Ford (NYSE: F) will stick to its plan to become less of a truck company and more of a car company, even if oil prices stay relatively low. According to Reuters, "A decline in gas prices would support consumer confidence, but customers still face job risks, potential financing difficulties with tight credit markets and other factors and it would not change Ford's planning assumptions."
Ford hurt itself with its last "all or nothing" gamble, and it could hurt itself with this one. Going to extremes has done little for Ford over the last decade.
The demand for small cars is not likely to change. It is hard to imagine gas prices going below $3 in the next year. Crude seems to have set a floor above $110 a barrel, which is still very high compared to 18 months ago.
But Ford has the brand image of being first in bringing the consumer high-quality pickups and SUVs. Its F-150 truck has been the top selling vehicle in the U.S. for a number of years.
Ford has to be careful it does not let the pendulum swing too far away from its current core business. In a couple of years, the market may change again. Use of alternative energy could help inch gas prices down by 2010. Ford can't afford to be caught flat-footed again.
Douglas A. McIntyre is an editor at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
8-13-2008 @ 12:44PM
jpdr1100 said...
Which is why they need a portfolio of offerings to meet the demands, regardless of which way the energy costs swing.
They've had the products, they just weren't smart enough to make them importable to the US.
8-13-2008 @ 1:51PM
Jobu37 said...
They still have excess capacity on the truck front to pick up any extra demand that may arise. Dearborn Truck, KC Truck, and Louisville Truck are well positioned to meet any unexpected demand that may come about in the future. The days of 950K F-series are over even if Dodge goes under and whatever % of their business goes to real truck customers is split between Ford and GM and that would still be under Ford's current truck capacity. On the full-size SUV front it would take quite a turnaround to even fill one line of production of Expeditions and Navigators and if nothing else, this recent run-up in fuel prices should have demonstrated to the buying public how stupid they were to buy these behemoths to begin with. That segment will never recover unless fuel drops well below $3.00 and at that point no one will have capacity to meet demand which would bode well for very good profits for the units they do have to sell. Explorer is moving to unibody construction so it would do well in either high or low fuel pricing environments. Ford does not need to be concerned with not having enough truck capacity. If the bottom completely falls out of fuel prices the one that may be poised to benefit the most would be Toyota. They have a brand new multi-billion dollar plant that would be lucky to sell a whole shift's worth of product in the current environment. So they are sitting on an additional two shifts worth of potential production if the market warrants it.
8-14-2008 @ 1:24PM
gumbo koontz said...
why is ford and gm blowing away profits with deep discounts on suvs and pickups . buyers can afford them without deep discounts because it guzzle gas . it is not gm and ford's responsiblity to help buyers afford a lot of fuel to support suvs and pickups. if buyers want deep discounts, they can get from big oil companies that sell gasoline to suv and pickup dirvers!! it is not gm and ford problem!! it is big oil problem!!