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mustang84isu

Ford wins $8.6 billion federal contract

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  • Ford Motor Company (NYSE:F) has won a government contract worth $8.56B, according to a filing with the General Services Administration.
  • The contract is for 2022 light vehicles to include sedans, light trucks and SUVs.

 

This is huge news, but I can't find any other source to confirm this yet other than Seeking Alpha.  $8.6 billion is a lot of vehicles.

 

What caught my attention is the mention of sedans.  Is this just a reporting error, or is this a hat tip that Ford sedans may be coming back to the US market?

 

https://seekingalpha.com/news/3767897-ford-lands-86b-government-contract-per-new-filing

Edited by mustang84isu

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3 hours ago, mustang84isu said:

This is huge news, but I can't find any other source to confirm this yet other than Seeking Alpha.  $8.6 billion is a lot of vehicles.

 

Yes sir mustang84isu, but unless the federal government is now paying retail prices for light vehicles, not good news for Ford's profitability. GSA contracts are notorious for demanding huge price concessions from vendors.

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50 minutes ago, rperez817 said:

 

Yes sir mustang84isu, but unless the federal government is now paying retail prices for light vehicles, not good news for Ford's profitability. GSA contracts are notorious for demanding huge price concessions from vendors.


Ford wouldn’t have bid on it if it wasn’t profitable,  

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Well what Ford submitted for “SEDAN, SUBCOMPACT, 4 PASSENGER, 4 DOOR” is actually a Mustang with the current wheelbase, so not a sedan.

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Looks like they're just submitting a price for the "GSA Schedule", from which all kinds of government agencies can purchase if they wish.

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3 hours ago, akirby said:

Ford wouldn’t have bid on it if it wasn’t profitable,  

 

Hopefully that is the case nowadays. Jim Farley is taking a hard stance against the profit eroding sales practices Ford employed in the past for both fleet and real retail customers.

 

In the past, Ford and other automakers sold light vehicles to the federal government via GSA at pricing per unit far below dealer invoice at retail. GSA sales were the most extreme example of fleet dumping.

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11 minutes ago, rperez817 said:

 

Hopefully that is the case nowadays. Jim Farley is taking a hard stance against the profit eroding sales practices Ford employed in the past for both fleet and real retail customers.

 

In the past, Ford and other automakers sold light vehicles to the federal government via GSA at pricing per unit far below dealer invoice at retail. GSA sales were the most extreme example of fleet dumping.


Ford’s final sales price is normally dealer invoice minus holdback (2%-3%) minus rebates and any other incentives.  Government and commercial fleet sales have always been good for Ford and not the s*$t show you like to portray them as,

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18 minutes ago, akirby said:

Government and commercial fleet sales have always been good for Ford

 

Good for revenue and keeping assembly plant utilization high, not good for profitability.

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10 minutes ago, rperez817 said:

 

Good for revenue and keeping assembly plant utilization high, not good for profitability.


That’s your opinion with no supporting facts,

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9 minutes ago, akirby said:

That’s your opinion with no supporting facts,

 

No sir. The lower profitability of light vehicle fleet sales, whether to government or businesses, compared to sales to real retail consumers has been a fact, practically a law, that has been affirmed by numerous automotive industry analysts for years. IHS Markit, Cox Automotive, etc. This applies to all automakers, not just Ford. 

 

And Ford's financials provide more supporting facts, through the actions it has taken in the past 5 years to reduce fleet sales, the dramatic contraction in those sales after the Covid-19 pandemic and its impact to the company, and its goal of achieving 10% automotive EBIT in North America (which it did in Q3 2021 for example, in part because fleet sales were constrained). 

 

As mentioned earlier, maybe from now on Ford and other automakers will be more aggressive with vehicle pricing for fleet customers (GSA and others) so it is in line with what retail consumers pay. And high value, high profit services and software sold to fleets through FordPro may be contribute to Ford achieving its EBIT goals. So there is potential for fleet business at Ford to be good for both revenue and profitability in the future.

 

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"Fleet dumping" is when you have unsold vehicles, and you send them to buyers that doesn't actually need them but will gladly take it because it is a good deal.

 

Selling to US Govt is the opposite of fleet dumping. The Govt doesn't buy your excess inventory just because. Every vehicle the Govt purchases was approved by some bureaucrat and was budgeted for ahead of time. No one is "dumping" otherwise in demand trucks, vans, and SUVs in the US Govt's lap for the Feds to figure out how to use it. Ford has lion share of Govt and commercial fleet business because it makes trucks and vans that those buyers want. Nissan tried for a decade to break into this business and it largely failed because it can't match Ford's formidable line up and strong fleet support - it's not as simple or easy as rperez817 thinks. If Govt fleet was not profitable, Toyota and Nissan wouldn't be trying so hard to get that business. 

Edited by bzcat

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6 hours ago, rperez817 said:

 

Yes sir mustang84isu, but unless the federal government is now paying retail prices for light vehicles, not good news for Ford's profitability. GSA contracts are notorious for demanding huge price concessions from vendors.


Are you suggesting Ford should not bid on these contracts?  Should federal government employees not have good vehicles to do their jobs?  If Ford, GM, etc. didn’t provide the necessary vehicles what should the government do?  
 

Most government vehicles are kept for 100k miles or more before being surplussed so they don’t flood the used market impacting resale value. They aren’t selling these vehicles at a loss and no retail sale is lost because of a GSA sale. 

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1 hour ago, ausrutherford said:

95% of these will be F-Series, Expedition, and Explorer PIs.

 

Ford isn't losing money on these. 

I would include Transit vans in that list as well. The GSA buys a lot of vans. This isn’t a bad thing at all. The GSA keeps their vehicles for a long time so it’s not like dumping them at rental agencies to be re-sold a year later. Generally speaking these vehicles will be less profitable then retail for the fact the government orders base trim levels, but even at base trim these larger trucks and SUVs are very profitable. To argue against this is just arguing for the sake of arguing.

Edited by 2005Explorer

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8 hours ago, jpd80 said:

I wonder if the government contract was won because Ford has electric trucks and vans coming……


I’m positive that was a huge factor, way more important than the cars.

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8 hours ago, jpd80 said:

I wonder if the government contract was won because Ford has electric trucks and vans coming……

 

Excellent point jpd80 sir. That must be a factor. In the Executive Order President Biden issued in January 2021, it mentions this (see below). Ford is in a good position with BEV light vehicles and trucks/vans already available or soon coming, and with vehicle assembly allocated to UAW represented plants for many of those. Executive Order on Tackling the Climate Crisis at Home and Abroad | The White House

 

Sec. 205.  Federal Clean Electricity and Vehicle Procurement Strategy.  (a)  The Chair of the Council on Environmental Quality, the Administrator of General Services, and the Director of the Office and Management and Budget, in coordination with the Secretary of Commerce, the Secretary of Labor, the Secretary of Energy, and the heads of other relevant agencies, shall assist the National Climate Advisor, through the Task Force established in section 203 of this order, in developing a comprehensive plan to create good jobs and stimulate clean energy industries by revitalizing the Federal Government’s sustainability efforts.

(b)  The plan shall aim to use, as appropriate and consistent with applicable law, all available procurement authorities to achieve or facilitate:

(i)   a carbon pollution-free electricity sector no later than 2035; and

(ii)  clean and zero-emission vehicles for Federal, State, local, and Tribal government fleets, including vehicles of the United States Postal Service.

(c)  If necessary, the plan shall recommend any additional legislation needed to accomplish these objectives.

(d)  The plan shall also aim to ensure that the United States retains the union jobs integral to and involved in running and maintaining clean and zero-emission fleets, while spurring the creation of union jobs in the manufacture of those new vehicles.  The plan shall be submitted to the Task Force within 90 days of the date of this order.

 

 

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14 hours ago, tbone said:


Are you suggesting Ford should not bid on these contracts?  Should federal government employees not have good vehicles to do their jobs?  If Ford, GM, etc. didn’t provide the necessary vehicles what should the government do?  
 

Most government vehicles are kept for 100k miles or more before being surplussed so they don’t flood the used market impacting resale value. They aren’t selling these vehicles at a loss and no retail sale is lost because of a GSA sale. 

 

The Biden Adm. has said many times that the Feds will buy ONLY built in America products and I believe also they must be union built. Musk has already protested along with the Asians and Germans. Not sure on Stellantis status. This applies to BEV subsidies in the future also. 

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Ford shares took a pretty big hit today, but the market was down overall.

Edited by 7Mary3

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Ford knows better than any of us the profit or loss on any sale, and as a rule they don't sell at a loss. When I look at the GSA Schedules, state bids, and other buying pools it tells me that the average retail buyer is paying too much, rather than fleet buyers paying too little. And when I'm shopping I use these bids as a target price, when I'm getting close I know I'm getting a good deal.

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1 hour ago, GearheadGrrrl said:

When I look at the GSA Schedules, state bids, and other buying pools it tells me that the average retail buyer is paying too much, rather than fleet buyers paying too little.

 

Either way, automakers will narrow the gap between retail and fleet pricing so that both buyer types pay "too much" as you put it. New vehicle buyers across the board will acknowledge the "screaming deals" they got in the past won't come back, not even when supply chains are "normal" again in the automotive industry.

 

Sales quality > Sales quantity is the rule for all automakers nowadays.

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