Motor Vehicle Sales Crash - Ford Worst Hit

By The Greek:

---Wall Street Greek covers the Motor Vehicle Sales Report each month. To see our current coverage of monthly auto sales, advance to our home page.--- Motor vehicle sales crashed today! Auto sales were reported for the month of September, and the data was daunting in its deterioration. The decline is expected to mark the 11th sequential aggregate monthly drop, marking the longest period of decline in 17 years.

(Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK)

At the end of each month, automobile manufacturers religiously offer their monthly sales data. This particular month provided yet another piece of economic puzzle that is quickly clarifying a daunting degree of deterioration.

Consumer stress, born of high gasoline and other expenditures, along with increasingly tightening credit, rising unemployment, falling investment securities and home values have all driven down consumer sentiment. Consumers clearly have good reason to avoid large purchases, especially the new car buy. And of those few who are looking for a new vehicle, they've even less reason to buy a gas guzzling monster of the Midway.

September Sales

Ford Motor Corporation (NYSE: F)

Ford Motor (NYSE: F) bravely produced its report earlier than many of its diseased peers. Unfortunately, it also set a very low bar for the rest of the bunch. Ford posted a September sales figure that represented a 34.6% decrease from its prior year result. While the data was impacted by one less day in this year's measured period, due to holiday, it was painfully obvious that the truck-heavy Ford suffered from its unique exposure.

Ford's SUV sales nosedived 57%, and overall US truck and van sales fell 38.8%. Clearly a sign that things could be different, Ford, Lincoln and Mercury brand sales declined a less dramatic 19.4%, and the Ford Focus actually grew sales by 4.7%!

So, it would seem the pathway forward is clearly marked for Ford: shift toward smaller, fuel efficient vehicles or else! However, gas prices have come back home, and are flirting with sub-$3 a gallon levels now. If a side effect of economic decline brings gasoline down enough, you have to wonder if demand will renew for the F-Series Pickup Trucks and larger vehicles generally. Ford's F-Series Truck segment experienced a sales decline of 42% in September anyway. As we first noted in our news breaking story, Ford is introducing a new line of pickup truck to address the current environment, the Ford F-1.50 Pickup.

Why Was Ford Hit So Hard?

In comparing Ford's results with its peers, a critical question commands us to answer it. Why were Ford's numbers worse than its peers? Clearly, Ford had greater exposure to the truck and SUV segments, and therefore intensified sensitivity to gasoline prices. So, as consumers generally shied away from gas guzzling trucks, it meant more to the market share leader, Ford. But, could there be more to it than that... After all, GM's truck sales did not collapse nearly as deeply as Ford's.

We took a closer look and noted that in 2007, Ford Crossover vehicles did especially well. We suspect, that while this acted as a stopgap measure in the early consumer migration from trucks, it also compounded upon this year's broader migration to the most fuel efficient of vehicles. In other words, people aren't settling for a more efficient SUV type vehicle or even a crossover; rather, they're hardly buying less fuel efficient vehicles at all now.

We also believe there is a competitive issue at play. The game has changed, and Ford's trucks are not among the most fuel efficient in "standard" categories, and when they are the most fuel efficient, they have other characteristics that seem discouraging to that specific segment's purchaser or Ford fans generally.

We looked at the fuel efficiency of Ford's trucks, compared to its competitors. While Ford offered vehicles among the most efficient, those vehicles didn't really fit for true Pickup and SUV fans. First of all, Ford's fuel efficient Pickup is really a Sub-Pickup. Ford is nowhere to be found in the efficient Standard Pickups list of most efficient vehicles. So, while every self-respecting Pickup coveter out there wants an F-150, when gas gets too pricey, they're looking at efficiency with a greater level of interest. As far as SUVs go, the king of SUV's, Ford, again offers a super-efficient vehicle. However, that vehicle is a hybrid, and hybrids have one big drawback, a hefty upfront sticker price. So, when price sensitive shoppers cruise the car lots, they're looking at efficiency, but that sticker price means a lot too.

Ford appears to have made a couple critical strategic mistakes in not designing league leading efficiency in "standard" lines of products. Even so, I view the greatest negative factor impacting F's results as simply, their greater exposure to trucks and SUVs.

General Motors (NYSE: GM)

GM's sales fell in September as well, but did markedly better than Ford. GM's light motor vehicle sales fell 15.6% in September. Surprisingly, GM's light motor truck sales only declined 19.3% (Ford's dropped 38.8%). As far as SUV's go, GM's did just as poorly as Ford's. However, as far as Pickups go, GM's stayed in the Standard Pickup group with its Silverado and Sierra, and saw a September sales decline of just 5.5%. This might explain why Ford is now working to introduce a more fuel efficient F-Series vehicle.

Toyota Motors (NYSE: TM) and Honda (NYSE: HMC)

Toyota's September sales fell an astounding 32.3%, driving TM's shares down 2.2% today. Toyota has been the darling of the industry during this downturn, second only to fuel efficient king Honda Motor (NYSE: HMC). But HMC fell 1.7% today also, as its September sales declined 24%.

So, there was no place to hide in the auto industry today for all you well-diversified types in need of universal exposure for the sake of risk reduction! The questions you should really be asking yourself at this point are, how much are these companies going to have to shrink and change to survive, and who might not make it.

Please see our disclosures at the Wall Street Greek website and author bio pages found there.