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Ford preps for new F-150 roll-out

  • Ford (F -0.2%) will moderately increase the prices on F-150 trucks with the 2015 line to account for new features, according to execs.
  • The automaker will likely use the increased gas mileage on the aluminum-bodied trucks as a selling point on top of the additional features.
  • Dealers are ordering the new F-150 trucks now for sale next year.
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Comments (30)
  • stockmarketchamp
    , contributor
    Comments (45) | Send Message
     
    pre orders strong for mustang......very strong.??......causing ford to hit a new high....??
    28 Jul, 12:20 PM Reply Like
  • princejerome
    , contributor
    Comments (10) | Send Message
     
    with the new 150 coming out --watch for an increase sooooon in the dividend---maybe even thus quarter !!!!
    28 Jul, 01:08 PM Reply Like
  • Tdot
    , contributor
    Comments (3914) | Send Message
     
    Jerome - The new F150 does not roll out until around Thanksgiving. They won't likely be up to full production deliveries and profitability for another 6 months or so.

     

    In the mean time Ford is having to deal with building, stocking, and shipping just enough current models to meet expected demand right through the 3-month shutdown starting in August, neither overstocking inventories and being forced to sell them off cheap when the new one comes along, nor risking running out and losing massive sales to competitors.

     

    Already Ford has said some 90,000 F-150 sales will be sacrificed in the transition to the new model. That represents nearly $4B in revenues and nearly a billion in profits (before taxes) gone - or about 25 cents per share.
    28 Jul, 01:49 PM Reply Like
  • cbroncos
    , contributor
    Comments (1013) | Send Message
     
    Previously Ford said that they started overbuilding F-150's last August and who knows how many they have now? Maybe they have enough so that the 90k loss matters very little or a whole lot?

     

    In the last month of reports Ford said that F-150 sales fell slightly, but transaction prices were higher. Then we got the earnings beat last Thursday. In the Q&A Ford basically said don't look for any big 2015 F-150 sales until Q1 of 2015. In 2013 Ford earned 45 cents in Q1, I think that with the new F-150 earnings in Q1 2015 may be over 50 cents.
    28 Jul, 02:32 PM Reply Like
  • Tdot
    , contributor
    Comments (3914) | Send Message
     
    As of June, Ford is quoting 90k F-150 pickup trucks that won't get built, never mind sold profitably. http://bloom.bg/1o77n0P

     

    The anticipated losses in revenues and earnings from wholesales to dealerships are huge, seeing as the trucks sell for $25-50k and yielding $5-10k in profits each. But that is only a part if the challenge. There will also be hundreds if not thousands of assembly line workers getting put on layoff, while others rebuild the factory tooling. And to build up the inventory before the shutdown will require a tremendous about of costly overtime pay.

     

    The total impact has been estimated at around 50 cents per share, which is why Ford is still looking to earn $1.32 instead of $1.85 as was expected for 2014 a year ago.
    28 Jul, 03:42 PM Reply Like
  • cbroncos
    , contributor
    Comments (1013) | Send Message
     
    I will bet you $10 that the total cost will not reach even 40 cents per share.
    29 Jul, 10:17 AM Reply Like
  • cbroncos
    , contributor
    Comments (1013) | Send Message
     
    The problem here Tdot is that the statement says they are set to lose 90k of production, but how many did they overbuild and still have waiting to sell? I have sure you remember that last August they started a 3rd shift in Kansas City to start building excess F-150's for this down time. So I doubt they will lose 90k of sales. If you look at what happened in June it looks to me that Ford is managing this very well.

     

    We will know if this continued into July very soon.
    29 Jul, 10:23 AM Reply Like
  • Tdot
    , contributor
    Comments (3914) | Send Message
     
    Well, you seem to forget - Ford has said to the analysts they have already yielded some 15k units of 2014 F-150 market share, in sharply reducing incentives and marketing (advertising). And the shutdown hasn't even started yet! They are self-limiting the wholesale supply to dealerships, and the retail transactions through incentives, to manage the inventory in pacing themselves for the marathon drought of August-November.

     

    They basically need about a 120-150 day supply to cover the Aug-Nov production gap, to make sure they don't run out of important arrays, which means not only a lot of costly overtime to build them ($$), storage costs ($$), and insurance ($$) on the inventory, all of that on top of the lost revenues and earnings from the constricted supply and reduced market share!

     

    Meanwhile GM and Ram and even Toyota are rapidly growing incentives and advertising like crazy to try to grab chunks of that market share that Ford is surrendering.
    29 Jul, 01:53 PM Reply Like
  • cbroncos
    , contributor
    Comments (1013) | Send Message
     
    So what is the days supply of F-150's? Well the dealership near me seems to be loaded with them. Now I have no idea if this is more than last year or not. But it seems to me that you could find out that information.

     

    I doubt many truck sales will be lost by Ford and found by GM and Toyota, instead I think many are waiting for the new truck. As you said they have been through this before and it worked out just fine.
    30 Jul, 08:45 AM Reply Like
  • Tdot
    , contributor
    Comments (3914) | Send Message
     
    Correct - Ford has been using massive overtime and weekends to build and stockpile sufficient 2014 F-150s at the secure dealership lots first, and is using rail cars, parking lots, warehouses, etc., for the overflow. Those vehicles parked in dealership lots are already "sold" (at the wholesale level) and the earnings on those are already booked. Those stored in rail cars, parking lots, and warehouses are in reserve - on call for when the dealerships need more.

     

    In a couple of weeks, not sure if they have announced the day yet, the tap is to be shut off at Dearborn (which normally produces some 1,200 pickups per day at regular time) in terms of 2014 production. Production of the 2015 model at Dearborn is said to begin in November, those going on sale around Thanksgiving. Once the 2015 production at Dearborn is underway, probably early next year, the F150 production line at Kansas City gets shut down for the transition to 2015 model. Apparently that is going to be a much easier affair, said to require only a couple of weeks.

     

    In any case, Dearborn will be unable to produce some 90,000 vehicles that it otherwise would have, and Kansas City is already working around the clock on both F150s and Transits. To avoid diluting the brand, and risking running out, in order to try to maximize profits on the remaining 2014 models, Ford is actively restricting incentives and other marketing activities, to keep a good balance between supply and demand for the remainder of the year. Ford has already given GM and Ram some sales, at least partly due to the incentives they offer - around 15,000 was the number getting passed around. The shortfall was nearly 7500 units just in June, and July is not likely to be much better.
    30 Jul, 10:19 AM Reply Like
  • Ryandan
    , contributor
    Comments (1614) | Send Message
     
    Anybody have experience in the insurance industry that can tell us how the insurance people are looking at this aluminum truck? I'm sure a large number of auto shops won't be able to handle major problems with the truck, and repair cost could skyrocket.
    28 Jul, 02:59 PM Reply Like
  • crockejo
    , contributor
    Comments (74) | Send Message
     
    the new Fusions are actually pretty nice and sporty....love the F-150 that's a real man's truck!
    28 Jul, 03:08 PM Reply Like
  • cbroncos
    , contributor
    Comments (1013) | Send Message
     
    I leased a 2014 Fusion Se with a 1.5 L Ecoboost engine and I love it! Getting around 35 MPG and easily goes up to 80 to pass an 18 wheeler.
    31 Jul, 09:35 AM Reply Like
  • J38765
    , contributor
    Comments (188) | Send Message
     
    Ryandan the insurance industry is fine with aluminum. The larger issue is getting enough shops equipped to handle early demand. It costs a moderately sized body shop about 75K in equipment plus training to get ready to repair aluminum. The shops also have to create separation from traditional metal repair areas. All in all that should be a relatively short term issue as the shops gear up. Early buyers may experience some frustration, but aluminum is coming and the industry will gear up to handle it.
    28 Jul, 05:15 PM Reply Like
  • Ryandan
    , contributor
    Comments (1614) | Send Message
     
    J38765

     

    Your response sounds so simple - thank you. I guess my only concern is Ford has been using aluminum on many of its cars and trucks for the last ten years and are now involved in some class action suits for defective aluminum parts.

     

    So maybe you could explain to me how the current repair shops are dealing with the problems and how all the repair shops now have to upgrade for the "Ford" change to aluminum when in fact they have been having problems with this for years?

     

    Another simple response would be appreciated.
    28 Jul, 11:02 PM Reply Like
  • Joel Ladzinski
    , contributor
    Comments (47) | Send Message
     
    Hey Ryandan, the Ford class action lawsuits were related to premature corrossion and per Ford, it was a problem with the prep process before painting the aluminum parts and unrelated to repairs. Knowing what they know now, I anticipate they have corrected this process for the new vehicles using aluminum and Ford is offering subsidies to certain body shops to become certified in aluminum repairs to prevent future problems.
    29 Jul, 03:40 AM Reply Like
  • Ryandan
    , contributor
    Comments (1614) | Send Message
     
    Trader Joel

     

    I'm sure Ford has learned something from the legal/service issue with aluminum parts. The point is they put out a product that had problems with durability. As a truck owner, I would always prefer a steel bed, I don't really care about the doors or hood. As for Ford offering subsidies to "certain" body shops, I see an instant up-charge of 20 to 50% in repair cost by designating exclusivity in aluminum repairs. And you start cutting some repair shops out of the herd and you're going to buy yourself some problems. Welcome to SA - good luck investing.
    29 Jul, 08:38 AM Reply Like
  • Dukester
    , contributor
    Comments (79) | Send Message
     
    The F150 is built at two plants, Dearborn assembly and Kansas City. While the Dearborn plant is down for the change over to the 2015 model, Kansas City will still be building the 2014 model.
    28 Jul, 06:48 PM Reply Like
  • Tdot
    , contributor
    Comments (3914) | Send Message
     
    If the Kansas City plant was singlehandedly able to keep up on F150 production to meet wholesale and retail demand for 3 months, while at the same time building the new Transit van, they would have shut down and closed the Dearborn plant years ago.

     

    At the end of the day, Ford is going to be short by about 90,000 units.
    28 Jul, 07:12 PM Reply Like
  • JD in NJ
    , contributor
    Comments (955) | Send Message
     
    So what is the net effect of being short by 90K units?

     

    A) Demand outstrips supply, driving per unit cost to the consumer higher?
    B) Supply cuts are balanced by lower demand as people wait for the new model, deferring some revenue?
    C) Disaster?
    29 Jul, 08:53 AM Reply Like
  • Ryandan
    , contributor
    Comments (1614) | Send Message
     
    D) All of the above.
    29 Jul, 09:11 AM Reply Like
  • Tdot
    , contributor
    Comments (3914) | Send Message
     
    As we saw in the second quarter, current F-150 sales and wholesale revenues are down in an otherwise up market, mainly due to lower incentives as compared to the competitors' offerings, which are newer. Dealers are not as able to negotiate the retail price down to undercut the competitors, and Ford is not piling suitcases of cash on the aluminum hoods. Ford is very carefully managing their inventory and net pricing to keep demand high and supply relatively low. The earnings are down, but the margins are up.

     

    It is a self-inflicted "planned and controlled" disaster, if you will. Rather like one of those implosions they do in Vegas from time to time when they tear down an old outdated casino hotel to make room for a newer, better one. Bookings may be a little thin for a while, but when the new one opens, the payoff is huge.

     

    By the way - they went through the same sort of thing in 1996, when they launched the "tenth generation" F-series, which was remarkably rounded and smoothed and streamlined for fuel efficiency. It was a completely different strategy though. There was worry in marketing that some traditional manly-type truck guys would find the new truck a bit too "feminine", so for a time they built the outgoing model and the new model, selling them side by side. It didn't last long - sales on the new smoothed-out model took off fast, and annual sales jumped from about 750k to well nigh a million, as suburbanites flocked to the sexy-new truck as a daily driver.
    29 Jul, 02:14 PM Reply Like
  • Ryandan
    , contributor
    Comments (1614) | Send Message
     
    Well, at least somebody on here is keeping the picture clear as a bell. Thank you for the facts and accurate observations.
    28 Jul, 10:57 PM Reply Like
  • ted lujan
    , contributor
    Comments (711) | Send Message
     
    Who cares if they are short 90,000 F-150? Some of the short fall will made up by the other new models coming into the market. Actually those who can not buy a '14 F-150 will probably go on the waiting list for the new aluminum F-150. We are looking at a real game changer with the truck. I am excited for the stockholders of Ford stock. $20.00 bucks may be very very conservative where the stock will go. The excitement on the new truck will bring new stock holders in to the company. Ford stock may replace the proverbial money tree. Only time will tell.
    29 Jul, 11:45 AM Reply Like
  • Tdot
    , contributor
    Comments (3914) | Send Message
     
    The only other all-new model coming in the next few months is Mustang. Most of the other "new" products yet to come in CY2014 are modest upgrades (eg: Expedition/Navigator). The all-new Transit and MkC are already on sale. The next major redesign is Edge/MkX - which comes along some time next year.

     

    Ford was not joshing you when they said they would be giving up around 90k truck sales, and the revenues and earnings to go with them. At the end of the day they are cutting production, as the Dearborn plant is forced to shut down for nearly 3 months for renovations. The Kansas City plant cannot keep up alone, so they are working expensive overtime and stockpiling to try to build up a reserve fleet. Previously they had the Norfolk Assembly plant building F-series trucks in Virginia, but that closed in 2007 as the Recession loomed as dark storm clouds approaching.

     

    The shortfall is being made up alright - Toyota, Nissan, GMC, Chevy, and Ram are taking advantage of Ford's misfortune, and are selling trucks like crazy, with lots of commercials and incentives.
    29 Jul, 02:32 PM Reply Like
  • Ryandan
    , contributor
    Comments (1614) | Send Message
     
    It seems to me you could offer a truck bed in either steel or aluminum as an option and not take the hit they are doing with a full rollover. Why not ease the public into the transition instead of pushing them into the pool.
    29 Jul, 03:37 PM Reply Like
  • Tdot
    , contributor
    Comments (3914) | Send Message
     
    Here is an interesting video (on YouTube) about the development of Ford's new Aluminum and Steel Truck. http://bit.ly/1toGqxI
    29 Jul, 03:54 PM Reply Like
  • ted lujan
    , contributor
    Comments (711) | Send Message
     
    Idot thanks.
    For the informative must see video for all Ford investors.
    30 Jul, 10:49 AM Reply Like
  • Tdot
    , contributor
    Comments (3914) | Send Message
     
    ... well, at least for those that might be concerned about the whole aluminum truck thing.
    30 Jul, 11:40 AM Reply Like
  • Tdot
    , contributor
    Comments (3914) | Send Message
     
    By the way, Ford has verified the 700-pound savings ... actually 732 pounds:
    http://ford.to/1s6URUg
    http://ford.to/1qNhdwM
    And corrosion resistance:
    http://ford.to/1s6VjC2
    31 Jul, 10:26 AM Reply Like
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