Strong Sales Reported by Ford
Ford has been witnessing strong growth in sales in developing markets, specifically in China. The reason behind the increase in sales is the unfortunate events that happened to the company’s competitors i.e. Honda (NYSE:HMC) causing a temporary slowdown in their production. Honda witnessed a major slowdown due to natural disasters last year in Japan and Thailand. In November, the sales of Ford vehicles in China increased by a record breaking 56% as compared to the last year. The car that was the reason behind the strong sales was Ford Focus which has been the best selling passenger car in China for the past three months.
The chairman and CEO of Ford Motor China, John Lawler, said, “We're grateful that so many Chinese consumers appreciate the value, performance and technology of the Focus, making it the best-selling passenger car in the world's largest auto market.” He further added, “Our plan to introduce 15 new vehicles by 2015 is on track, and with the launch of the Ford Kuga and EcoSport SUVs, we're going to make more inroads into China's fastest-growing segment as we work to double our production and retail capacity by 2015.”
In the US market, Ford SVT Raptor is enjoying high sales. Raptor is an F-Series pickup that features a 411-horsepower V-8. The vehicle is gaining positive reviews for its performance on rocky hilltops and in ice and snow. The high sales for Raptor come as a surprise considering the overall economic situation. The first factor that plays against it is the gas mileage. Buyers have started to consider the gas mileage of the vehicle before purchasing it, but in the case of Raptor, that consideration seems to be ignored. The high sales of Raptor are evidence of the fact that buyers attach high value to the performance of a vehicle.
The biggest problem that is causing hindrances in the way of very high profitability of the firm is the continuous recalls. Ford has had four recalls for its vehicle Escape for a very serious reason i.e. the tendency of the engine to catch fire. Another vehicle, Ford Fusion, was also recalled for the very same reason. This recall caused trouble to 89,000 Escape and Fusion owners. These constant recalls raise serious concerns regarding the quality of the cars produced by the company. However, considering the trend of financial performance of the company, these recalls will not cause any serious decline in the revenue of the company. The loss incurred by the company on the recalls will be balanced by the strong sales of Ford’s cars in other regions.
Extended Marketing Campaign
Ford’s marketing strategy for its Lincoln brand may result in high sales, therefore high profits in the next fiscal period. The company seems to be pushing its marketing to a new level by securing Super Bown spot for Lincoln brand along with running an extensive campaign of print and TV ads. However, an extended marketing campaign for the brand may increase primary anticipation for the new car lineup under this brand, but the acceptability of the vehicles depends upon factors apart from advertising. One of the factors is the reviews of the users of the vehicles. If the cars lined up under the Lincoln brand get positive reviews, this may impact the sales of the vehicles in a very positive manner therefore it may give further push to Ford’s revenue for the next fiscal period. It may be a rational decision to wait for the Lincoln reviews to come in before buying the stock of the company, however, the upward trend for stock price following the positive anticipation surrounding the company will benefit the short term investors.
After the analysis of the strong sales of Ford vehicles in Chinese and US markets and the strong possibility of the continued demand in the next financial period, it can be concluded that the revenue of the company will continue to rise in the next year. The revenue of the company for the year ended Dec. 31, 2010 was $128 billion which rose to $136 billion for the year ended Dec 31, 2011. Since the revenue is expected to continue this trend,in my opinion investors should buy Ford’s stock. The increased sales in multiple territories suggest that the profitability of the company may rise in the prospective periods and this will reflect positively on the market performance of the company. Therefore, the investment in the company is feasible for both short term investors.