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Ford wins $8.6 billion federal contract


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While those high profit sales sound good, they come at a price- Lost volume. If the industry wants to shrink U.S. sales from the usual 15 million units/year to 10 million with higher per unit profits, the lost volume will shrink the whole auto and related industries. That means lost middle class jobs and an even smaller pool of middle class customers to buy those cars.

 

Would make more sense to expand the market to 20 million or so units a year, which if you look at how population has increased over the years and the increase in multi commuter families is what the volume should be. As long as nobody's losing money on any of those 20 million units, it's all good... For the economy.

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41 minutes ago, GearheadGrrrl said:

While those high profit sales sound good, they come at a price- Lost volume.

 

That's a great point GearheadGrrrl. On the retail consumer side of things, Automotive News reported today that profitability of the average new car dealership in the U.S. hit a record high in the first 3 quarters of 2021, because of a lower volume of new vehicle sales. Why average dealership profits are setting new records | Automotive News (autonews.com)

 

As mentioned earlier, I don't think this is a temporary thing. Automakers and dealers alike seem happy to pay the price of lost volume for the kind of profitability they're seeing nowadays. 

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On 11/10/2021 at 5:21 PM, GearheadGrrrl said:

While those high profit sales sound good, they come at a price- Lost volume. If the industry wants to shrink U.S. sales from the usual 15 million units/year to 10 million with higher per unit profits, the lost volume will shrink the whole auto and related industries. That means lost middle class jobs and an even smaller pool of middle class customers to buy those cars.

 

The US auto market never gone below 10 million sales in the past 40 years...the closest it has come was in 1982 and 2008.

On average its 14-18 million sales a year

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40 minutes ago, GearheadGrrrl said:

I was throwing out round numbers, I hope we stay above 10M and I'd like to see 20M. Unfortunately some of the dealers have other agendas...

Each months total sales are use to calculate the annualised selling rate (SAAR), October’s SAAR  was 13 million but looking overall so far this year, I’d estimate it’s about  14-15 million sales for the 12 months. A few years ago, 17 million was considered a strong number….

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28 minutes ago, GearheadGrrrl said:

And while some short sighted dealers welcome the profits low production numbers are giving them, the auto industry is a huge part of the economy and shrinking it shrinks the economy. That isn't good for anybody.

While the auto industry plays its part in the economy, new vehicle sales  are only a small part of it, service industries now heavily outweigh manufacturing jobs, has done so for quite a while.

 

If anything, dealers are making a killing on used cars as well, these are unusual times…..

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On 11/12/2021 at 8:27 PM, GearheadGrrrl said:

And while some short sighted dealers welcome the profits low production numbers are giving them, the auto industry is a huge part of the economy and shrinking it shrinks the economy. That isn't good for anybody.

And your over reacting too

 

part of the shortage is due to lack of chips, not some nefarious plot by the dealerships to sell less. 
 

there hasn’t been massive layoffs in submanfactuers either-just a slow down in how many units are being built due to aforementioned supply issues. 

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On 11/9/2021 at 8:34 PM, rperez817 said:

 

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.

 

 

With all due respect you are off-base about this.  Much of the "reporting" that has been done regarding fleet sales paints an inaccurate picture because of:

 

1)  Variable Marketing Accounting.  Many news "analysts" tend to focus/report on the variable profit of retail vs fleet margins without taking into account variable incentives (rebates/financing) that reduce the profit of retail deals but are not used on fleet deals.  Ford and other OEM's hide the data on variable incentives quite well because they don't want people to know how much they really have to discount things.  

 

For example, when Ford sells a retail Explorer with 0% financing on the financials it may show a $5,000 profit for that vehicle while a commercial sale may show a $4,000 profit, so retail is better, right?  Nope......

 

With the commercial sale the profit is $4,000 and nothing is deducted from that.  With the retail sale the profit is actually $2,000 because Ford Motor has to pay Ford Credit subvention money to "buy down" the interest rate.  Ford Credit is not in the business of loaning money for free.....Ford is really who pays for it.  That money is a "below the line" adjustment so it doesn't dilute the variable profit numbers shown for the Explorer.  (Again, Ford doesn't want people to know how much they really have to discount some things.)

 

2)  Fleet sales as a whole are broken down into 3 sections:  Rental, Commercial and Government.  When I was working in the fleet division at Ford our Commercial and Government net profit per units were actually higher than retail in many cases.  Problem was, the daily rental sales, which at the time were a lot more than what Ford is doing today, pulled down the average so much that overall it showed "fleet" being less profitable than retail.

 

The bottom line is, Commercial and Government sales were both very profitable for Ford, and that is something they do very well compared to most other OEM's.

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50 minutes ago, iamweasel said:

 

With all due respect you are off-base about this.  Much of the "reporting" that has been done regarding fleet sales paints an inaccurate picture because of:

 

1)  Variable Marketing Accounting.  Many news "analysts" tend to focus/report on the variable profit of retail vs fleet margins without taking into account variable incentives (rebates/financing) that reduce the profit of retail deals but are not used on fleet deals.  Ford and other OEM's hide the data on variable incentives quite well because they don't want people to know how much they really have to discount things.  

 

For example, when Ford sells a retail Explorer with 0% financing on the financials it may show a $5,000 profit for that vehicle while a commercial sale may show a $4,000 profit, so retail is better, right?  Nope......

 

With the commercial sale the profit is $4,000 and nothing is deducted from that.  With the retail sale the profit is actually $2,000 because Ford Motor has to pay Ford Credit subvention money to "buy down" the interest rate.  Ford Credit is not in the business of loaning money for free.....Ford is really who pays for it.  That money is a "below the line" adjustment so it doesn't dilute the variable profit numbers shown for the Explorer.  (Again, Ford doesn't want people to know how much they really have to discount some things.)

 

2)  Fleet sales as a whole are broken down into 3 sections:  Rental, Commercial and Government.  When I was working in the fleet division at Ford our Commercial and Government net profit per units were actually higher than retail in many cases.  Problem was, the daily rental sales, which at the time were a lot more than what Ford is doing today, pulled down the average so much that overall it showed "fleet" being less profitable than retail.

 

The bottom line is, Commercial and Government sales were both very profitable for Ford, and that is something they do very well compared to most other OEM's.

 

I could think most vehicles bought by the government are going to be Escape S, F150 XL, and so on. No Limiteds and Platinums that come with big profit margins. I have driven local government vehicles in the past, and all were basic trim levels. 

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16 minutes ago, FordBuyer said:

 

I could think most vehicles bought by the government are going to be Escape S, F150 XL, and so on. No Limiteds and Platinums that come with big profit margins. I have driven local government vehicles in the past, and all were basic trim levels. 


This latest contract had plenty of higher trim vehicles.

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14 minutes ago, FordBuyer said:

 

I could think most vehicles bought by the government are going to be Escape S, F150 XL, and so on. No Limiteds and Platinums that come with big profit margins. I have driven local government vehicles in the past, and all were basic trim levels. 

 

So what. Too many falsely assume that fleet sales are either no-profit, loss leaders or constitute fleet dumping at the expense of profits. 

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2 hours ago, ice-capades said:

 

So what. Too many falsely assume that fleet sales are either no-profit, loss leaders or constitute fleet dumping at the expense of profits. 

 

Right.  Whenever I hear people discussing fleet sales and fail to separate rental from commercial/government I just shake my head.  That's a clear sign that person doesn't have a clue....

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Most GSA vehicles I've seen are normally mid-line products-not el cheapo stripper models. Even most rental cars aren't cheap stripper models anymore. 

 

I had a Chevy Sonic a few years back as a rental when I was out in MS-it was actually pretty nice and HUGE improvement over the Aveo I had back in 2007, which had the same equipment levels as a car from the 1980s. 

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3 hours ago, ice-capades said:

 

I used to see all the vehicles headed for delivery to the FBI office. They were anything but "el cheapo" models. 

 

I get it now as feds buy lots of Tahoes and Expedition like vehicles. Police agencies certainly like hybrid Explorers. Good profit margins for sure. 

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18 hours ago, silvrsvt said:

Most GSA vehicles I've seen are normally mid-line products-not el cheapo stripper models. Even most rental cars aren't cheap stripper models anymore. 

 

I had a Chevy Sonic a few years back as a rental when I was out in MS-it was actually pretty nice and HUGE improvement over the Aveo I had back in 2007, which had the same equipment levels as a car from the 1980s. 

 

I had a Rav 4 rental a few months ago after an accident, and, while I don't recall what trim level it was (nor do I know the hierarchy of Toyota trims), this thing had blind spot and adaptive cruise.

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  • 2 weeks later...
On 11/18/2021 at 1:43 PM, FordBuyer said:

 

I could think most vehicles bought by the government are going to be Escape S, F150 XL, and so on. No Limiteds and Platinums that come with big profit margins. I have driven local government vehicles in the past, and all were basic trim levels. 

False I have seen many government vehicles and many of the GSA fleet at least are not the base models I have seen various Escape trims some of them with AWD and various colors not just white and I have also seen various colors of XLT F-150s with 4x4  and 4 doors and Transit XLTs of course I have also seen base models used in the government including a white 2WD regular cab short bed XL F150 with V6 non ecoboost engine

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  • 3 weeks later...

Back when I first entered the Navy in the early 80's I remember all the stick-shift vans we had on base. I grew up and learned on sticks but it was funny listening to the sailors who would "grind them till they found them" trying to shift those things.  Nowadays a standard is almost unheard from. Anyway, glad to hear Ford is going to be a vehicle of choice for the government again. My preferred brand all the time for any vehicle, not including the Harley I used to ride. 

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