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Executives

Erich Merkle – U.S. Sales Analyst

Ken Czubay – Head of U.S. Sales and Marketing

Ellen Hughes-Cromwick – Chief Economist

Analysts

Brian Johnson – Barclays

John Murphy – BofA Merrill Lynch

Chris Ceraso – Credit Suisse

Adam Jonas – Morgan Stanley

Patrick Archambault – Goldman Sachs

Elaine Kwei – Jefferies

Karl Henkel – Detroit News

Deanna Durban – Associated Press

Keith Naughton – Bloomberg

Mike Ramsey – Wall Street Journal

Byron Pope – Ward’s Auto

Ford Motor Company (F) Monthly Sales Call October 2, 2012 10:00 AM ET

Operator

Good day ladies and gentlemen and welcome to the Ford monthly sales conference call. My name is Latasha and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question and answer session towards the end of this conference. If at any time during the call you require audio assistance, simply press star followed by zero and a coordinator will be happy to assist you.

I would now like to turn the call over to Mr. Erich Merkle, U.S. sales analyst. Please proceed.

Erich Merkle

Thank you, Latasha, and good morning, and welcome to Ford’s September 2012 sales call. Based on early results this morning, we anticipate that September SAAR finished the month around 15 million vehicles, including medium and heavy trucks. We estimate that September in absolute volumes finished the month just above 1.2 million vehicles –again, this is including medium and heavy trucks. This would provide us with an industry increase of approximately 12% for the month of September versus the same month a year ago. By our estimates, the industry continued to show strength in retail sales in September, representing approximately 82% of the overall sales mix. Calendar year-to-date through September, we believe the industry is running at approximately 14.6 to 14.7 million total vehicles, consistent with August and July. This remains in line with our forecast range of 14.5 to 15 million total vehicle sales for this year.

A few observations from a segmentation perspective – September marked the industry’s start of Truck Month. We estimate that the total full-sized pickup truck segment represented approximately 11.7% of the overall industry in September, up from just over 11% in August. This represents the highest share levels for this segment this year. We saw the full-sized pickup truck segment continue to strengthen and gain momentum as the month progressed, reaching approximately 12.4 to 12.5% as we approach month-end. We also saw a surge in the small car segment growth last month, just as we did in August. With higher fuel prices at the beginning of the September, the small car segment moved to just over 23% of the overall industry with much of the strength at the end of August flowing through the first half of September.

Now here to provide you some additional texture from Ford’s perspective is Ken Czubay. Ken?

Ken Czubay

Good morning everyone, and thank you Erich. In September, Ford sales totaled 174,976 vehicles, unchanged from last year. Retail sales were up 4% compared to last September. We saw gains coming from cars, utilities and yes, F-series as we kicked off Truck Month in September. It’s a really exciting time at Ford right now. We have a strong portfolio of products and customers are responding well to our investment in fuel-efficient power trains in cars, utilities and trucks. Ford’s lineup keeps getting better, and now we are ramping up inventories of our newest products – our all-new C-MAX hybrids and Fusion and Fusion hybrids.

Erick talked about the industry’s segment expansion in small cars and full-sized pickups. We saw the same pattern on Ford dealer showrooms last month. With 55,077 pickups sold, we had our best September F-series sales results since 2007; plus, September marked our 14th consecutive year-over-year increases in our pickup truck sales.

Escape posted its best September sales ever with 23,148 vehicles sold. The all-new Escape continues to be one of our fastest turning vehicles along with Fusion. Approximately 50% of our Escape sales are coming from people trading in non-Ford vehicles – incredible conquest rates with high series Escapes, that would be the SEL and Titanium, now accounting for nearly 60% of sales. EcoBoost represented over 90% of all Escapes sold last month, working to push the total number of EcoBoost equipped vehicles the Company has sold since introduction in July of 2009 to more than 350,000.

With higher fuel prices carrying over to the first half of September, Focus sales increased 91% in September. In fact, September was Ford’s best small car sales month in a decade. We have been able to expand our share in the segment from its low of approximately 6% to our current share level today of about 10%. That’s a jump of more than 60% retail share increase in just five years.

Also of note, we sold nearly 1,000 of the all-new C-MAX hybrids in the final days of September. I just got back from a meeting with one of our key dealer groups and they tell me we are bringing new customers to Ford with this all-new vehicle. Frankly, they were swarming all over the lots as they were delivered.

And finally, our commercial business is up 9% this year. Based on vehicle registration data, we continue to be the number one seller of commercial vehicles in the United States. Building on this success, we now have our all-purpose police interceptor sedans and utilities in the market for six full months, and have sold over 10,000 vehicles to police agencies across the nation. Based on registration trends, we anticipate being the leader in this business in 2012.

That’s a look at Ford. Now let’s turn the call over to Ellen to get the latest developments on the economic front. Ellen?

Ellen Hughes-Cromwick

Great, thanks Ken. Since our last monthly sales call in early September, economic fundamentals are still pointing toward modest economic growth but there are now signs of a better housing recovery ahead. Let’s recap some of the key fundamentals.

First off, we received September purchasing managers report that was more encouraging, but as we’ve noted in prior calls, the manufacturing sector is expanding at a slower rate compared to the first half of this year. Capital goods orders have ratcheted down in recent months. At the same time, consumer confidence has picked up, house prices are up in all 20 metro areas, house sales are growing, employment’s up about 1.4% over a year ago. On net, our outlook for the U.S. economy calls for growth in the 2% range this year.

Now here are some of the details. I mentioned the September purchasing manager’s index. That kicked up to 51.5%, and any reading, as you know, above 50 suggests that the manufacturing sector is likely to expand in the next three to six months, so that was a good reading. In fact, it was helped by some potential improvement in orders, particularly if you look at the sub-index of the purchasing managers index for those of you that like to look at the details. The capital goods orders reading within that was up, so if that follows through when we get incoming data releases on businesses’ capital goods orders, that will be a positive development.

Now turning to the consumer sector, the University of Michigan Consumer Sentiment reading rose by 4 points in September to 78.3. Car-buying appetite – now that’s new and used cars – moved up to a reading of 66%; in other words, 66% of the over 500 people surveyed indicated that it was a good time to buy a car.

Now from August to September, new car loan rates did not really change much according to Bankrate.com, and while we saw in the UofM survey on confidence that 26% of those buying a new or used car indicated low interest rates as a factor for them, we have readings in this range in prior months this year.

Now let me turn to the housing sector. Housing-related data continues to suggest that the recovery is gaining some momentum, and I point particularly to the Case-Shiller Home Price Index, probably the most solid statistic we have on home price trends, and it showed the increase across all 20 major metro areas and the data led, but for the month of July up in all of these metro areas. New home sales are up 24% in the 12 months through August of this year. Mortgage rates are low, as you know, and August housing starts are up 28% over a year ago. So just a recap, with September sales around 15 million units, it really does reinforce our full-year call for sales in the 14.5 to 15 million unit range that Erich mentioned.

Now with that summary, let me turn it over to Erich. Erich?

Erich Merkle

Thank you, Ellen. Taking care of a few housekeeping items, taking a look at our fleet for the month, when we take a look at our fleet mix, total fleet as a percent of our sales was 26%. The commercial component was 13% of our overall sales. Government was 5% and daily rental was 8%. This compares to September of last year when our fleet sales as a percent of total overall sales were 28%, the commercial component was 13%, the government component was 6%, and daily rental represented 9%.

When we look at the first nine months of this year, calendar year-to-date January through September, our fleet sales as a percent of our total sales are 31%. The commercial piece of it is 14% of our total sales, government is 5%, daily rental was 12%. This compares to the same period a year ago when fleet was 33% of our total sales. In that mix, commercial represented 13%, government was 7%, while daily rental was 13%. So again, very well managed fleet part of our business.

When we take a look at inventories for September of 2012, our inventories, our gross stock for cars totaled 114,000, for trucks it was 225,000, utilities were 111,000, giving us a total of 450,000 gross stock. That translates to a days supply of 62. This compares to September of last year – last year we had 126,000 cars in gross stock. We had 190,000 trucks, 108,000 utilities, giving us a total of 424,000, which translated into 61 days supply.

With that, Latasha, I’d like to take some calls from some folks, and we’ll start it up with the analyst community please.

Question and Answer Session

Operator

Thank you. [Operator instructions]

Your first question comes from the line of Brian Johnson with Barclays. Please proceed.

Brian Johnson – Barclays

Good morning. Just want to talk about the pickup truck segment. How should we be thinking about it, or how are you looking at it through the year-end, because on the one hand we seem to have improving sequential sales, as we typically do, improving percent of the U.S. SAAR kind of four by large pickups. On the other hand, the year-over-year comps are lagging most other categories. So roughly where is this in line with your expectations? To what extent did gas prices play a role this month, and then how do you expect it to flow through the remainder of the year?

Ken Czubay

Hi Brian, this is Ken. Let me give you my thoughts on pickup truck sales. As we mentioned, the segment is starting to show its seasonal increase. It did that sequentially – July, August and September. The line is slightly below the historical line of segmentation, so we’re seeing a fair amount of robustness with cars, so they add to 100%. Relative to ours, I think the trend line will continue. We’ll continue to see improved segmentation, and of course with Ford being the leader in truck sales, we’ll continue to see good truck business on our end.

In September when you look at the number, it was the best month since 2007 for us, so that’s pre-recession. That’s a pretty solid number, and we’re confident that not only are we on plan but with the EcoBoost offerings continuing to take a high percentage of the retail business because of the shift toward fuel economy and performance, that we’re going to have a good fourth quarter. So in sum, I think we’re on the pattern and we’re on our plan with Ford’s F-series business.

Brian Johnson- Barclays

Okay. And any changes in competitive behavior over the course of the month? It looked like GM sales were soft. Did that result in incentives, and if so did you have to respond?

Ken Czubay

No, not on our part. You’ll have to talk to them about that.

Brian Johnson – Barclays

Okay, thanks.

Erich Merkle

Thank you, Brian.

Operator

Your next question comes from the line of John Murphy with BofA Merrill Lynch. Please proceed.

John Murphy – BofA Merrill Lynch

Good morning guys. Just one follow-up question on the pickups – it looks like year-to-date, you guys have done a very good job of capturing your Ranger customers as that truck rolls off, and it doesn’t look like that happened this month. I’m just curious if anything changed. It looks like GM small pickups actually did pretty well. I’m just curious if you’re losing some of those Ranger buyers, or you feel like you’re still able to retain them and what you can do in the future to hold onto them.

Ken Czubay

Hello John, this is Ken again. We’re on our plan. It’s a little bit of a lagging indicator for us because we track where people come into the market with Ranger, but we had expectations for a high percent of those going into F-series. And what the dealers are telling me is that customers are rolling into the EcoBoost because it gives better fuel economy, certainly much better performance, and has all the attributes that the majority of those customers are looking for. So no, it’s been very consistent this year.

John Murphy – BofA Merrill Lynch

And then just lastly on the inventory, you highlighted it sounds like it’s in pretty good shape across the board. Just curious if there’s any pockets of shortages, particularly on the Escape and Fusion as you go through the changeover and ramp up of that inventory.

Erich Merkle

Yeah, certainly John. On a macro level, the inventory is very consistent with where it was last year, but we are changing over to Escape and Fusion, as you just pointed out, and we continue to ramp those vehicles up and get more inventory on dealer lots. So that will be important as we go through the months to come.

John Murphy – BofA Merrill Lynch

So it’s fair to say that those two products were probably inventory constrained in this changeover process in the month of September?

Erich Merkle

That would be correct.

John Murphy – BofA Merrill Lynch

Okay. And then just last, the Focus doubling in sales, what went on there to drive the doubling in the sales?

Erich Merkle

Well the doubling, one is that it wasn’t just a double over last year, but one of the things that we find is with the gas prices at the end of August and early in September, that did really help Focus tremendously. The other to keep in mind is not just the doubling from last year, but it’s the best that we’ve really had for small car and for Focus in 10 years, so it was a very good sales performance month for Focus and we’re very pleased with it.

John Murphy – BofA Merrill Lynch

Okay, thank you very much.

Erich Merkle

Thank you.

Operator

Your next question comes from the line of Chris Ceraso with Deutsche Bank. Please proceed.

Chris Ceraso – Credit Suisse

I think if that’s me, if you can hear me, it’s Chris Ceraso at Credit Suisse.

Erich Merkle

Hi Chris.

Chris Ceraso – Credit Suisse

How’s it going?

Erich Merkle

Very well, thank you.

Chris Ceraso – Credit Suisse

So just a couple of things – I think you just touched on this, but the Fusion was down quite a bit year-over-year. Is that available of the new one that’s constrained, or is it that you’ve got buyers that are waiting for the new one and they’re not buying the old one? Maybe you can help us with how much of the mix of those, or just what happened with the Fusion.

Ken Czubay

Chris, this is Ken, and you hit the nail right on the head. We are right on plan of our Fusion sell-down, and it’s getting to the bottom of the inventory. We’re loading up with the new 2013. Dealers are just starting to receive them and they’re very excited about it, and we anticipate that to take off in the first 10 days of this month. We had people who made their choice between ‘12s and ’13s, and it was just the inventory depletion on ’12 and an inventory build-up on ‘13s. We’re looking forward to a really good fourth quarter with the all-new Fusion.

Chris Ceraso – Credit Suisse

Okay. And then the follow-up on the Escape – you mentioned you’re selling some high trim levels and good series mix. Do you have an idea of roughly what the increase in average price or average transaction price is versus a year ago?

Erich Merkle

We don’t get into ATPs on specific vehicles, Chris, but we have a number of customers, as Ken just stated, are putting a lot of content on the vehicle and they’re really going with the higher series vehicles, so that’s certainly very good for—customers like it, and it’s very good from a business perspective.

Ken Czubay

What we’re finding, Chris, is that of course when you launch a product, there is often a richer mix. It’s too early to tell, but I think dealers are telling us consumers are dazzled by the technology, they’re dazzled by the EcoBoost, so it’s really taking off.

Chris Ceraso – Credit Suisse

Maybe just to come at it a different way, can you tell if the average price on a vehicle is now more consistent with the competitors in that segment, where a year ago, let’s say, the Escape might have been at a bit of a discount to some of the competitors.

Ken Czubay

No, I think that the new product, especially with the early returns on the mix, will obviously increase it; but I think there’s too short of a wheel base to see the pattern. But again, consumers have choices on the lot. We have pretty good inventory of them, and they are choosing the higher mix vehicles right now.

Chris Ceraso – Credit Suisse

Okay, thank you.

Erich Merkle

Thank you, Chris. Latasha, next caller, please.

Operator

Your next question comes from the line of Adam Jonas with Morgan Stanley. Please proceed.

Adam Jonas – Morgan Stanley

Hi, good morning everybody. Did you see a material change in lending attitude following QEIII a couple of weeks ago?

Ellen Hughes-Cromwick

Oh hi Adam, this is Ellen. You know, not really, at least data that we have access to. So for example, you’re probably aware that the U.S. Federal Reserve tracks car loans in volume, but we won’t get September data for another couple of months. If you look at Bankrate.com and you look at August run rate on a 48-month new car loan compared to loan rates in September, the drop was about 6 basis points. So I guess net, I would just say it takes two to tango – you know, you need somebody coming in to really want to buy, and I think in general the economy chugging along at about 1.5 to 2%, that we’re gradually seeing people come back. And as I mentioned, employment is growing. It’s not as good as anybody would like to see it, but we’re up about 1.4% year-over-year.

Ken Czubay

So Adam, this is Ken. What I would add to that is dealers are telling us that the vast majority of consumers who are coming in, credit is available. Our great partners at Ford Credit are still doing over half of our business, and credit is not an issue.

Adam Jonas – Morgan Stanley

Great. And just as a follow-up, where is the incremental borrower coming from on the FICO curve now? Would you say that you’re starting to see both Ford Credit and third party guys going a little bit deeper due to the very strong performance of the subprime and near-prime market, or is there any material change in the incremental borrower on FICO?

Ken Czubay

No, we’ve been very stable with that at Ford Credit.

Erich Merkle

We’ve been right around 5 to 6% - that was before the recession, during and after the recession, so we haven’t changed at all.

Adam Jonas – Morgan Stanley

You’re saying 5 to 6% of loans to subprime?

Erich Merkle

The higher risk, yes, 5 to 6%, and that has been consistent prior to the recession, during and after the recession. It has remained unchanged.

Adam Jonas – Morgan Stanley

Great, thanks very much.

Erich Merkle

Okay, thank you.

Operator

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

Patrick Archambault – Goldman Sachs

Hi, good morning. My question is just on incentives and average transaction prices. Can you give us a sense of how you trended and maybe some early color on the industry that you’ve seen as well?

Ken Czubay

This is Ken, Patrick. Our trend was essentially flat – I mean, about as flat as it could be from both the prior month, August, and year-over-year. I mean, it’s incredibly stable. The industry is about the same also, so there was no rise in incentives at Ford or the industry, is our observation. As Erich mentioned, the transaction prices, there’s a lot of ins and outs with the ’12 models and ’13 models, so they are basically very difficult to track on a macro basis.

What we’re finding, though, is that customers are coming into Ford and they are buying the cars, as I mentioned, on Escapes with the technology and the advances in fuel economy. So they recognized the benefit there in many cases of doubling their average fuel economy numbers, so we’re getting rewarded for that in the marketplace.

Patrick Archambault – Goldman Sachs

Okay. And I guess one follow-on, if I may – I think you commented on it early on, but I might have missed it entirely. Did you say that the momentum of sales picked up towards the back half? Did I hear that correctly?

Ken Czubay

We didn’t address it, but I will. The beginning of the month had some carryover from Labor Day, so there was a little bit of a spike there, a little bit of a payback. But then the month picked up momentum as it progressed. We had a good last weekend.

Erich Merkle

And also Patrick, as I said earlier, you saw stronger small car sales at the beginning of the month then followed by stronger pickup truck sales towards the second half of the month, so the month was—the mix changed a little bit between the two as the month went on.

Patrick Archambault – Goldman Sachs

Okay, great. Thank you.

Erich Merkle

Okay, thank you very much. Latasha, could we take one more caller from the analyst community? We’d like to then turn it over to the media, please.

Operator

Sure. Your next question comes from the line of Peter Nesvold with Jefferies. Please proceed.

Elaine Kwei – Jefferies

Hi, this is Elaine Kwei in for Peter. Regarding the cadence of sales during the month, would you say overall did things slow down a little bit toward the end since the 20-day mark, or do you think things stayed fairly consistent just on an overall basis?

Ken Czubay

Elaine, this is Ken. I think that they gradually improved as the month came to an end. As I mentioned, I think because of the strong Labor Day marketing activity, they may have been a little higher and then decreased a little bit and then picked up as they normally do. We had a strong last weekend to the month.

Elaine Kwei – Jefferies

Great. And just one quick follow-up – on the new Fusion, would you expect to see a similar percentage mix of the higher trim levels, SELs and Titaniums, as what you’ve been seeing on the new Escape?

Ken Czubay

Well, early indications from the press and from the people that have driven it, they are very excited about the trim levels; but consumers will make that choice. We are anticipating that because it’s just such a beautifully designed and high fuel efficient and high technology contented vehicle. We think it’s going to be a market winner, so we would expect that, especially in the fourth quarter.

Elaine Kwei – Jefferies

Great. Thank you, Ken.

Erich Merkle

Thank you, Elaine. Latasha, could we open it up to the folks in the media, please?

Operator

Sure. [Operator instructions]

Your next question comes from the line of Karl Henkel with Detroit News. Please proceed.

Karl Henkel – Detroit News

Hey, good morning guys. Just two quick Escape questions – you said conquest made up about 50% of sales. I’m just wondering what the breakdown is for model year ’12 versus model year ’13 on the Escape, and whether you think that gas prices also played a role in Escape sales in maybe pulling some potential buyers away from other utilities like Edge and Flex.

Erich Merkle

Karl, yes. If we take a look at Escape, predominantly everything in September was ’13. I think it’s safe to say it was over 95% of September sales were ’13, so it was predominantly all ’13. In terms of the segment overall, the segment weakened a little bit even though we performed very well in the month of September. And in terms of—you know, Escape has always been a good performer for us, and we certainly expect to see Escape do very well going forward.

As it relates to Edge, when we take a look at calendar year-to-date, Edge sales are up about 7%, so last year we also held very tight with Edge throughout the whole year. We’re not seeing too much migration away from Edge to Escape, but Escape is performing very well for us and you can see it in our macro utility number. Our overall utility sales were up 9%, and a big part of that was Escape.

Ken Czubay

And Karl, I would add when you look at the great portfolio of utilities that we had, the Escape—like Erich just said, Escape was up about 3,000. Edge was down about 900, and then Explorer was up over 2,000 also. So it was a strong performance by the entire portfolio of utilities.

Karl Henkel – Detroit News

Thank you.

Erich Merkle

Thank you, Karl. Latasha, next caller please.

Operator

Your next question comes from the line of Deanna Durban with Associated Press. Please proceed.

Deanna Durban – Associated Press

Hi there everybody. A couple things – I heard during the call, at one point I think you said it was the best month for F-series since 2007, and another point I think you said it was the best September, so I just wanted to get that clarified first of all.

Erich Merkle

It’s the best September for F-series since 2007.

Deanna Durban – Associated Press

Best September – okay. And I also wanted to ask—you said there were stronger pickup sales in the last half of the month. Why would that have been?

Erich Merkle

Well, the thing of it is when you start looking at Truck Month, and generally speaking in the month of September when you go back and you look at previous Truck Months, as the Truck Month unfolds and as a lot of activity starts to unfold towards the second half of the month, it does tend to make pickup trucks come to life really towards the back half of the month for September.

Ken Czubay

And Deanna, this is Ken. It’s the phenomena of the ads seeding in the minds of the consumer and the phenomena, just as we mentioned earlier, of the trend as we approach the end of the year of the segment growing. And Erich pointed out, the segment was stronger in the final week that we had seen, so sequential segment growing, marketing actions taking hold, and we would expect that to continue.

Deanna Durban – Associated Press

Okay. Are you seeing some conquesting, because it sounds like GM and Chrysler trucks maybe weren’t as strong in September, and I’m wondering if most people who are getting Fords are trading in Fords or--?

Ken Czubay

Well although there is very strong loyalty within the truck community, what we’re finding is that the consumers are really conscious of fuel economy throughout the lineup from the small cars to F-series, and as we pointed out with EcoBoost doing so well, we’re literally—you know, if you look at the data, the units in operation on pickup trucks, the average pickup truck is 11 years old. And when you come in and buy a Ford EcoBoost pickup truck, you can pretty much double your fuel economy. So we’re seeing a good number of conquest people fueled by not only, like I said, the power train improvements but throughout all the favorable attributes of the F-series.

Deanna Durban – Associated Press

Okay, thanks very much.

Erich Merkle

Thank you, Deanna. Latasha, next caller please.

Operator

Next question comes from the line of Keith Naughton with Bloomberg. Please proceed.

Keith Naughton – Bloomberg

Hi, good morning. So the analysts had expected you guys to be up 2.3%, but you end up flat, and I’m just wondering what you would attribute that to. You mentioned inventory, Ellen mentioned an economy that’s still chugging along and not growing real robustly. Is there something that held you back in September?

Erich Merkle

Yeah, Keith. If you take a look, not all of the analysts had us up 2%; in fact—

Keith Naughton – Bloomberg

No, that’s the average of our estimate – 11 analysts.

Erich Merkle

Yeah. In fact, there were a number that were around 1 to 2%. And you made the point about inventory, and yes, with the inventory on the Fusion as we continue to expand and bring those products to our dealer lots, that will improve. So even if you were to take a look at Fusion and you were to say it had a flat sales month year-over-year, that would be quite a significant difference in our macro. So the Fusion represents about 12 to 13% of our total sales. Okay?

Keith Naughton – Bloomberg

Great. Thank you very much.

Erich Merkle

Thank you.

Operator

Your next question comes from the line of Mike Ramsey with Wall Street Journal. Please proceed.

Mike Ramsey – Wall Street Journal

Good morning.

Erich Merkle

Hi Mike.

Mike Ramsey – Wall Street Journal

Hi, how are you?

Erich Merkle

Well.

Mike Ramsey – Wall Street Journal

Good. I wanted to ask about the overall industry. It looks like the industry is going to have a very strong month on SAAR rate, and with you guys being about flat and the other domestics’ margin lines, is the SAAR really high because we’re seeing—I think that this time of year was still pretty rough last year for the import brands that were affected by the earthquake and tsunami. Is that one of the reasons why we’re seeing a really strong month, is that the comparables are much better this year and they’re fully back in the market? I know that this is an industry question, but I’m wondering if there is anything in particular that made this month so strong across the industry.

Ellen Hughes-Cromwick

Mike, this is Ellen, and I’ll just provide a couple of key elements here. We have been talking to you on these sales calls about the fact that the overall number of vehicles in operation really took a hit post-financial crisis. We actually had an outright decline in the number of vehicles in operation, and yet every year we end up with over 2 million more people that are of driving age. So we have some basic physicals underneath the economy as it goes through this recovery that wants to really get vehicle sales up and the overall number of vehicles of operation moving higher. So there is that rough element underneath the industry that is causing, I think, this fundamental improvement, especially if you look at a three- to six-month moving average, which is probably a good metric to use in that regard.

And then Ken just mentioned on full-sized pickups the age – I mean, these vehicles are just too darn old, frankly, and the economics are such that a customer looks at how much do I have to spend to keep this older vehicle on the road versus what am I going to have to pay to really ramp up to a new vehicle. And so that’s having also an overall effect in terms of lifting the industry a little bit higher. So I think those are really good key fundamentals that will serve the customer and the industry well in coming months.

Ken, you wanted to add something?

Ken Czubay

Yeah, what I would add, Mike, is that although it was a good month for the industry in September, it basically calendarizes, Ellen, for SAAR within our guidance of between 14.5 and 15, and it’s in the range that we’ve been talking about for the last 90 days. And I think your observation was correct about year-over-year comparisons with the Japanese-based companies coming back into the market where they weren’t in the market last year at this time. And from Ford’s standpoint, I think we’re on plan with our Fusion sell-down and our Fusion C-MAX hybrid and Escape reloading for our dealers.

So I think the overall commentary would be that the industry is on plan and Ford is on plan, and we’re looking forward to a really good fourth quarter.

Mike Ramsey – Wall Street Journal

Right. Thanks a lot.

Erich Merkle

Thank you, Mike.

Operator

Your next question comes from the line of Byron Pope with Ward’s Auto. Please proceed.

Byron Pope – Ward’s Auto

Hello gentlemen. I was just wondering if you could tell me or give me a little color on why the Focus sales were up about 91%, we’re showing. That’s phenomenal growth. Was it just because the inventories were so depleted last year?

Ken Czubay

Well I think, Byron, we have a number of issues at play. First of all, research after research shows that fuel economy is a big driver, the number one driver in the minds of the consumer, and they are going to the great value proposition of Focus. We have—like we’re going to do with Fusion, C-MAX hybrid and Escape, we have reloaded our inventories for our dealers, so there is good inventory. And consumers, when they look at the car portfolio that’s on the showroom, and there were some—you know, the depletion of the Fusion like I said, there were people who went to the Focus, all in all it’s just a great value proposition and we expect—that’s our expected sales rate. There will be a little bit more balancing out as Fusions and C-MAX hybrids hit the showroom floor, but it was just a solid month.

Erich Merkle

And Byron, I also might add that remember we’ve been talking about the tremendous growth that we’ve been having in California. California is the top sales state for small cars, and the other is that you can compare it to September of last year. We had to go back 10 years, actually, to September of 2002 to find a comparison, so that’s our best September in a decade. It really performed very well in September. We’re very pleased with it. We’re very pleased with how well the vehicle is performing on the coast.

Byron Pope – Ward’s Auto

Thank you very much.

Erich Merkle

Okay, thank you. One more call, please.

Operator

We have no further questions in the queue.

Erich Merkle

Okay, thank you very much. I appreciate everyone tuning in today and we look forward to speaking to everybody next month. Thank you.

Operator

Thank you for your participation in today’s conference. This concludes the presentation and you may all now disconnect. Good day.

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Source: Ford Motor's Management Presents September 2012 Monthly Sales - Sales Call Transcript
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