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Ford Warns “Used Car Prices Will Drop for Years”

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Earlier this morning we noted Ford’s “CFO Let’s Chat” meeting with analysts before which Ford announced weak 1Q adj. EPS guidance of 30c-35c, coming in well below analyst estimates of 47c, which they blamed on higher costs, lower volume & unfavorable exchange rates. 

With the call now concluded, here are a couple of the key takeaways:

First, the bad…

  • Volumes will start to fall off this year, next year
  • Used car prices will drop for several years
  • European profit will fall this year
  • China sales down sharply in 1Q
  • India more difficult than expected
  • All options on table including traditional restructuring

…and the good-ish…

  • Favorable market factors offsetting higher commodity prices
  • Inventory levels “in very good shape”
  • Sedans play diminishing role in U.S. business; SUVs, trucks make up 73% of U.S. business
  • Not seeing anything to suggest economy will “tip over”

And while Ford is confident they’re not seeing “anything to suggest the economy will ‘tip over’” (which is good, right?), their own presentation slides would seem to paint a slightly different picture.

First, on Q1 2017 earnings by region, South America is expected to be flat…so that’s at least not negative, which is nice…

And while Ford pointed to their gross inventory days as a sign that the industry does not have an inventory problem, they snuck in at the very bottom of slide 9 the fact that overall industry inventory was up 13 days in February vs. last year…

…and industry incentive spending paints pretty much the same picture…

And for those of you holding out hope that current volumes aren’t simply the result of a massive auto loan bubble, we present to you some details behind Ford Motor Credit’s “consistent and predictable” U.S. loan portfolio.  To summarize, loan terms up, lease mix up, charge offs up massively…all great news


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    Total 6 comments
    • Alana

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      • Eggzactly

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    • raburgeson

      LOL, They killed the market, they helped destroy the middle class, there went their customers. They are charging more for a car than I would pay for a house. They drove used car prices up and tried to wipe out the used car industry. The older cars had incentives on them to be scrapped. The leasing contracts put the nail in the coffin. The value in the merchandise fell drastically during this period in time. The fisher price toys they have been producing have more plastic in them than anything else. They cheapen everything on the car they can and raise the price. You pay horrible prices for things like twist tie radiator clamps. Got a plastic radiator?

      • Eggzactly

        My neighbor just bought a new truck. We were talking and he said he paid almost $55k for it. I was in shock. He could have bought a Lexus or BMW for that and he didnt even need a truck. His tires will never meet mud. :wink:

    • Redlist Renegade

      GREAT and If the dealers want to over price them (like a LOT of them DO) then let ‘em Rot on the Lot !!!

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