Sales Up, Ford Eyes Road Ahead

Celeste Headlee: So, the Cash for Clunkers program has been a runaway success, and one of the best sellers among people who are taking advantage of the program, is the Ford Focus. Also up there is the Ford Escape, so Ford announced yesterday that it’s going to boost production of those two models. Shares of Ford closed Thursday with a 2.6% rise, supposedly on that news. It all sounds very promising, and to let us know how promising it is, is George Pipas, he’s Ford Motor Company’s top U.S. sales analyst. So George, August is always a very good month — usually the best month of the year for auto sales anyway, plus we have this Cash for Clunkers deal going on… is it too soon to boost production of these models? Are sales going to drop off when all this goes away?

George Pipas: Well, two very good questions, Celeste, thanks for having me on. We need to boost production in order to replenish the inventories that have been drawn down to historic low levels in July and August. So this is partly about trying to boost the supply of fuel efficient vehicles in the near term, so that we can satisfy demand while the Clunkers program is still on… but it’s also to replenish supplies of these fuel efficient vehicles going forward as we head into 2010.

CH: So is this a temporary boost in production, until you find out what the real demand is?

Pipas: Well, we take it a step at a time, for sure. We’ve increased production every quarter this year; in the first quarter we produced 349,000 vehicles in North America, the fourth quarter level included in this announcement takes us to 570,000 vehicles. Some of that boost in production is because of consumer response to the new fuel efficient products we’ve brought to the market. Probably the most recent is the 2010 Fusion and Fusion Hybrid, which have been great sellers ever since they were introduced in March, so it’s a little bit of our own success at gaining market share in a tough, tough market, but the icing on the cake has been this Cash for Clunkers program which has really taken show room traffic to levels we haven’t seen in many, many months.

CH: So lets put some perspective on this success — are we actually talking about a *profitable* month for Ford?

Pipas: [laughter] Well, when we announce third quarter results in October, we’ll certainly be able to provide an indication for how this level of production in the third and fourth quarter translates to profit and cash flow.

Katherine Lanpher: What does that mean?

CH: Yeah, what does that mean?

KL: I have to tell you that I heard more in your laugh than I did in what you just said, so if can help me understand that.

Pipas: We certainly have made progress. Our second quarter results were just anonunced in late July, so it’ll be another quarter before we have another announcement about profitability and cash, but we certainly are seeing our cash outburn decline…

CH: The “cash outburn decline”… that means your numbers that are in the red, right?

Pipas: That’s right. We are still in the red in the second quarter, making great progress from where we were about 3 quarters ago, but … we’re on the road to profitability, for sure.

CH: That kinda means you can see black from here, right?

Pipas: We certainly hope so, that that comes soon.

KL: “Cash outburn,” that’s certainly my Takeaway phrase for the day, but we actually have a Takeaway question for you, which is: we’re asking listeners what it would take to get them behind the wheel of the Chevy Volt… so tell us, what would it take to get you there? $40,000?

CH: Wait, let’s not get him in trouble, here, maybe not the Chevy Volt…

KL: Oh, but I wanted to get him in trouble.

CH: What would it take to get you behind a car that got 230 miles to the gallon?

KL: (and is called Volt)

Pipas: Well, what I would do is, I’d buy a Ford Fusion Hybrid which costs a quite a bit less than that, provides more range, and at a substantially less price.

CH: that’s George Pipas trying not to become one of the unemployed in Michigan.

KL: No, you know what that is? That’s public relations outburn.

CH: George Pipas does Ford Motor Company’s sales analysis. Thanks so much.

Pipas: You’re welcome.