Ford Trifecta: Charging More, Gaining Share at a Profit
Ford doesn’t brag about this to consumers, but the company is quietly succeeding at charging more for its cars and trucks, by dialing back discounts and adding more standard and optional features to its vehicles.
Ford’s success is partly because of new models catching on, like the redesigned Ford Focus and the Ford Taurus, and partly because of profitable and commonly ordered features like the Ford Sync communications system. Strategically, the improvement is also because Ford is trying to stop producing too many cars and trucks in the face of too little demand. That relieves the pressure to cut prices.
The net result is that Ford’s cars and trucks fetched an average of about $1,500 more in the third quarter worldwide than the year-ago period.
That’s only a rough indication of how much more consumers paid. Ford doesn’t sell cars and trucks direct to U.S. consumers; it sells vehicles on a wholesale basis to dealers. However, the net pricing improvement is a good indication that Ford has been able to cut back on the cost of rebates and discount financing paid direct to consumers.
Ford has also gained market share at the same time. That shows consumer acceptance despite the somewhat higher net prices.
Ford President and CEO Alan Mulally said Ford’s net pricing improved in the third quarter by about $1.9 billion from the year-ago quarter. Wholesale unit volume for the quarter just ended was about 1.2 million. That works out to a net pricing improvement per wholesale unit of $1,542.
Ford announced today third-quarter net income of $997 million, a turnaround of about $1.2 billion from a year-ago loss of about $161 million. Ford’s crucial North American automotive operations had a pre-tax operating profit of about $357 million, the first time that’s happened since the first quarter of 2005.
In light of the favorable third-quarter results, Mulally upped Ford’s forecast for 2011 from breakeven to “solid profitability” on a pre-tax basis.
However, Mulally said Ford remains no more than “cautiously optimistic” about 2010, based on uncertainty about the strength and timing of economic recovery.
Chart: Ford
Jim Henry has been writing about the auto industry from a business perspective for more than 20 years. He is also a member and past president of the New York-based International Motor Press Association.
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