolls.

Erich Merkle

Yes, Himanshu, our transition in terms of October, right now we're at 60% for new models for 2012, so...

Himanshu Patel - JP Morgan Chase & Co, Research Division

Is that dealer stock or is that the -- what percent of October sales were...

Erich Merkle

That was sales.

Himanshu Patel - JP Morgan Chase & Co, Research Division

So 60%?

Ken Czubay

The important part is, is that all of our vehicles are into the new model year with the exception of F-150s. So we've made the transition from a production standpoint.

Jenny Lin

As to the industry sales, we expect continued growth in 2012 for the economy, but we will be issuing our forecast at the Detroit Auto Show.

Operator

Your next question comes from the line of Brian Johnson from Barclays Capital.

Brian Arthur Johnson - Barclays Capital, Research Division

Question probably for Jenny, Ken and Erich sort of probably jump all here. 2 related strands, first is can you update us on Ford Credit penetration both loan and lease? And then second, the broader question is to what extent do you think were settled down to a core group of credit-worthy buyers? And are there buyers who would have been in your showrooms, and compare the showrooms in '06, '07, who just turned in a position in terms of their balance sheets to take on a new car purchase? And if so, what does that mean for pent-up demand and how quickly that does or doesn't come back?

Erich Merkle

Well, I can tell you that the first one is leasing at Ford has been very consistent and it's running in the range of 10% to 15%, and that really hasn't changed. Ford Credit we -- consistently buys business across the credit spectrum, including through the recent recession, so dealers surveys reflect a high satisfaction with this support, but it's -- again, it's very consistent.

Ken Czubay

It's -- this is Ken and because there are great partners on the vehicle sales side, they're right in the low 50s, which is where they have been. And with the interest rates as low as they are and competitive in the marketplace, any consumer who is financeable has credit available to them. So I don't think that is a hindrance.

Brian Arthur Johnson - Barclays Capital, Research Division

But what about dealers, what are your dealers telling you in terms of consumers' willingness to lever up as opposed to just they would get approved if they came in?

Ken Czubay

Well, I think that consumer expectations have been lowered from the days of the mid-2000s like you said. And they're acting much more responsibly. And frankly, the Ford Credit is acting appropriately. They're in business to make any deal happen that should happen, happen. So I think there's a good balance right now.

Erich Merkle

Thank you, Brian. Okay, Jennifer, at this point, what we'd like to do is turn it over to the folks in the media. So we'll take the first call from the media then.

Operator

Your first question comes from the line of Keith Naughton from Bloomberg.

Keith Naughton - Bloomberg

Ken, last month you said that you're going to increase sales on the Focus. You said, "Put it on the calendar 4 months from now." That actually declined a little bit for the fourth month in a row. They're down 9.1% over the last 4 months, and were outsold by the Cruze last month. And I'm just wondering if you're meeting your sales targets on the Focus?

Ken Czubay

Well, we are, Keith. As a matter of fact, overall, they were virtually equal to last year. And on the retail, they were up 4%. I think most importantly, as the showroom balances out, you see that Focus has done incredibly well in its segment. That segment is very challenging, and the growth of the segment -- excuse me, the growth of the Focus in the segment has improved 50% from the summer months. So we're very pleased with the performance of Focus as a standalone and as it fits in with Fiesta and Fusion.

Erich Merkle

And Ken, I think sequentially, if you look at the Focus, in October, we were up 19% and then in September, we were up 10% compared to August. So we feel confident that both the share and the sales continue to grow, and we're having some very impressive results on the coast.

Operator

Your next question comes from the line of Mike Ramsey from The Wall Street Journal.

Mike Ramsey

I'm just going to let it go because I basically have the same question as Keith. I think that a lot of people do. It seems to me like the Focus is struggling to take the leadership position even though it seems like a good car. And I'm wondering if there's any pricing changes in the offering or incentives that you're considering for that vehicle?

Ken Czubay

No, it is on plan, Mike. I mean, the improvements we've had in year-over-year, the improvements we've had in segment share and the pricing have, it all triangulates to be exactly on plan. So we're pleased with the progress and we're pleased with the absolute numbers in October.

Operator

Next question comes from the line of Alisa Priddle from Detroit News.

Alisa Priddle

With the flooding issues aside and with the Japanese, with those customers who waited sort of finally getting back and buying the vehicles that they've been holding off on, just wondering what sort of this sort of new state of semi-normalcy might mean for you guys?

Erich Merkle

Well, from Ford's vantage point, we're not experiencing any impact from the Thai flooding event. But if everything happens, we monitor and watch everything closely. And we'll certainly take any -- any action if, in fact, it becomes necessary, Alisa.

Ken Czubay

And from the marketplace, we're pleased that all of our competitors are full players now. I mean, frankly, it's better for the market overall for everyone to have product offerings because at this stage, we are very pleased with the products we have to come out -- when consumers come out to look at some of our competitors' products, we know they're coming out to look at our products. And we have a very good lineup, and it's evidenced by the sales numbers that we posted in October versus last year.

Operator

Your next question comes from the line of Greg Gardner from Detroit Free Press.

Greg Gardner

Yes, as we see customers shift back toward larger and heavier vehicles and gas prices moderate, what's happening with your hybrid models, Escape, Fusion? What's going on with the demand there?

Erich Merkle

Yes, Greg, hybrid sales are down and they're down year-over-year and...

Greg Gardner

How much?

Ken Czubay

They've been -- I mean, they've remained stable as a percent when you look at Fusion and Escape. So we haven't really seen that much of an impact.

Erich Merkle

Right. And so when you look at -- I think as you look at the -- a switch from cars to utilities, I don't know that, that entirely paints the correct picture. What we are seeing, and I think as Ken alluded to earlier, is that if you go back just a few years, Ford was 70% trucks. Today, however, we're 2/3 cars and crossovers, so that is really a pretty significant about-face or a 180-degree turn.

Greg Gardner

What were the -- I do get a specific sense of that. I can remember earlier in the year when you talked about the percentage of the total market that came from compacts and subcompacts, B and C-segments, as I recall, it was around 20. Where is it now?

Erich Merkle

A lot of that is going to be seasonal. So when you start taking a look at cars, passenger cars generally perform better in the spring -- in the first half of the year, particularly, in the spring. In the second half, it's usually more utility-based in the second half. But at Ford, as you well know, we have a very diverse product portfolio that's made up of small cars. It's made up of utilities. Some of those utilities quite small, such as with the Escape, and very fuel efficient. So we're well-positioned to take advantage of those changes as they occur year-in and year-out.

Ken Czubay

And then the other thing I'd add is that at Ford, the hybrid, while it's been very steady, our EcoBoost, which is still the mainstay of our fuel economy story, is still a very big success. When you look at -- I talked about 6 cylinders on pickup trucks being over 50% the retail mix and EcoBoost on pickup, remember, a year ago, we sold no -- or last December, we sold no 6-cylinder pickup trucks. It's over to half -- over half now, 40% of all retail pickup trucks are EcoBoost that consumers are still being driven by fuel efficiency, and Ford is leading the charge on fuel efficiency.

Operator

Your next question comes from the line of Kevin Krolicki from Reuters.

Bernard Woodall

It's Bernie, masquerading as Kevin. I was wondering if you could comment on the -- I know you had a solid month, and seems industry wide, the pace for slow and steady recovery continues. But then I look at the wider market and the whole sector's taken a beating in the marketplace, I was wondering, does this indicate that October is actually a high watermark and things are going to -- with the economic signals, going to send us down from here? Or have you guys got it right or the marketplace has it right? Somebody's got it wrong.

Jenny Lin

Yes. I don't think so. This is not high watermark or anything like that. The whole sector just was driven by the market development in Europe. So we do not comment on the stock price change -- over change in the stock price. We do expect that to continue to improve.

Bernard Woodall

Okay. So the market's just too pessimistic? It seems like the auto sector is down worse than the shares. I mean, I guess, you've already answered the question though.

Jenny Lin

Yes.

Operator

Next question comes from the line of DeeAnn Durbin from The Associated Press.

DeeAnn Durbin

Two quick things. Ken, I think you mentioned people cross-shopping cars and trucks. I wanted to know a little bit more about that. When did that -- when did you start noticing that? Is that something that's been happening in the last couple of months? What are they cross shopping? And also, if someone can just briefly discuss the tax issues that cause people to want to get pickups this time of the year? I'm just not clear on -- I think I heard depreciation mentioned in the call, and I just need some clarification on what's going on there.

Ken Czubay

Sure, DeeAnn. I'll take your first question. What I was saying is the cross-shopping between CUVs, small utilities and cars, for example -- not trucks. For example, the Escape and the Fusion are intensely cross-shopped. And as we have a solid offering in the CUVs with the Escape, Explorer and Edge and we have the solid offerings with the cars with Focus and more importantly, the Fusion, we're getting cross-shopping there. As the fuel economy improves on all of them, the value proposition evens out, and it's terrific to have 5 vehicles that people cross-shop, but the #1 cross-shopping is between CUVs and the Fusion, for example.

DeeAnn Durbin

Okay. And I mean, that has been going on, but did you -- have you seen that accelerating...

Ken Czubay

Yes, it's been accelerating. We find it to be accelerating. But at Ford, we're finding 1 plus 1 is equaling 3, so we're very pleased with the offerings as the fuel economy story improves across the board. And Jenny, do you want to try to answer the other question?

Jenny Lin

Yes, it is about the accelerated depreciation in the business spending on vehicles that was supposed to be expiring by the end of this year. And that's why business may -- decided to take advantage of that while it is still in effect.

Erich Merkle

Okay, Jennifer, I just want to add a few last comments. We appreciate everyone's attendance on the October sales call, and we look forward to joining everyone next month. Thank you very much, everyone, for your participation.

Operator

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.

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Source: Ford Motor Co., Oct 2011 Sales/ Trading Statement Call, Nov 01, 2011
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