Ford Sees Margins Shrinking as Buyers Shift to Small Cars

[Biker16]

What's bad is that GM is making an 8% margin as compared to Ford's 12%.

 

If GM's margin is 8% now, where will it be when Ford's is 8%?

 

GM most profitable models are all end of life. their large pickups and SUVs which can have up to $12,000 in profit are old. GM's margins should improve as they replace those models.

 

Which means they're more profitable, right?

 

Profit by itself should not be the only motivation in product planning. With the expected growth in small cars for needs to find a way to maintain market share and not to simply write off small cars because it is less profitable.

 

As Antaus said Ford needs more product.

 

Your assumption amuses me.

 

You assume that it never occurred to Ford to import EU product, rather than realizing that such an effort would require an expensive adjustment to the supply chain--and possibly expensive tooling (consider the unique FNA fascias--you would have to coordinate the logistics of delivery of those fascias not to a plant ten miles down the road, but a few thousand miles away, over open water).

 

 

It is not that complex,Richard, Fascias are not expensive to transport nor to make additional molds to build. the costs of moving production must be weighed again the costs of losing sales, and building additional capacity, sometimes it makes sense to import.

 

what "expensive adjustment to the supply chain" is required for the same product built to global standards in different plants? again we have one ford to make things easier not harder. Ford has for the focus airlifted complete IPs from Germany to the US, because they are the same f'n car, with very minor differences.

 

the biggest issue is Global Ford's manufacturing system is imbalanced, with over supply in some places and under-supply in other, and going forward building indentical cars on both sides of the Atlantic, will invite more exporting and importing to solve these imbalances.

[Biker16]

It is. Fewer options, lower transaction prices (due to fewer options) and in the case of GM's A & B, they have to survive on NA volume alone, while Ford's B car is sold throughout the Americas.

how do you define fewer options?

[NickF1011]

GM most profitable models are all end of life. their large pickups and SUVs which can have up to $12,000 in profit are old. GM's margins should improve as they replace those models.

 

How is lowering profit-per-vehicle going to improve margins?

[akirby]

There you go not looking past the end of your nose again.

 

164,000 vs 207,000.

 

That's total employees.

 

I believe that's also the global employee numbers. Based on what someone (jpd80?) posted in the past the U.S. employees were much closer to half of GMs U.S. employees because we were comparing U.S. sales numbers. If you want to use global employees then we should use global sales.

 

It may not be 2 to 1 but Ford is making more profit on fewer sales with significantly fewer employees than GM. That's why the margins are better.

[FordBuyer]

 

 

There you go not looking past the end of your nose again.

 

164,000 vs 207,000.

 

That's total employees.

 

I believe that is total employees worldwide, not U.S. only, and 2 times 164,000 is 328,000, not 207,000. So GM doesn't have two times more employees than Ford. Not even close. Of course GM needs more employees with four divisions to Ford's 1.25. And I would agree that GM should have cut down to two divisions....Chevy and Cadillac, but it is what it is right now. And don't forget that Chevy is coming out with 13 new models in 2013 including new pickups. So Chevy is trying to keep pace with companies like Ford that have very fresh lineup. And again, I believe Fusion, Focus, Escape, Edge, and Explorer represent a super strong lineup for Ford. Kudos to Ford for being so strong down the middle. Very formidable lineup. My choice right now would be Focus SE hatch with sports appearance package or Fusion SE with same package.

[NickF1011]

I believe that is total employees worldwide, not U.S. only, and 2 times 164,000 is 328,000, not 207,000. So GM doesn't have two times more employees than Ford. Not even close. Of course GM needs more employees with four divisions to Ford's 1.25. And I would agree that GM should have cut down to two divisions....Chevy and Cadillac, but it is what it is right now. And don't forget that Chevy is coming out with 13 new models in 2013 including new pickups. So Chevy is trying to keep pace with companies like Ford that have very fresh lineup. And again, I believe Fusion, Focus, Escape, Edge, and Explorer represent a super strong lineup for Ford. Kudos to Ford for being so strong down the middle. Very formidable lineup. My choice right now would be Focus SE hatch with sports appearance package or Fusion SE with same package.

 

If you're honestly going to refer to Lincoln as ".25" of a division, you can't in the same breath refer to GMC as anything more than 0.1.

[FordBuyer]

 

 

If you're honestly going to refer to Lincoln as ".25" of a division, you can't in the same breath refer to GMC as anything more than 0.1.

 

What are Sierra, Acadia, and Terrain sales? I'm under the impression they are pretty good. I would say total way over 100,000 sales/year and probably closer to 200,000 if not more. Lincoln is not even half that. And drop the argument that Lincoln makes a profit and GMC doesn't. I don't believe Lincoln is profitable right now with such dismal sales and Ford at same time giving Lincoln more attention as in resources, marketing, and investment. Lincoln is a work in progress that may or may not return Ford's investment.

[akirby]

What are Sierra, Acadia, and Terrain sales? I'm under the impression they are pretty good. I would say total way over 100,000 sales/year and probably closer to 200,000 if not more. Lincoln is not even half that. And drop the argument that Lincoln makes a profit and GMC doesn't. I don't believe Lincoln is profitable right now with such dismal sales and Ford at same time giving Lincoln more attention as in resources, marketing, and investment. Lincoln is a work in progress that may or may not return Ford's investment.

 

Because all that matters is sales volume.

[akirby]

It's not about the vehicles. It's about overhead and management practices and profit margins.

 

You still don't understand how a company could be #1 in sales and go out of business do you?

[NickF1011]

What are Sierra, Acadia, and Terrain sales? I'm under the impression they are pretty good. I would say total way over 100,000 sales/year and probably closer to 200,000 if not more. Lincoln is not even half that. And drop the argument that Lincoln makes a profit and GMC doesn't. I don't believe Lincoln is profitable right now with such dismal sales and Ford at same time giving Lincoln more attention as in resources, marketing, and investment. Lincoln is a work in progress that may or may not return Ford's investment.

 

Sales are irrelevant in this comparison. GMC has less unique engineering into its lineup than Lincoln does. If sales are all that matter, hell, Lamborghini must only be 0.0002 of a brand.

Edited November 16, 2012 by NickF1011

[RichardJensen]

GM has 101k employees in NA: http://media.gm.com/... Highlights.pdf

Ford doesn't provide a similar table but:

 

20,000 white collar workers in NA got bonuses earlier this year, there are 4,500 CAW workers in Canada, in 2011 there were 41k UAW workers in the US and about 2.5k have been added since. Add 3k at HMO and 2k at Cuatitlan....

 

Ford NA can be safely estimated to employ about 70k people. That is significantly less than GM, if not 'half' of GM.

 

Further, the difference appears to be largely in administrative, not manufacturing jobs.

Edited November 16, 2012 by RichardJensen

[FordBuyer]

 

 

Sales are irrelevant in this comparison. GMC has less unique engineering into its lineup than Lincoln does. If sales are all that matter, hell, Lamborghini must only be 0.0002 of a brand.

 

I would agree that GMC is more like what Mercury was to Ford. Share platform with Chevy with some different creases in sheet metal. And I'm on record saying I don't see why GM kept GMC after bankruptcy. I guess because GMC is grouped with Buick at its retail stores. But GMC is relevant sales wise, and it doesn't cost GM much more to put GMC nameplates on Chevy products and charge more. And right now Lincoln is irrelevant sales wise as it drops down to 5,000/month and combined MKS/MKT sales maybe drop under 1,000 the way things are going. Lincoln is starting to go the way of Suzuki and Mitsubishi in many areas of country. out of sight, out of mind. Hopefully new MKZ and then new MKEscape being shown at NAIAS will breath some relevancy into moribund Lincoln.

[fordmantpw]

I would agree that GMC is more like what Mercury was to Ford. Share platform with Chevy with some different creases in sheet metal. And I'm on record saying I don't see why GM kept GMC after bankruptcy. I guess because GMC is grouped with Buick at its retail stores. But GMC is relevant sales wise, and it doesn't cost GM much more to put GMC nameplates on Chevy products and charge more. And right now Lincoln is irrelevant sales wise as it drops down to 5,000/month and combined MKS/MKT sales maybe drop under 1,000 the way things are going. Lincoln is starting to go the way of Suzuki and Mitsubishi in many areas of country. out of sight, out of mind. Hopefully new MKZ and then new MKEscape being shown at NAIAS will breath some relevancy into moribund Lincoln.

 

And another brand doesn't cost any more than just putting a new nameplate on it? Advertising, marketing, branding, dealerships, everything else that has to have the bowtie taken off and 'GMC' put in it's place. How many people buy a GMC that wouldn't buy a Chevy? How much extra does it cost to run GMC vs. just producing Chevy? How much money does GM spend to get each additional sale, and is it more or less than the profit on each of those vehicles?

 

Don't compare it to Lincoln...Lincoln is changing. Slowly, but it is changing. We have no indication GMC is going to be anything other than rebadged Chevy's with a few different creases here and there.

[NickF1011]

I would agree that GMC is more like what Mercury was to Ford. Share platform with Chevy with some different creases in sheet metal. And I'm on record saying I don't see why GM kept GMC after bankruptcy. I guess because GMC is grouped with Buick at its retail stores. But GMC is relevant sales wise, and it doesn't cost GM much more to put GMC nameplates on Chevy products and charge more. And right now Lincoln is irrelevant sales wise as it drops down to 5,000/month and combined MKS/MKT sales maybe drop under 1,000 the way things are going. Lincoln is starting to go the way of Suzuki and Mitsubishi in many areas of country. out of sight, out of mind. Hopefully new MKZ and then new MKEscape being shown at NAIAS will breath some relevancy into moribund Lincoln.

 

OKAY.

[grbeck]

I would agree that GMC is more like what Mercury was to Ford. Share platform with Chevy with some different creases in sheet metal. And I'm on record saying I don't see why GM kept GMC after bankruptcy. I guess because GMC is grouped with Buick at its retail stores. But GMC is relevant sales wise, and it doesn't cost GM much more to put GMC nameplates on Chevy products and charge more. And right now Lincoln is irrelevant sales wise as it drops down to 5,000/month and combined MKS/MKT sales maybe drop under 1,000 the way things are going. Lincoln is starting to go the way of Suzuki and Mitsubishi in many areas of country. out of sight, out of mind. Hopefully new MKZ and then new MKEscape being shown at NAIAS will breath some relevancy into moribund Lincoln.

 

GMC is one of the last examples of 1970s badge engineering that still works, and that is as much a result of the boom in truck and SUV sales as anything else. Whether it still will work when Chevrolet dealers inevitably get the high-lux trim versions of Chevrolet trucks and SUVs that they want is an unanswered question.

Edited November 16, 2012 by grbeck

[Biker16]

This.

The telltale of profitability is that Ford chose to build Focus in the USA, Ford wouldn't have done that if the returns were marginal..

 

they could still be marginal but they would have been worse if built elsewhere.

 

How is lowering profit-per-vehicle going to improve margins?

 

they are selling fewer full size pickups and those they are Selling require far more incentives to sell.

 

Selling an all new truck would increase sales and reduce incentive increasing Margins on those trucks and overall margins for the entire company, those Trucks make up a large portion of their overall profits and sales.

[jpd80]

I would agree that GMC is more like what Mercury was to Ford. Share platform with Chevy with some different creases in sheet metal. And I'm on record saying I don't see why GM kept GMC after bankruptcy. I guess because GMC is grouped with Buick at its retail stores. But GMC is relevant sales wise, and it doesn't cost GM much more to put GMC nameplates on Chevy products and charge more.

I think these are very relevant points and underscores the difference in philosophy between Ford Only strategy versus GM Multi-branding,

GM is sales and volume centric and needs to maintain business activity across its brands by keeping production levels up.

 

 

And right now Lincoln is irrelevant sales wise as it drops down to 5,000/month and combined MKS/MKT sales maybe drop under 1,000 the way things are going. Lincoln is starting to go the way of Suzuki and Mitsubishi in many areas of country. out of sight, out of mind. Hopefully new MKZ and then new MKEscape being shown at NAIAS will breath some relevancy into moribund Lincoln.

You were doing so well....

Lincoln is not critical to the success of Ford's bottom line, I think this is because Ford was looking hard at the future of Lincoln when they pulled the trigger on Mercury.

At times I wonder about a re emergence of Mercury as a full line of re-skinned Fords which would allow Lincoln moving to a higher plane like an American Jaguar or MB..

A financially stable Ford could pull it of but I wonder whether the thought of all that complexity and expended resources is now off putting to the brass and that less brands is better.

And I'll admit that Lincoln looks like moving higher without a "Mercury strategy" so maybe I answer my own questions....

Edited November 16, 2012 by jpd80

[jpd80]

Ford - Lincoln two brand approach is neat clean and efficient, it would be hard to justify moving away from it.

Just as GM is stuck in mufti-brand land where moving away, closing down brands is frightfully expensive

so the cost of replicating vehicles across brands hopefully justifies their existence...

Edited November 16, 2012 by jpd80

[BrewfanGRB]

Gee, I didn't know that GMC, Buick, and Cadillac were cheaply priced vehicles, let alone different Chevy trucks galore, Corvette, Camaro, Malibu, and new Impala. Where do you guys come up with this bullshit? Both GM and Ford are doing well. Why don't you drop the GM bashing for awhile.

 

Why don't you just stop whining about it? You don't like what's written on a free, Ford-centric forum and you want the USERS to change? You're like an idiotic parent who complains about all the sex and violence on TV, demanding those shows be taken off the air, when they could change the channel or turn it off. So here, you could just go somewhere else that indulges what YOU want to be written.

[BrewfanGRB]

As noted above the B and C segment GMs have higher sticker prices than the Ford counterparts (Focus Electric excepted). In Central Indiana and the Twin Cities, the Fords also currently offer larger cash incentives than the GMs - though this of course may not be true in other parts of the U.S.

 

So what you're really saying is...what, exactly? You have anecdotal evidence that larger incentives are offered (now, but haven't analyzed the totality of incentives offered year-to-date on these model for either make) in your isolated region of the country. We can derive very little from this as to what the ATPs and margins for each model are.