Sector Outlooks

Ford on Track to Be #1 U.S. Carmaker

Things are looking up for the one American automaker that didn't go for a government bailout, and it's not just because of "cash-for-clunkers."

September 2, 2009

Ford’s recent navigation of financial shoals is paying off big-time. The Detroit automaker took a different tack than its rivals, which sought aid from the federal government and shelter in bankruptcy court.

It’s on course to grab the brass ring in 2010, becoming No. 1 in U.S. auto sales. An $18-billion low interest loan in 2006 -- when the company mortgaged itself, including its iconic blue oval insignia -- is allowing Ford to remake operations. It’s slashing costs and developing common bodies, braking and wiring systems for its vehicles worldwide and putting in place new flexible assembly lines that let plants shift rapidly from making one model to another. Plus, Ford is committed to new model development -- pledging to revamp its entire fleet by early 2011, and then repeating the feat in a few years.

As a result, by year-end 2010, Ford’s U.S. sales will likely edge out both General Motors’ and Toyota’s, but it’ll be a photo finish. The best bet: Toyota will come in second and GM will slip to third. Already, Ford’s share of U.S. auto sales is climbing. It’s likely to top 16% this year and be a hair over 17% next, mainly at the expense of GM and Chrysler. A market share gain of one percentage point reverses a slide that had plagued the firm for more than a decade.

GM’s share of new-vehicle sales will be about 19.5% this year, nearly one percentage point lower than in 2008, and come in at barely 17% in 2010. Chrysler’s share will continue to plunge. Its slice of vehicles sold by new-car dealers will slip and slide to as low as 8.5% this year and around 8% in 2010, down from 11% in 2008. Foreign brands will largely hold their own through 2010, with Honda and Toyota posting small gains next year.

Ford is getting a boost from a new cycle of models whose popularity seems to be hitting its stride. “There is a perception that Ford has its fingers on the pulse of what consumers want to buy, whether this be a raft of hybrids, such as the Fusion, Escape and Mariner, or the new Taurus,” says Howard Kuperman, president of Phil’s Ford Lincoln Mercury in Port Jervis, N.Y., and chairman of the New York State Automobile Dealers Association.

It’s not just curbside appeal that’s giving Ford’s sales a lift. “Consumers are making a decision to buy a Ford product because it did not accept federal bailout money, as did GM and Chrysler, and it didn’t go through bankruptcy as did the other two,” says Aaron Bragman, an auto analyst with IHS Global Insight, a business consultancy. Such consumer anger may fade over time, but Ford’s sales should keep gaining as it builds on strong sales through next year with the introduction of all-new Focus and Fiesta small cars and an ultraefficient commercial van, the Transit Connect, says Bragman.

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