Ford Motor Company (NYSE: F ) continues to say that the rollout of its all-new 2015 F-150 is going as planned. Ford’s new pickup is “off to a very strong start,” CEO Mark Fields told The Motley Fool earlier this month. But Ford is still ramping up production, Fields said, and dealers may not have full inventories until “mid-to-late summer.”
Meanwhile, General Motors Company (NYSE: GM ) is seeing big sales gains for its Chevrolet Silverado — without heavy incentives. Is Ford’s slow ramp-up putting it at risk of losing some big customers?
A slow rollout for the latest version of America’s best seller
Ford makes the F-150 in two factories, both of which required long shutdowns to install tooling for the all-new F-150. Ford’s Dearborn, Michigan plant began production of the new trucks in late November, and its Kansas City factory started in mid-March.
But the two factories aren’t quite up to full speed yet, and won’t be until later this spring. That means dealers have very few new trucks to sell. But the ones they have are selling very quickly, spending just 18 days in inventory on average, Fields said. (50 to 60 days is more typical for pickups.)
Ford says that it’s prioritizing retail sales over commercial sales while supplies are tight — and it was rewarded with a 10% year-over-year gain in retail sales in March.
That’s the right move: Retail sales tend to be more profitable, as retail buyers tend to prefer higher-trim trucks than businesses buying for their fleets. But commercial sales are a big part of Ford’s pickup business — an important part — and right now, it’s losing those sales to its ancient rival.
GM is winning a lot of business while Ford ramps up
Here are the numbers that tell the tale: For the first quarter, overall sales of the F-Series, which includes the F-150 and its Super Duty siblings, were up just 2.3%. Meanwhile, Chevy Silverado sales rose 17.6% during the same period.
GM isn’t getting those gains by juicing retail sales with huge incentives. Rather, it appears that GM is grabbing the commercial-fleet sales that Ford isn’t able — or at least willing — to make right now. GM said that commercial deliveries of its full-size pickups, which include the Silverado and the similar GMC Sierra, rose 41% in March.
That’s very good for GM. Auto investors are often wary of “fleet sales,” remembering the bad old practice of automakers dumping unsold inventory on rental-car fleets at cut-rate prices. But sales of trucks to commercial fleets — big contractors, mining companies, and the like, who may buy 10, or 50, or 300 pickups at a time — are good profitable business, and Ford and GM compete hard to win those sales.
Ford may have the newest truck on the block, but GM’s big pickups were brand new for the 2014 model year, and they’re still well regarded. And unlike Ford, GM has enough of them to win a lot of commercial business.
A dent in Ford’s sales that could linger
The odds are good that Ford will be able to win back most of its lost commercial-fleet market share later this year. But it’s also possible that GM is winning some of Ford’s longtime commercial customers, and it’s possible that those customers will like their new Chevy trucks enough to keep buying them in the future.
This is a big deal for investors. Pickup sales are the biggest driver of profits for Ford and GM in North America, and for both — but especially Ford — North America is generating a big percentage of global profits right now. Small shifts in pickup sales can have an outsized effect on both companies’ bottom lines, as we saw in Ford’s results last quarter.
Ford has warned us to expect lower profits in early 2015, largely because of the F-150 rollout — but it expects to make up the difference later in the year. It probably will, but GM may have stolen some of its customers in the meantime, and that may have some long-term effects.
Long story short: Tight supplies of the new Fords are helping GM win some valued business. If GM holds on to those new clients, the dent in Ford’s pickup sales numbers — and profits — could linger. Stay tuned.
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