Ford: November 2007 Sales Call Transcript

Ford Motor Company (F)

November 2007 Sales Call

December 3, 2007 1:00 pm ET

Executives

George Pipas - U.S. Sales Analyst

Emily Kolinski Morris - Ford's U.S. Senior Economist

Analysts

John Murphy - Merrill Lynch

Rod Lache - Deutsche Bank Securities

Peter Nesvold - Bear Stearns

Joe - Banc of America

Rob Hinchliffe - UBS Securities

Robert Barry - Goldman Sachs

Jim Henry - BusinessWeek.com

Mike Spector - Wall Street Journal

John Welbes - St. Paul Pioneer Press

Eric Morath - The Detroit News

Joe Dorm - Credit Suisse

Brian Johnson - Lehman Brothers

Greg Bensinger - Bloomberg News

Neal Boudette - Wall Street Journal

Presentation

Operator

Good day, ladies and gentlemen. Thank you very much for your patience and welcome to the Ford Monthly Sales Call for November of 2007. My name is Bill; I will be your conference facilitator for today. At this time, all of our participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's presentation. (Operator Instructions).

As a reminder, today's conference is being recorded for replay purposes. I would now like to transfer the conference over to your host for today's presentation, Mr. George Pipas, U.S. Sales Analyst. Please, proceed sir.

George Pipas

Thank you, Bill. Good afternoon everybody and welcome to Ford's November sales conference call. Joining me today is Emily Kolinski Morris, Ford's U.S. Senior Economist. As usual, Emily will provide you with insights about the economy and be available to answer questions once we start the Q&A segment.

First I want to offer this preamble. We, not just at Ford, but all of us are operating at a challenging and uncertain business environment. Most important thing we can do at Ford is to stay focused and stay real. Stay focused has to do to with continuing to make progress against our plan. At Ford we are encouraged by the progress we have made in quality, cost, team work and of course bringing new products and technologies to market that resonate with consumers. Staying real has to do with not counting on some hoped-for improvement in the economy or in consumer demand. As someone once told me, hope is not a plan. We are going to continue to monitor consumer settlement, buying attitudes and demand through a clear lens.

Emily, why don’t you take over now?

Emily Kolinski Morris

Okay. Thanks, George. That's an appropriate introduction. Of course, as all business cycles, there are periods when the fundamentals need to adjust and we can see that today the economy is in the midst of such a soft patch. Food and energy prices are rising, home prices are declining and consumer confidence is below its historical average.

Now, for most of this economic expansion that began now six years ago, consumers have been able to offset adverse development such as higher energy prices with what has been an extended period of job and income growth.

Today, while job growth is still in excess of 1% and real incomes are growing at a 3% pace year-on-year, other head winds are rising. As a result, vehicle sales have softened over the last few months. We believe this reflects concerns about the credit and stock market squeeze along with the ongoing adjustments consumers are making in response to housing and gasoline price conditions.

So with an economy in transition such as this, we have to balance our outlook across a range of competing signals. The six months moving average of vehicle sales has trended down to the low 16 million unit range in recent months, that includes medium and heavy trucks with particular weakness on the retail demand side of the industry.

Clearly, we are concerned about the credit market turmoil and the softer economy, so we are taking a cautious approach to planning our business. We are focused primarily on ensuring that our production is aligned with demand and we'll continue to monitor this closely as we go forward.

George Pipas

Thank you, Emily. Now, for the sales: as you can see, Ford's November sales were slightly higher than year ago. Total company sales, including Jaguar, Land Rover and Volvo were up four tenths of a percent compared with last year. Sales for Ford's domestic brands: Ford, Lincoln and Mercury were up 1%. If you sort our products into familiar categories you will see familiar themes.

Crossover utility vehicles are growing. It's true at Ford and it's true for the industry, where crossovers have been, are and will continue to be the fastest growing category. Through October, industry sales of crossovers were up 17%. Our crossover growth has been stronger than the industry growth in 2007, owing to the fact that we have two all new and three redesigned models.

In November, combined sales of our crossovers were up 119% and year-to-date sales were up 63%. Also worth noting, is that full year Edge sales will likely exceed our revised target of 120,000 because through November Edge sales are little over 116,000 units. I just want to share with you a little anecdote and of course, it's a positive one, but I think that it represents a feeling we have about our entire product line up.

This comes from a blog site, I am not even sure which one but it was sent to me by none other than Jim Kane. So you can imagine it’s going to be a positive one. This has to do with a customer who went on a blog after he traded competitive foreign midsize sedan, one that's pretty well known for our Ford Edge Limited complete with Microsoft Sync and he wrote, "I have to say that I am in love with my ride. Yeah, you are not surprised but I am. You are not more surprised than I with this assertion." I will tell you what when I turned my back on American cars in 2004 I planned on that being a permanent decision.

As many of you know, I have been looking at crossover utility vehicles for months. I have dickered with sales folks at BMW, Volvo, Infiniti and Lexus, entertain the notion of a new Dodge, Buick, or even Lincoln offering. It’s quite a lengthy blog, the person likes to write, but he closes with anyone in the market for a mini van or SUV should consider the Ford Edge. I dare say that you will be a believer in the vehicle, especially, if you are techno-hound who wants a car as smart as the phone.

Another thing that we've been seeing in recent months is Lincoln retail sales were higher for the 14th month in a row. Total sales, which were shown on the sales report, were down, owing to lower fleet sales from the Town Car. We have been out of production for several months, in fact since we closed the Wixom plant. We will restart Town Car production soon at St. Thomas shortly after the first of the year and that's where we built the Crown Victoria and Grand Marquis.

We saw higher retail and total sales for the Ford Focus as well as the Ford Fusion and Mercury Milan. As you all know, the Ford Focus was redesigned for 2008 and November was its first four month on sales. Ford Focus competes in the small car segment and Fusion and Milan are in the mid-size segment. These two segments have been growing this year and that was true in stage in November.

If you look at industry-wide retail sales in November and compare that to October or last November, you would be struck by the shift to small cars, mid-size cars and crossovers. And you would be struck equally as much, by the shift away from trucks and truck-based sport utility vehicles. And you can certainly see examples of that in our sales report.

Finally, I want to talk a little bit about SYNC before I conclude with some housecleaning items. I am going to be honest with you. Those of you who know me would guess that I am not your target SYNC customer. At least, they don't think I am. But I do want to share a few observations about this product which is available on 12 Ford, Lincoln, Mercury products.

First, SYNC products are turning faster than non-SYNC equipped models. For example, on the new Focus, the overall turn rate is 25 days, which is pretty good. But the SYNC equipped model is turning in 21. And if you look at the turn rates for these 12 models on which SYNC is available, the turn rate in November was 52. When these models are SYNC equipped, the turn rate is 27.

Second, customer satisfaction is pretty high. We conduct post-purchase interviews on almost everything. 80% of new owners who purchased the vehicle with SYNC say that the product SYNC exceeds or greatly exceeds their expectations of the product. I am guessing they had pretty high expectations to begin with otherwise they wouldn't have messed with that thing.

Third, SYNC appears to be changing for the better opinions about Ford and consideration for our products. Recently, we had a product display at the Miramar Auto Show in San Diego. And most of the vehicles there were equipped with SYNC. This was just one of several SYNC-owned tour events around the nation and 66% of consumers who visited our display at Miramar said SYNC improved their opinion of Ford and 57% say they were more likely to buy a Ford after learning about SYNC.

Now for sure we've had displays like the one at Miramar long before we had SYNC, and we gathered statistics. Generally, when people get behind the wheel of the Ford product, 40% of the visitors to that display say they have an improved opinion about Ford. But at the Miramar Show, 66% did and that's when we exposed them to SYNC. 30% at a product show or product display at some event we hold, 30% say there are more likely to buy our Ford product. But as I indicated at Miramar, it was 57%. So bottom line, SYNC appears to be, and I think that's what we should say at this point, elevating consumer opinion about Ford and purchase consideration.

As we have said before, this is one of our greatest challenges. We believe we have the products and the quality to stand up to the best of the best. Our challenge is to elevate awareness, opinion and consideration for our product.

Just a note on production, I think that our Q1 production plan down 7% from last year's first quarter actuals, last year meaning, first quarter 2007, is consistent with our outlook for consumer demand during this near-term period.

Inventories; 589,000 vehicles were in stock at the end of November. This includes units that are in transit. As I've indicated in previous calls, that's up from October's 564,000 units, but down from a year ago, when we reported 628,000 units in inventory at the end of November. We close by saying that we expect yearend 2007 inventories to be below yearend 2006 inventories and understandably so, given our reduced sales forecast on an industry-wide basis. Incidentally, for those inventories, 589,000, 183,000 were cars and 406,000 were truck.

Let's get underneath the skin of the November sales variance. Let's have a level set here. Earlier, I said Ford and Lincoln Mercury sales were up 1%. Retail sales were close to a year ago. They fell short by 4,000 units. That's 3%.

Total fleet sales were up this month, for the first month in a long time. They were up 12% and that has two pieces. The daily rental volume was down 1,000 units, 6% from a year ago. Commercial and government fleet sales were up 25%. It's a big variance in percentage terms. In volume, it means 7,000 units.

So, what we have is retail, down 4,000 units; daily rental, down 1,000 units and then total fleet volume, up 6,000 units or 12% with the 7,000 unit increase in commercial and government fleet sales.

Our fleet mix in November was 32% compared with 28% last November. Year-to-date, our fleet mix is 30% compared with 33% in the first 11 months of the year ago. Year-to-date, we've reduced daily rental volume by 143,000 units compared with last year and our share of the daily rental market is 16%.

A couple of notes on what we know about the industry at this point, to give you some indication of where November industry sales might end up. It would appear that total industry volume the SAAR would be about $16.0 million and let's pick the light vehicle sales rate at $15.7 million for the month. Industry sales would probably be 4% lower than year ago in November. That's consistent with discussion that Emily was offering, trending lower as we gone through the year.

Probably, the retail volume for the month industry-wide is down more than the total 4% variance. We think that probably retail volume was down 7% compared with last November and that fleet volume industry-wide was about flat. We'll know more as we go through the month but that gives you some indication as to where the retail consumer was this month.

Now, Bill, let's get started on the Q&A. We have covered a lot of territory and I am looking forward to talking to people in the next half hour about what's going on out there. Okay. Thank you for starting the Q&A session.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions)

And our first question comes from the line of John Murphy of Merrill Lynch. Please proceed.

John Murphy - Merrill Lynch

Hi, George, how are you?

George Pipas

Hi, John.

John Murphy - Merrill Lynch

A question on pricing and what you are seeing out there in the market right now because you had a really good third quarter on net price in North America. I am just trying to figure out if that has continued here? It seems like you've stepped up incentive spending on '07 miles, but maybe not on '08. It also sounds like you are taking pretty good price in fleet market, both rental and commercial. I was just wondering if you could give us some color around all those aspects.

George Pipas

Well, not a lot of specifics, except to say that clearly, I think it's always best to let the financial results, which you've seen in really, not just Q3 but Q2 and if I can remember back as far as Q1, that has been a positive for us as we progress through this year, consistent with our plan.

I think Emily has offered in the past that -- well, all that Emily offered to the comment about net vehicle pricing, Emily that we see in the government data, but with regard to November, I would just offer that it seemed to us in looking at the data, that incentive spending was generally lower than it was a year ago in November and generally lower than it was in October too. But Emily, I want you to offer the comment about what we're seeing in the data.

Emily Kolinski Morris

Well, unfortunately, the government data, we're still looking at third quarter at this point as well (technical difficulty) November reading by another couple of weeks. But the trend over the course of the year has been relatively flat. So, I don’t think we've seen any significant shift, at least in the first month of this quarter. And I can't really comment on what might have happened in November as far as that statistic. But I think the anecdotes we are getting are better (technical difficulty).

George Pipas

Yes and so, I think the general comment is that on balance, the OEMs have been pretty disciplined in their production planning and this flows through the pricing. Interestingly, I think Emily, the observation from the latest few events survey is that there are only about two months in the last 15 years in which vehicle buying attitudes were lower than they were presently and one of the reasons sighted is the lack of generous deals, the lack of compelling deal. So, that is probably contributing to the softness and slowing in industry sales that we have been seeing. Okay, next question Bill?

Operator

Thank you very much sir. Ladies and gentlemen, next question comes from the line of Rod Lache of Deutsche Bank Securities. Please proceed.

Rod Lache - Deutsche Bank Securities

Good afternoon.

George Pipas

Hi Rod.

Rod Lache - Deutsche Bank Securities

Couple of questions, first Emily we've seen vehicle demand in the past few months low 16's and this month 15.7. Can you just update us on your expectations for light vehicle demand in ’08? What kind of trajectory would you expect? Do you think things weakened from here and then come back in the back half or just any thoughts on that?

Emily Kolinski Morris

Okay, I will give you from a directional insight on that. As always, we are going to be providing a milestone for a full year 2008 vehicle sales in January. But for now, what I can tell you is that in the next six months, say we expect sales in a range of 15.5 to 16 million units on total industry, so you could say that by 300,000 for medium and highly truck sales.

The other point I would like to mention though is that, as we look at this month or any other months result, we should keep in mind the fluctuations in month-to-month vehicles sales can be very large and in fact historically are larger than the 500,000 unit range on the guidance that I just provided to you. So, I always want to be careful not to read too much into any one month, as of course by early six month, make sure close to six months something average for all the units. So, we have a little bit of a clearer picture of where the trend is as apposed to reading a lot into a single monthly base.

Rod Lache - Deutsche Bank Securities

Okay and then secondly, some clear strength here in the commercial and government. Is it commercial or is it government? For the overall market, if you look at 2008, what's your outlook for fleet?

George Pipas

Well, I guess I will address myself to Ford. Some of the strengths, at least the magnitude of the strength in November, Rod, I don't read that as, we have the beginning here of a rebound in commercial and government fleet purchases. The commercial and government segment has held up better for the industry and for Ford for sure, than what we've experienced in the daily rental, because in 2007 our daily rental sales are down more than 30% from a year ago and we’ve lost quite a bit of share in the daily rental market to other competitors.

In the commercial sector and the government sector, sales have been down in 2007 in the low single-digit range and in those categories. We've gained share in the commercial fleet market and we have lost share in the government market largely, as a result of the discontinued Taurus, that’s the single product that's stands out.

I think for next year, I have indicated that we plan to continue our not meltdown but that's a poor choice of words. We plan to continue our reduction in the daily rental business next year. I think that, our expectations are that the commercial and government business will hold up pretty well, but may not match this year's levels similar to what we experienced in 2007, perhaps a modest decline owing to the slowing economy, so that's what I have to offer on that at this point.

Rod Lache - Deutsche Bank Securities

Okay. Can you share any thoughts on where you think inventories need to come down to just given your -- it sounds like somewhat downwardly revised sales expectation?

George Pipas

Well, I think you could expect us to generally keep inventories at or below last year's level as we progress through the end of the year and into next year. So, our sales -- our production decline of 7% is basically spot on with what we think will be an industry decline of about that magnitude in the first quarter compared with the first quarter of '07.

Rod Lache - Deutsche Bank Securities

Okay, great. Thank you.

George Pipas

Okay, Rod. Next question Bill?

Operator

Next question comes from the line of Peter Nesvold of Bear Stearns. Please proceed.

George Pipas

Hi, Peter.

Peter Nesvold - Bear Stearns

Hi, George. Emily, question for you. This last month you talked a little bit about how retail sales might be declining in '08 versus '07, and then now, with at least for the first half of '08 looking at late vehicle start 15.2 to 15.7. It seems like a pretty big jump in your internal forecast and I am curious, was it the consumer sentiment data or was it anything else that led to a meaningful change?

Emily Kolinski Morris

No, I don't think there was any. It's been pretty consistent as I said, with the trend that we have been seeing. As we look at the six months moving average, moving down to now around 16 million, 16.1 million units, and we don't expect that to turnaround immediately obviously, given as you mentioned the consumer settlement data and some of the other factors that we are seeing out in the market. So, I wouldn't say there's been any kind of dramatic, there is no dramatic shift built into the outlook.

George Pipas

At this point, I would just want to clarify for everybody Peter, you having raised the question is or following up on Rod's question, is that make sure that you all don't interpret Emily's remarks as our 2008 full year forecast.

Right now, we are focused on the year end now in developing our operating plan. And so, what she has provided you, which is something we typically wouldn't do at this point. But, we feel like it's important, is in the near-term, in the next three to six months, we expect light vehicles sales to operate within a range, the simple tendency, if you will, is probably in the range of 15.2 to 15.7, and total vehicle sales that would be like 15.5 to 16.0.

And we'll give more consideration to the second half at this time, so why not talk about the second half. Not only is this a particularly challenging environment, but as I said earlier, it's also one that continuing a fairly high level of uncertainty. So, we would just want to stay away from second half at this point. Thanks guys. And next question Bill.

Operator

Next question comes from the line of Jairam Nathan of Banc of America. Please proceed.

George Pipas

Hi.

Joe - Banc of America

Hi, this is actually Joe for Jairam.

George Pipas

Okay. Hi, Joe.

Joe - Banc of America

Hi. I have just two things. One, you had mentioned, I think last month that on daily rental, one month would be up, one month would be down, but net it would be fairly even. So, I am assuming next month, we should still see a large decrease in daily rental?

George Pipas

No, I think a month ago what I said Joe, was that November and December daily rental would probably be comparable to taken together, those two months taken together would be similar to a year ago. And so, we were down a little bit in November compared with the year ago.

And I think you could conclude that as I said last month that we would be up a little bit in December. Neither month is at an earthshaking variance and one that tilts the scale either way. But I think that daily rental will be up a little bit in November, but that we will for the full year, had still gone beyond the initial guidance that I gave you back in January, We're on a pass to reduce daily rental sales by about a 140,000, 142,000 units for the year compared with the initial guidance of 135,000.

Joe - Banc of America

Okay.

George Pipas

Okay.

Joe - Banc of America

Yeah. Can you give us a sense then, as to where some of the newer daily rental units are going or like what percent of Edge for instance is daily rental?

George Pipas

Yes. Well, for our new products, we have at least the Ford brand products. We have as part of our go-to-market strategy to place about 15% of what we expect our total volume to be into the daily rental market. So that's through a Focus, it was through a Fusion, it was through a Edge.

And our feeling is based on some analytical, based on some research with consumers who rent is that we get a lift in consideration from people that get behind the wheel of the products, very similar to what I was describing at that auto display at the Miramar Auto Show.

So, that's an important aspect of our go-to-market strategy, and basically, we tap it at that level. So asking specifically about the Edge for the full year, about 15% and you can expect that when we do the Flex in the middle of next year, that that will be an important part of our go-to-market strategy to get that product on the road, people behind the wheel and help us elevate consideration of our product. Next question, Bill?

Operator

Next question sir comes from the line of Rob Hinchliffe of UBS. Please proceed.

George Pipas

Hi, Rob.

Rob Hinchliffe - UBS Securities

Hi. I wonder if you can talk about the S Series, the environment that you are talking about for the next six months. It's been what had a few bad months in a row now. Does it get truly worse in the kind of environment you are talking about?

George Pipas

Well, obviously, when we come into the first part of 2008 Rob, we are coming up on the anniversary of some issues in the housing market. So, I think that next year's performance for example, should show up better year-over-year and I'm talking about the period prior to the F-150 introduction at the end of the year, because I don't know what the economic environment is going to look like at that time.

But in the next few months, I wouldn't expect the variances to be as sharp as they have been during the course of 2007 because we are blistering on this tough business environment.

Having said that, we can certainly see in the data that after the last few months when the industry seemed to be benefiting from very high levels of incentives, volume was pulled into that period and full size market didn't do too badly in August, September and October during those clearance programs.

But now, even with the yearend clearance programs, the market is very tough out there in this category and not even year-ending clearance programs are really shifting the volume in this segment, either compared with October or compared with the year ago. So, it's going to be tough.

Rob Hinchliffe - UBS Securities

Can you talk to us about that the first quarter production schedule? Is the F-Series production disproportionately down versus the 7% total decline?

George Pipas

No, I won't talk about F-Series in particular or any product in particular, but I will tell you that the 7% decline is basically, pretty evenly distributed between car, truck and total. Our current production in that 685,000 unit forecast for Q1'08 is 195. The truck production is 490. That's the total of 685.

Last year, it was 207 in the first quarter of -- I'd say, last year first quarter of '07, was 207 car, 533 truck and 740 in total. So, that's a 6%, 8% and 7% decline for car, truck and total respectively. Okay. Next question, Bill?

Operator

Next question comes from the line of Robert Barry from Goldman Sachs. Please proceed.

George Pipas

Hi, Robert.

Robert Barry - Goldman Sachs

Hi, George. Good afternoon.

George Pipas

Good afternoon.

Robert Barry - Goldman Sachs

I was wondering if you were seeing any increase in conservatives and then, the level of inventory dealers are willing to hold as we head into a more uncertain macro environment.

George Pipas

Well, I think we all are. They are businessmen too and some of them are pretty big businessmen, representing several stores under public ownership. I don't know, but any more conservatism, for example, than we have, they know what's going on in their market and it probably does vary a little bit by geographic region.

But, I personally, characterize the relationship between dealers and manufacturers as the one that is much more of a partnership, than it might have been, let's say, 30 years ago. There was an old saying that a zone manager shouldn't come back to the office until they had completed their wholesale and completed 100% of it.

And the standing joke was, is that the reason we put headlights on cars in the first place was because the zone manager usually have to comeback late at night after they had completed their wholesale. That's not really the case. It's more of a business planning discussion. And so, we are all really aware of what's going on in each individual market.

Bill, I'd like to turn to the members of the automotive journalists that are in our audience today and if you could facilitate that for me, I'd appreciate it.

Operator

Certainly, our first question will come from the line of Jim Henry of BusinessWeek.com. Please proceed.

Jim Henry - BusinessWeek.com

Hi, George.

George Pipas

Yes.

Jim Henry - BusinessWeek.com

My first question has been asked and answered about whether your short-term expectations for sales, but I also wanted to ask about the model, your mix, between '07 and '08?

George Pipas

Sure.

Jim Henry - BusinessWeek.com

That tells me, and this has come up in earlier month, that the switch from the '07 to '08 went better than it has done in a few years. But you know better than I and maybe you could put some numbers on that?

George Pipas

Sure. From a stock standpoint, Jim, at the end of November, only 13% of the 589,000 units that are in stock are the older model. So, you can translate that to be 87% are new models. The sales mix in the month of November was 77% new and 23% old. Next question, Bill?

Operator

Next question comes from the line of Mike Spector of the Wall Street Journal. Please proceed.

Mike Spector - Wall Street Journal

Hi, George.

George Pipas

Hi, Mike.

Mike Spector - Wall Street Journal

I have a general question about the shift in the sales mix generally with SUVs and CUVs. I am curious if you can give us a little color on the margins on those vehicles. How the margins on the crossover is compared with the larger SUVs and how that maybe affecting the business going forward, as you have to drive down continued decline in SUVs and increase in CUVs?

George Pipas

No, I think there are plenty of analysts out there that will give you all the color you want. I don't know that Ford or anybody else has provided anything in the way of specific guidance. We all know that the margins on smaller products are not as big as their own bigger products. And I think that's true. I think a 1,500 square foot home doesn't have the margins that a 4,500 square foot home does. So, yes, that's all that I am going to say about that.

Mike Spector - Wall Street Journal

Okay.

George Pipas

Okay, next question Bill.

Operator

Next question comes from line of John Welbes of St. Paul Pioneer Press, please proceed.

George Pipas

Yes, hi John. Good to hear from you. John, are you there? Can we switch it Bill?

Operator

Up there you go, Mr. Welbes your line should be open now.

George Pipas

Yes, John.

John Welbes - St. Paul Pioneer Press

Hi, George.

George Pipas

Yes.

John Welbes - St. Paul Pioneer Press

Hey, I know that your Rangers are a small piece of your business but you are keeping around another year. Can you tell me what's that including to your fleet sale performance?

George Pipas

Not materially.

John Welbes - St. Paul Pioneer Press

Alright and where did the inventory stand and Ranger compared to unit sales?

George Pipas

I would have to look at last months inventories because I don’t pull the inventories by product line until the day after.

John Welbes - St. Paul Pioneer Press

Okay.

George Pipas

And then that's issued through the trade journals.

John Welbes - St. Paul Pioneer Press

And in these results we're looking at, are Canadian sales included in these?

George Pipas

Interesting question, I've seen this in a couple of research note recently, to extent that, well, what did you mean by that first of all?

John Welbes - St. Paul Pioneer Press

Sales of Rangers are north of the border.

George Pipas

Okay. That’s what I thought you meant. To the extent that there are any, not only for Ranger, but for any product, if a U.S. dealer sells the product, it’s included in the U.S. dealers sales report and I really don’t know what the extent of that is. It's somewhat limited although I don’t want to diminish the issue for a dealer who happens to be close to the border. But it's somewhat limited by the fact that -- on a national scale it's somewhat limited by the fact that there aren't all that many big cities or big areas close to the border are they.

John Welbes - St. Paul Pioneer Press

Right, okay.

George Pipas

I think that’s true in Minnesota.

John Welbes - St. Paul Pioneer Press

Yeah, that’s true. We'll keep hearing that if we are selling relatively well, and it's using it relatively in Canada compared to a domestically. But…

George Pipas

Well there aren’t that many Ranger sales to begin with, are there?

John Welbes - St. Paul Pioneer Press

Right.

George Pipas

Okay.

John Welbes - St. Paul Pioneer Press

Okay. Thanks George.

George Pipas

Okay. Next question Bill?

Operator

Next question comes from the line of Eric Morath of The Detroit News, please proceed.

George Pipas

Hi.

Eric Morath - The Detroit News

Hi, George can you talk a little bit more- you mentioned in sense of the big trucks. Can you add afterwards what are the incentives looking like on them?

George Pipas

You have to talk to Jim Kane. I don’t know what the current level of incentive programs are although, I just watch the TV, right. And I know that incentives on full size trucks industry wide, it’s certainly one of the highest segments in all the industry with the possible exception of some of the luxury segments where leasing and well mostly leasing incentives tends to generate high levels of per unit spending on those high priced products. Okay. But apart from that the specifics could be made available by Jim or Lydia Cisaruk at Ford, or Link of Mercury.

Eric Morath - The Detroit News

Alright, thank you.

George Pipas

Okay, next question.

Operator

Actually we do not have any other questions from the media at this time.

George Pipas

Okay any more questions from the analyst Joe?

Operator

Yeah, we do have a question from Joe [Dorm] of Credit Suisse.

Joe Dorm - Credit Suisse

George, you already answered me.

George Pipas

Okay. Any other questions Bill in the queue.

Operator

Yes, actually, we do have a question from the line of Brian Johnson.

George Pipas

Hi, Brian.

Operator

I’ll prolong. Let me just get his line for you.

George Pipas

Okay. Brian, are you there?

Operator

No, he is coming on hold on once, I’ll inform you, George.

George Pipas

Okay.

Operator

And there is Mr. Johnson from Lehman Brothers

Brian Johnson - Lehman Brothers

Good afternoon, George.

George Pipas

Hi, Brian.

Brian Johnson - Lehman Brothers

Within your economic forecast and within your production, where did you see Super Duty going and I asked because CSM had a lot of downtime for Kentucky Truck schedule and then they backed it off and we are trying to interpret what's really going on with that product line?

George Pipas

I think as a guide, you can continue to use 40% of production and sales over any extended period of time. Super Duty sales represented they were actually over 41% this month, but 40% is kind of a month end, month all level that you can use to calibrate yourself there, and I think that will be true going forward probably as well.

Brian Johnson - Lehman Brothers

And how does within the 150 line inventory look on the Super Duty versus the 150?

George Pipas

Again, I don't know. And in any indication and in any way, that's not something we provide to the trade journals on a recurring basis.

Brian Johnson - Lehman Brothers

Okay, thanks.

George Pipas

Okay. Next question Bill, if there is one.

Operator

Yeah, we actually have a couple from the media. We have one from Greg Bensinger of Bloomberg News. Please proceed.

Greg Bensinger - Bloomberg News

Hello.

George Pipas

I am still anxious too and I am just interrupting Bill right and left. I got to behave myself here. Yeah, are you still there, Greg?

Greg Bensinger - Bloomberg News

Yeah, can you hear me?

George Pipas

Yes, I can.

Greg Bensinger - Bloomberg News

If you have to point one or two factors that accounted for the gain this month, what would you say they were and is that repeatable in coming months for Ford?

George Pipas

Well --

Greg Bensinger - Bloomberg News

Is it just crossovers or…?

George Pipas

Well, I think it depends on how you look at the business, right? If you look at it by product line, you could say crossovers, but wait a minute, crossovers have been strong all year along. The biggest difference between this month's report and the report of the last 10 months or some people have said 12 months, 12 months in a row declines.

But just focusing in on 2007 Greg, the biggest difference is that in the previous 10 months, our daily rental declines were 20%, 30%, 40%, sometimes over 60% lower than a year ago and consistent with what I indicated in previous months, that we would have completed the lion share of our daily rental reductions by the end of October and that corresponded with the end of production of the Taurus at the end of last October.

So if you go back, Bill, to just this past October, I can't remember exactly but I think the Taurus volume was 15,000 to 20,000 units, okay, in October of '06 and this year, there was none. But in November of last year, there were only 5000 Taurus. So we have now anniversaried on the end of production of that product and while we are going to continue to reduce daily rental volume in 2008 calendar year, the reductions are not going to be of the magnitude that they were when we discontinued the Taurus product.

And that's basically it, yet the retail volume was pretty close to a year ago. The commercial and government volume was up but not by a big. It was a nice big percentage, but it wasn't much. It wasn't huge, although I am happy to have a huge chunk of volume. The biggest difference between now and the last 12 months has to do with the end of Taurus production and all that volume going away in each of the last 12 months. Okay?

Bill, you said there is another question.

Operator

We do have another question from Neal Boudette of the Wall Street Journal. Please proceed.

George Pipas

Yes, hi, Neil.

Neal Boudette - Wall Street Journal

Hi, George, how are you today?

George Pipas

Good.

Neal Boudette - Wall Street Journal

I wonder if you could elaborate on this production number in the first quarter. It looks to me to be down by about 7%. Can you elaborate and what the thinking is there? Some of that is fairly obvious, but --?

George Pipas

It's easy. That's an easy question. In fact, it's a soft ball. It's exactly consistent. Well, it might be off by two or three-tenth of a percent, but it's exactly consistent with our view about where industry sales are going to be compared with a year ago. So, we feel our inventories are pretty well set, okay, where we are right now, in general terms.

And we feel like our sales are going to hold up well relative to the rest of the industry. So, if we just cut right through it our production decline in the first quarter is consistent with our view about the industry outlook in the near term. And that end, obviously, there is a level of uncertainty in there but that's at this point, where we are calling it.

Neal Boudette - Wall Street Journal

Of this cuts, where do they predominantly fall? It's in the truck segment or the car segment?

George Pipas

Someone asked earlier about car and truck and I indicated that car production in the first quarter is down 6%, truck production is down 8%, and the total is down 7%. So, there is very little difference between one category and another.

Neal Boudette - Wall Street Journal

Is the F-150 factored into that?

George Pipas

Yes.

Neal Boudette - Wall Street Journal

Or is this the opening line.

George Pipas

You're talking about the new F-150? Well, the newest F-150 doesn’t begin production until sometime in the second half of the year.

Neal Boudette - Wall Street Journal

That’s what I thought. That's what I wanted to check to see if you are talking about old F-150 production, if that’s reflective of the last few months of production of the old model.

George Pipas

Well, yes. I mean F-150 is in there and it’s such a big part of our volume, total production couldn’t be down by 8% on the truck side without some reduction in F-150, F Super Duty and who knows what else that goes into the truck categories, Ford utilities, etc.

Neal Boudette - Wall Street Journal

But is the F-150 going out of --?

George Pipas

No. It doesn’t go out of production until the summer, if that’s what you mean.

Neal Boudette - Wall Street Journal

Okay. But that 8% reduction in truck production, that’s fully the result of where you expect the market to be?

George Pipas

Yes. It doesn’t have anything to do with the launch of the new product. It's much too early to be factoring that into the equation with regard to a specific changeover. The changeover won't occur probably until the third quarter.

Neal Boudette - Wall Street Journal

Okay.

George Pipas

Okay?

Neal Boudette - Wall Street Journal

All right, thanks a lot.

George Pipas

Okay, Neil. Bill, I think that wraps it up. I really do appreciate: A, all the participation; B, the level of interest in the discussion. And we look forward to talking to you in the near future.

Operator

Thank you very much, sir, and thank you, ladies and gentlemen, for your participation in today's conference call. This concludes the presentation for today and you may now disconnect. Have a good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: [e-mail]. Thank you!