Is Ford Motor a Step Closer to the F-Series Turnaround?

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Mar 31, 2015

Ford Motor’s (F, Financial) F-Series deliveries have been weak in the past several months. The F-Series is the top revenue- and profit-generating vehicle for the company. However, the retooling process at the Dearborn and Kansas City plants kept facilities shut for a temporary period in the last year. This has resulted in a supply problem. Let’s try and look deeper into the issue to see how it impacted numbers, and study whether the F-Series sales would recover.

F-Series sales volume gets hit

The F-Series sales volume was down 1.3% in 2014. The vehicle has been the highest-selling truck in the U.S. market for years, and a sales plunge like this appears worrisome. F-Series sales include sales of both heavy duty and light duty trucks. However, Ford’s light truck F-150 is the most popular variant and makes for most of the F-Series deliveries.

After witnessing dull volumes in 2014, the F-Series got a brilliant start to 2015 when it recorded sales of 54,370 units in January, a rise of 16.8% compared with 2014. However sales dropped 1.2% in February as supply was tight. The second-largest American automaker is already under the scanner after experiencing poor truck sales in the past year. If sales continue to remain weak, the company will come under further scrutiny.

The primary reason behind weak F-Series sales is the retooling at two major facilities where the trucks are manufactured. Ford had to retool these plants to upgrade the system and introduce the latest technology to manufacture the aluminum-bodied 2015 F-150. For this, the automaker had to close down production for some weeks. It is estimated that this process cost the company sales of at least 90,000 trucks last year as the F-Series supply was disturbed in the market. While Ford’s supply was constrained by the retooling process, General Motors’ (GM, Financial) Chevy Silverado and Fiat Chrysler’s (FCAU, Financial) Ram pickups made good gains. Silverado and Ram’s market share improved as Ford wasn’t able to stock the F-Series truck sufficiently to meet soaring truck demand.

Confident to see a turnaround soon

Despite challenges, the Blue Oval is confident of a turnaround in F-Series sales. Overhauling the Dearborn plant took as much as 13 weeks in 2014. After this was complete, Ford started retooling the Kansas City facility towards the end of December 2014, which got completed this year in the early half of March. Production has just fired up at the facilities and will take some time to cater to the early rush for the new vehicle. Until the production picks up, buyers will have to wait. The problem is that such short-term supply constraint results in sales slip for some months. The company expects to stock the dealers sufficiently with the F-150 pickups by June end. Now that renovating the two facilities is complete, Ford executives say that the supply problem should get resolved soon.

Though there’s been some skepticism regarding the prospects of the new 2015 F-150, Ford stays very optimistic. The light truck that the company launched late last year has received solid response from customers. The use of aluminum has drastically reduced the weight of the 2015 F-150 by 700 pounds and improved the fuel economy by leaps. It’s selling so well that Ford has not been able to match the soaring demand. A key metric used to ascertain the demand for any vehicle is how long it stays at the dealer's lot. Ford’s F-Series is rolling off from the showrooms in 18 days compared with an approximate of 45 to 50 days for other cars at this time of the year.

It’s too early to say how well the new F-150 will sell. But the early demand suggests that the F-Series popularity is only rising. Once the truck is sufficiently stocked with the dealers, sales volume will get a big boost leaving the Silverado and Ram further behind.