Regular TTAC readers know that there’s more to a successful performance from an automaker than pure volume alone. Average transaction prices, market share, and incentives all play a role in translating production numbers into profits. Luckily, our pals at TrueCar have broken all that lovely data down, and they’ve sent over the numbers behind Ford’s recently-announced $8.3b profit, the Blue Oval’s best performance in over a decade. And, as you can imagine, a performance like that requires not only a hefty increase in volume (up nearly 20% on the year) but also improvements in market share (up 1.23%), and transaction price. Yes, incentives stayed stronger than they perhaps needed to be, but they now make up a lower percentage of the average transaction price. And that, ladies and gents, is how you make a $5.4b pre-tax operating profit in the US market alone [Q4 and historical data after the jump].
Before anyone else says it:
Well of course that’s what you’d expect from an evil and corrupt corporation like Ford, with no good product and taking candy from babies to make their billions.
Anyway, good for them, hopefully they keep the well received product coming, making automobilies and making a profit while doing so is the goal.
I’ll assume that incentives consist of two parts – a straight discount (dollars on the hood) and interest rate assitance (zero % interest on payments over x amount of years).
If interest rate subsidation is included in the incentive amount, should Ford (in this case) get accolades for lowering their incentives or just that market conditions resulted in lower amounts of money being allocated to cover the spread of interest rates. We might be comparing apples to oranges.
just picking nits here – but the $5.4 bn was North America and the unit volume cited (1.9 million) was U.S. – apples to apples would be the $5.4 bn in pre-tax on 2.4 million units in North America. Still, I’m sure they’d sign on long-term for pre-tax of $2242 per unit (8.4%).
Not a whole lot of cost to take out any more – except perhaps interest expense of $1.5 bn(reduced by $330 mn in 2010 and will come down further based on the $14.5 bn debt reduction in 2010). So its good to see Ford TCing of the B on the revenue side.
– the data sources I use for incentives do consider finance incentives. Not sure how TrueCar does it, but they should be in there.
Ford Dropped a helluva lot today, great chance to get stock at a price 3 months past. It will probably go back up quick.
Not sure how they are calculating the discount percentage, but if you take
incentives / transaction price there has been basically no change year-over-year. Ford still has a great story, but it should also be noted that the rest of their auto operations (in aggregate) are still losing money………………
Wow…disappointing results.
http://www.cnbc.com/id/41311347
http://www.dailyfinance.com/story/ford/ford-shares-tank-on-worse-than-expected-earnings-results/19819553/
Why would anyone expect anything other than disappointment from Ford?
2005 was really their best year. How is it that Ford could make more money in 2010 with less market share and selling a million fewer cars? Was it the $500 less per vehicle in incentive that made all that difference? Decreased labor costs? Better corporate structuring? Someone enlighten me.