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EDITED TRANSCRIPT
F - September 2016 Ford Motor Co Corporate Sales Call
EVENT DATE/TIME: OCTOBER 03, 2016 / 2:00PM GMT
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OCTOBER 03, 2016 / 2:00PM, F - September 2016 Ford Motor Co Corporate Sales Call
CORPORATE PARTICIPANTS
Erich Merkle Ford Motor Company - U.S. Sales Analyst
Mark LaNeve Ford Motor Company - VP, U.S. Marketing, Sales, and Service
Emily Kolinski Morris Ford Motor Company - Chief Economist
CONFERENCE CALL PARTICIPANTS
Colin Langan UBS - Analyst
David Tamberrino Goldman Sachs - Analyst
John Murphy BofA Merrill Lynch - Analyst
Christina Rogers Wall Street Journal - Media
Megan Lampinen Automotive World - Media
Nick Bunkley Automotive News - Media
Keith Naughton Bloomberg News - Media
PRESENTATION
Operator
Good morning. My name is Kalia and I will be your conference operator today. At this time I would like to welcome everyone to the Ford monthly
sales conference call. (Operator Instructions)
Thank you. I would now like to turn the call over to our host, Erich Merkle, US Sales Analyst. Please go ahead.
Erich Merkle - Ford Motor Company - U.S. Sales Analyst
Thank you, Kalia, and good morning, everyone. Welcome to Ford's September 2016 US sales call. Today I am joined by Mark LaNeve, Ford Vice
President, US Marketing, Sales, and Service; and Emily Kolinski Morris, Ford's Chief Economist.
First up, we want to get an industry perspective and I'm going to turn it right over to Mark. Mark?
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
Thank you, Erich, and good morning, everyone. Let's start with some September highlights.
Based on early incoming data, we believe the industry performed well in September, although we expect sales were down just slightly from that
very strong September last year. Actually it was an incredibly strong September in 2015. Our expectation is that September total sales, including
medium- and heavy-duty trucks, rolled in at about 1.465 million vehicles. This would translate to an industry SAAR around the 18 million vehicle
mark and was likely the industry's second-best September sales performance since 1994.
We believe retail sales will come in down about 1% with sales of approximately 1.21 million vehicles. Total sales for Ford were down 8% with 204,447
vehicles sold. Retail sales were down 4%, while fleet sales were off 21%.
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OCTOBER 03, 2016 / 2:00PM, F - September 2016 Ford Motor Co Corporate Sales Call
Just as we laid out at the beginning of the year and have talked on many of these calls, much of our daily rental sales were frontloaded in 2016 and
will be much lower in the second half, which we are obviously seeing now. In September, as an example, daily rental sales were down 36% year
over year and were responsible for more than 60% of our fleet decline for the month.
In addition -- just a reminder -- September 2015 was far and away -- I just talked about how strong it was for the industry. Well, for Ford, September
of last year was far and away our best performance in the year, giving us our toughest year-over-year comparison for this year. In fact, September
that we just concluded, of 2016, was our second-best September since 2006. The best, however, was just last year, giving us -- helping -- yielding
that year-over-year decline.
Talking about incentives; they were up $430 in September compared to last year and $230 sequentially from August. Ford incentives were up less
than the overall industry. We were at $290 year over year and we were up $90 versus August. So we did see both in August and September increased
competition in terms of additional incentives into the marketplace.
Importantly, Ford's transaction prices are continuing to outpace the industry, propelled by a rich mix and a strong average transaction price of the
all-new Super Duty which went on sale and we just started delivering them last month. Overall, Ford's average transaction pricing in September
increased by $1,100 versus a year ago, compared to an industry that grew $400.
Our outlook for the remainder of the year remains unchanged as we continue to see strong retail and industry sales, but slightly lower compared
to the record 2015 levels. Looking ahead to 2017, again we expect US industry sales to remain strong, but at a lower level than last year.
Now let's take a look at some of the individual product performances for the month, beginning with vans and trucks.
Vans have been a strength for us all year long, driven by Transit. Last month the Transit sales were up 6% with 10,799 vans sold. Transit continues
its run as America's best-selling van, outselling even the minivans that are in the marketplace today.
For F-Series, September represented our best retail sales of the year, with retail market share up more than 100 basis points compared to last year.
Overall F-Series sales were down 3%, but that total F-Series of almost 68,000 units is a solid number for any month and a continuation of the strong
F-150 performance that we have seen really since its launch. Now we've added the all-new Super Duty, built from the same military-grade alloy
that adds allows for added capability in every part of the truck.
Speaking of the all-new Super Duty, it represented about 23% of our overall Super Duty sales in September, actually much higher than we anticipated,
and drove up average transaction prices for our pickups and the Company overall. The all-new Super Duty is selling at a very rich mix with low days
to turn. The Lariat and higher series trucks totaled 80% of our Super Duty retail sales in September, growing average transaction pricing for the
all-new Super Duty to $62,000 per truck in September.
We are also seeing days to turn for the new truck at just 13 days, approximately twice the rate than we initially expected. Early metrics on Super
Duty are off the charts and we are very pleased with the strong customer reaction during the month of September.
Just as an aside, I have been the last couple weeks at quite a few dealer meetings and they are really over the top with the new Super Duty, especially
in the key truck markets like Texas. I was joking to my wife that my pockets are full of business cards where dealers are literally writing down order
numbers from customers that are just dying to get their new Super Duty and looking for me to get it sequenced and expedited through the system.
So we're delighted with the start we've had so far.
Let's move ahead and talk to Lincoln. Lincoln retail sales were up 8% in September and again outperforming the premium segment, which we
estimate was down 2% to 3%. Lincoln MKX retail sales momentum continues with a 22% increase in September, while MKC also helped lift Lincoln
overall retail demand with a 3% retail gain for the month.
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OCTOBER 03, 2016 / 2:00PM, F - September 2016 Ford Motor Co Corporate Sales Call
Last month dealers also began taking stock of and reporting sales of the all-new Continental. I was also with a group of our Lincoln dealers this
year and they couldn't be more delighted with the launch to date. And not just reception of the Continental, but some of the other Lincolns that
has brought just new customers into the Lincoln showroom and are selling MKZs, MKXs off of that traffic.
Inventory availability will continue to expand nationwide. It's very short right now and we are seeing incredibly strong consumer interest with
initial sales of 775 vehicles out of almost no stock in September.
New Continentals, as an example, we are spending -- last month new Continentals were spending just six days on dealers' lots. The coming months
are going to be very exciting for Continental and the Lincoln brand.
So that's a quick look at September. I look forward to your questions. Now I will turn it over to Emily for an update on the economic front.
Emily Kolinski Morris - Ford Motor Company - Chief Economist
Thank you, Mark, and good morning, everyone. Although the data released during last month showed some moderation in economic activity late
this summer, the economy overall remains on steady footing with tracking estimates of third-quarter GDP well above the 1.4% growth rate recorded
in the second quarter.
The household sector continues to lead the recovery, supported by ongoing improvement in labor market conditions. Interest rates remain low,
while energy prices are showing signs of stabilization. These conditions are consistent with an outlook for steady US economic growth in the
coming quarters.
Some details of recent releases include labor market gains averaging 230,000 for the last three months through August, with the September jobs
report to be released this Friday. New claims for unemployment insurance remained below 260,000, which is a level consistent with continued
gains in employment, although some of this momentum is beginning to rotate into wage and income gains as labor markets continue to tighten.
In fact, real disposable income rose, although just by 0.1% August after a solid 0.4% gain the prior month.
Other income data, including average hourly earnings and the most recent census data on household income, confirm a general trend of improving
wage and income conditions. Consistent with the softness in August new vehicle sales, real personal consumption expenditures declined by 0.1
percentage points in August, led by durable goods spending, while spending on services posted a modest gain.
In terms of consumer confidence, the University of Michigan Sentiment Index rose 1.4 points in September to reach 91.2, a level roughly in line
with the year-to-date average. The gains were concentrated among upper income households and in the expectations components of the survey.
Consumers' assessment of vehicle-buying conditions declined 3 points to 65% in September with more respondents citing low interest rates than
low prices as reason to buy. A similar dynamic was reflected in home buying conditions, although housing data also demonstrated some reversals
in August after strong releases earlier in the summer. Housing starts slowed modestly to 1.14 million units on a SAAR basis in August, although
permits remained steady, suggesting support for sales in the coming months.
New home sales also declined from a strong July reading, but remained well above their June level. On balance, low interest rates and improving
income are likely to provide continued support for gains in this sector.
Finally, data from the manufacturing sector has been somewhat volatile in recent months, but after an unexpected decline in August, the September
Purchasing Managers Index for manufacturing was up 2.1 points to 51.5, including a 6-point increase in new orders and gains in the employment
and production indices as well. As Erich mentioned earlier, we see the September SAAR approaching the 18 million unit range, putting the
year-to-date industry SAAR at about 17.7 million units.
So with that let me turn it back over to Erich for some further comments.
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OCTOBER 03, 2016 / 2:00PM, F - September 2016 Ford Motor Co Corporate Sales Call
Erich Merkle - Ford Motor Company - U.S. Sales Analyst
Okay. Thank you, Emily. We're going to take care of some of the housekeeping items here a minute.
Taking a look at our gross stock inventory, for September of 2016 we had 153,000 cars in gross stock. In terms of trucks, we had 314,000 trucks in
gross stock; 184,000 SUVs, giving us a total of 651,000 vehicles in gross stock. This translates into 80 days' supply for the month.
Comparing this to August of 2016, the month earlier, cars were at 153,000; trucks were at 307,000; SUVs were at 180,000; and the total came out
to 640,000 vehicles, representing a days' supply of 81 days. Comparing this to a year ago, September of 2015, in cars we had 170,000 cars; 292,000
trucks; 137,000 SUVs; giving us a total of 599,000 vehicles, which translated into 68 days' supply.
Taking a look at fleet as a percentage of our sales for the month and year to date. For the month of September, fleet as a percentage of our total
sales was 21%. This breaks down to 9% commercial, 6% government, and 6% daily rental.
Comparing this to September of 2015 a year ago, fleet as a percentage of our total sales was 24%. The breakout on this is 10% commercial, 5%
government, and 9% daily rental. Looking at calendar year to date, fleet as a percentage of our total sales through September was 31% with a
breakout of 12% commercial, 7% government, 12% daily rental.
Looking at calendar year to date a year ago, through September of 2015, fleet as a percentage of our total sales represented 28% of our total sales.
The breakout at the time was 12% commercial, 5% government, and 11% daily rental.
So now that we've taken care of getting the housekeeping out of the way, we would like to turn it over and start taking some calls. We will start
with the analyst community first, Kalia. Thank you.
QUESTIONS AND ANSWERS
Operator
(Operator Instructions) Colin Langan, UBS.
Colin Langan - UBS - Analyst
Great, thanks for taking my question. Any color --? It looks like the SAAR this month is coming in a little bit better than expectations. Is there anything
unique in the month that is driving the slightly better than year-to-date SAAR?
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
Thank you, Colin. We were encouraged to see it. The industry we believe is going to come in at 18 million, which is obviously a really strong number.
The only thing I could say that was, I would say, interesting was that there was a lot of incentive activity -- very aggressive sales events -- for the
Labor Day period. In our case, I believe we ran through September 6 and many of our competitors ran through the 9th or the 10th.
So the first 10 days of the month were really strong with a lot of fixed marketing behind some very aggressive offers out in the marketplace. Although
the rest of the month was very steady as well; I wouldn't characterize it as the entire month got made in the first 10 days. But that was, I think, a
contributing factor was some very successful and aggressive Labor Day promotions.
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OCTOBER 03, 2016 / 2:00PM, F - September 2016 Ford Motor Co Corporate Sales Call
Colin Langan - UBS - Analyst
Any color on incentives in the month? You mentioned -- I think the press release says that industry ATPs were up $400, but -- is that hiding just a
mix benefit?
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
Well, $400 blended month to month is a pretty aggressive increase. We typically -- over the last three or four years, I've said the industry has been
fairly disciplined and with -- a movement of $100 in a month is more typical up or down, so an increase of $400 in the month was fairly aggressive.
It did temper. You saw the spending was a little bit more than that early in the month and it tempered as people came off their Labor Day promotions.
But we have been indicating that we see more aggressive pricing activity over the last several months in the market and we saw a continuation of
that in September, although not alarmingly so. Just continued aggressive activity.
Colin Langan - UBS - Analyst
Sorry, the press release I thought mentioned that $400 was the industry increase in transaction prices. Is that also the increase in incentives, too,
or --?
Erich Merkle - Ford Motor Company - U.S. Sales Analyst
The incentive spend was up about $430 in September compared to a year ago and then versus August sequentially was about $430 -- or $230, I'm
sorry.
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
Yes, we happened to have a couple right at the $400 number. I'm sorry [about that], Colin. Thank you.
Colin Langan - UBS - Analyst
Got it, okay. So the overall mix is hiding the increased incentives? Got it, okay.
Just lastly, any thoughts --? There's been some headlines around auto financing defaults rising. Is that a concern for your outlook for the rest of the
year or is that just part of the return to a norm? Any thoughts there on some of those headlines?
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
I've seen a lot of commentary different places on increase in leasing extended term. We really -- our leasing penetration is actually down slightly
from a year ago; been very consistent over the last six, seven months. Our penetration of long-term financing has been very steady and we haven't
seen any increase whatsoever in our default rates.
Colin Langan - UBS - Analyst
All right, thank you very much.
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OCTOBER 03, 2016 / 2:00PM, F - September 2016 Ford Motor Co Corporate Sales Call
Operator
David Tamberrino, Goldman Sachs.
David Tamberrino - Goldman Sachs - Analyst
Great. Good morning and thank you for taking our questions. Just two for me.
As I take a look at some of the results that have come out this morning from a pickup truck side, both yourself and GM it looks like were down a
little bit year over year, but Ram pickups were up pretty significantly. I'm wondering if there was anything particular you were seeing from an
incentive environment from any of your competitors that might have driven that bifurcation within the market.
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
David, GM and FCA, on their pickups, jumped quite a bit from August to September in terms of their overall incentive spending around their pickups.
We actually had a really solid F-Series month. We had our best retail F-150 of the year was within a handful of what we did September of a year
ago, and September of a year ago I can tell you was sensational, both overall Ford brand and our pickup business.
But the escalation that I talked about earlier, incentives August and September, was on some of the high-volume car segments and pickup trucks.
It really wasn't on utilities, so that's where it was centered.
David Tamberrino - Goldman Sachs - Analyst
Okay. Then maybe just a follow-up from that before I get into my next one. The commercial sales environment for the F-Series, is that just partially
due to the launch of the Super Duty? Why it's a little bit of an underperformer relative to retail?
And when do you expect that to rebound? Is that a fourth-quarter event or is that possibly into next year as you get up the launch curve on the
Super Duty?
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
Our commercial business, both in our vans around primarily our Transit product and in our pickup trucks, both F-150 and F-Series has been very
solid all year. You will get month-to-month fluctuations based on customers that are ordering a large volume of products and when they want
delivery and when we can produce them, so any aberration in the commercial truck number for the month is purely timing. Our business is very,
very solid in that part of the market.
David Tamberrino - Goldman Sachs - Analyst
Okay, that's helpful. My last one is just on your inventory position at 80 days' supply right now, up year over year from 68. I know it's only flat from
August, but you had a better sales environment as the divisor.
So wondering how inflated that is as a result of the recent launch and if you expect that to be coming down sequentially as we get into the
October-November timeframe.
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OCTOBER 03, 2016 / 2:00PM, F - September 2016 Ford Motor Co Corporate Sales Call
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
We do. We expect to come down sequentially right through the end of the year. Not a lot. I can tell you that at 80 days' supply if you go back to
September of 2014 we were at 83 days' supply. Last year was abnormally low, both the combination of the F-150 ramp up and we were actually
way too lean on SUVs in September of a year ago.
So if you look at the aggregate numbers that Erich gave you, we've got about 20,000 less cars in stock, reflecting weaker car segmentation and
we've got more SUVs, about 40,000 more SUVs, which is where you want to have the inventory and our truck and van inventories fairly balanced.
So a couple days higher than we'd like, but certainly within a normal range, and it will sequentially come down as we go through the end of the
year.
David Tamberrino - Goldman Sachs - Analyst
All right, appreciate the color. Thank you.
Operator
John Murphy, Bank of America.
John Murphy - BofA Merrill Lynch - Analyst
Good morning, guys. Just a first sort of housekeeping question here on inventory and sales mix by model year. Erich, I wonder if you could just
give us what the model year 2016s represent as a percent of the sales for this last month and also for inventory, just so we can gauge the sequential
impact that these model year changeovers might have on pricing going forward.
Erich Merkle - Ford Motor Company - U.S. Sales Analyst
The 2017 model year right now is about 40% and 2016 would be 60%, the remainder of that.
John Murphy - BofA Merrill Lynch - Analyst
And that is in inventory or is that of sales?
Erich Merkle - Ford Motor Company - U.S. Sales Analyst
That's of sales for the month of September.
John Murphy - BofA Merrill Lynch - Analyst
Got it, okay. And do you have that split for inventory?
Erich Merkle - Ford Motor Company - U.S. Sales Analyst
I don't. It's roughly running right about in line with sales, so it doesn't follow too far off from that, John.
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OCTOBER 03, 2016 / 2:00PM, F - September 2016 Ford Motor Co Corporate Sales Call
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
But, John, I'm glad you asked the question because it gives me chance to provide a little context for future months. We had an extended year build
on the F-150, so we will be selling almost entirely 2016 models right through the end of the year. So our mix of 2016s will look higher actually -- I
don't know where those numbers get published, but you see them just because F-150 is such a big part of our business and we will be selling 2016s
really for the balance of the calendar year.
Then at some point, even though our incentive spending right now on F-150 is well below our competitors, it may inch up over the coming months
as the competitors start rolling in their -- get the MYCO [Model Year Change-Over] actions on their 2017s and we continue to sell 2016s. I can't
predict what that will be, but we will see those MYCO actions in the first quarter next year when we flip over to 2017s. On F-150.
John Murphy - BofA Merrill Lynch - Analyst
Got you, that's helpful. Then just a second on this fleet versus retail shift. Obviously, you guys sold heavy on daily rent in the beginning of the year.
As we go through the next three months, will we see a level similar to what we saw in this month or could it potentially get a little tougher on
comps even October, November, December?
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
The daily rent number will continue to be a tough number year over year. Government and commercial will be much more stable, but we will be
down significant numbers in daily rent for the balance of the year.
John Murphy - BofA Merrill Lynch - Analyst
Okay. But similar to this month or could it potentially --? Because I think the comps get even a little bit tougher as we go through the next couple
months.
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
I can't give you that number off the top of my head, John; I apologize. But I know our overall fleet number will be down double digits every month
for the balance of the year, with the vast majority of that being driven by lower daily rent.
John Murphy - BofA Merrill Lynch - Analyst
Okay. Then just lastly, the Expedition was great this month; has been doing fairly well on a year-over-year comp basis for most of the year. It seems
like you're going to be launching a new one as we get into calendar year 2017 for model year 2018.
What do you see is driving the strength here in the last year of this product and really what's the opportunity you see out there in the market in
these large SUVs?
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
Well, $2 per gallon gas and some of the improvements that have been made in our vehicle and overall ride quality, fuel economy, all the technology
that is available now in these vehicles, which historically have come off the truck platform, has obviously helped the overall segment. We are really
looking forward to getting the new Expedition and Navigator into the marketplace next year. We continue to perform well with the current ones
and, in many ways --.
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OCTOBER 03, 2016 / 2:00PM, F - September 2016 Ford Motor Co Corporate Sales Call
I started my career at Cadillac back in 1981 and the entire market was D and E sedans. The entire luxury market, if you can believe that. And that
market is entirely gone and, to some extent, has been replaced by luxury crossovers and SUVs, but to another extent, has been replaced by full-sized
SUVs where people are buying them as truly a premium purchase depending on their lifestyle.
We continue to see strength in that under the current economic conditions we are in, current fuel economy environment. We continue to see a
good opportunity in that segment.
John Murphy - BofA Merrill Lynch - Analyst
Great, thank you very much.
Operator
There are no further questions from the analysts. That will conclude the analyst portion of the call. We will now be moving into the media portion.
(Operator Instructions) Christina Rogers, Wall Street Journal.
Christina Rogers - Wall Street Journal - Media
Thanks for taking our questions. I've got two here. Bob Shanks -- I think it was during the Investor Day presentation -- he had mentioned that leasing
is going to be more expensive and difficult going forward for manufacturers, mostly because of softening residuals.
I was just wondering: Are you anticipating a pullback in leasing this year or next, both for Ford and the industry? Will you be able to offer the same
kinds of low monthly payment deals that you have been offering in the past couple years?
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
In terms of our business, Christina -- thank you for your question. I just mentioned it a little bit ago; we take a very disciplined approach to leasing.
We have seen some softening in -- it's actually not industry wide. It's in certain segments of the market in residual values. So that's a little bit of
caution flag, but you do have to manage total supply in a market which includes our new vehicle supply, things like the off-rental, off-leasing
vehicles coming back into the market.
But we have been running 4, 5, 6 points below the industry in terms of overall lease penetration, so we've managed it in a pretty disciplined way.
It has probably cost us a little bit of business, but that is a trade-off we've been willing to make in terms of preserving our residual values on behalf
of our customers and what's good for our overall profitability of our business. So it's something we will keep an eye on, but there are leasing markets
in the country -- New York comes to mind -- that the vast majority of the customers want to lease and we intend to keep our dealers competitive
in those markets.
Christina Rogers - Wall Street Journal - Media
So do you think you will be able to continue running at the 4% to 5% rate?
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
Below? 4% to 5% below the industry?
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OCTOBER 03, 2016 / 2:00PM, F - September 2016 Ford Motor Co Corporate Sales Call
Christina Rogers - Wall Street Journal - Media
Yes. Or do you think you will pull back more?
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
No, I think we are comfortable where we are. Of course the market changes -- things change. Residual values, overall cost of money, and other
factors that go into leasing change every month or periodically, and so we will adjust accordingly. But we're going to run -- we are going to do
what's right for Ford and for our customers and our dealers. Right now 18% to 20% range is a good range for us to run the business at.
Christina Rogers - Wall Street Journal - Media
Okay, thank you.
Operator
Megan Lampinen, Automotive World.
Megan Lampinen - Automotive World - Media
Thanks, I've got two quick ones for Mark. I was hoping you could touch on what might have come out of the Texas State Fair. Does this sort of event
get people fired up for pickup sales?
And also, while it's not a motor show, how important an event is that in terms of a marketing tool and spreading the brand message?
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
Texas State Fair is a very critical event on our calendar. In terms of overall impact to the business, the core day-to-day selling cars and trucks, SUV
business, it ranks right up there with the major auto shows.
We have had a -- we've got a tremendous dealer body, dealer group in Texas. Our business is very strong there, so we have always had a big presence
and put a lot of support behind the Texas State Fair. We used it last year to launch a new Super Duty; this year to continue to tell the story, show
off our new Raptor and some of the other tremendous truck variants that we have.
So it's a fun event and it's a very important event for Ford Motor Company and for our dealers in the state of Texas. We are delighted with the way
it turned out and we will continue to be heavily involved with it moving forward.
Megan Lampinen - Automotive World - Media
Just as a bit of a follow-up, one analyst had currently described competition in the US in general, not just the pickup segment, as being at an all-time
high. Is this something that you would agree with?
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OCTOBER 03, 2016 / 2:00PM, F - September 2016 Ford Motor Co Corporate Sales Call
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
I would say the business is as competitive as I've seen in my 32 years, but it's competitive in a very strong industry. We are running 17 million, as
Emily said, 17 million unit industry, which historically is right near -- very close to -- you can see the peak from there. It's a very strong industry.
Where the industry don't feel too good is when it's real competitive at a 10 million industry, which it was six or seven years ago, so I will take this
all day long. But it is very, very competitive out there. Everybody is trying to protect the share and in spots grow it and we're competing every day.
Megan Lampinen - Automotive World - Media
I've got it, thanks very much.
Operator
Nick Bunkley, Automotive News.
Nick Bunkley - Automotive News - Media
Good morning. So the Fusion and the Escape, which are both updated this year, you have still been having some negative numbers on there. Is
that just that you're still selling a lot of the old ones on those or --? Can you talk about your expectations for those?
Then is there anything else in the lineup that -- crossovers or SUVs, that you are production-constrained that is holding them back or on the car
side that you've got a little bit more than, given the numbers the last couple of months?
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
Thanks for the question, Nick. Let me start with Fusion. Of course, you have had -- the C/D mid-car segment has gotten hit really hard this year in
terms of overall segmentation down. Our retail sales for Fusion actually continue to run at record levels. Our market share performance has been
very steady.
On Escape, the segment is incredibly competitive. I believe there's 22 entries in the small SUV segment and it feels like new ones coming every
day, so pressure now with the emergence of the mini utility segment, which we are currently not competing in, which is drawing down some of
the lower part of the market.
But I can tell you it's actually -- you had said about the old models; it's actually the reverse. We introduced our 2017 versions earlier in the year,
second quarter -- beginning of second quarter with Escape and toward the end of the second quarter with Fusion, so we were selling 2017 models
at a higher price versus 2016 models for most of our competition.
So any month-to-month variation that you might have seen would be as a result of that because both products are very well received in the
marketplace and our market share continues to operate in a very normal range. We'd like to be higher -- of course we would -- but we are pleased
with the performance of both vehicles so far.
Nick Bunkley - Automotive News - Media
Okay. So as you look across your SUV lineup down a couple percent is production any relation to that or what's going on with it?
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OCTOBER 03, 2016 / 2:00PM, F - September 2016 Ford Motor Co Corporate Sales Call
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
No, Nick, we've got adequate inventory really on all three segments or portfolios: cars, trucks, SUVs. They are down a couple percent on a retail
basis year over year is purely how strong September was a year ago.
It was not just a good month last year; it was far and away our best month of the year, September. So we believe our market share this September
will be well above our six-month and 12-month rolling average. We are very pleased with the month; just had a tough year-over-year comp.
Erich Merkle - Ford Motor Company - U.S. Sales Analyst
Also, Nick, we are also getting some very good pricing on the SUVs. So if you look at the Escape, for instance, our average transaction prices were
up $500 per vehicle in September and that compares to a segment that was actually down about $360, so we are very mindful of that as well.
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
Part of that, Nick, is a reflection of the -- we were selling I believe in -- I can tell you we probably sold 90%, maybe over 90% 2017 model version
Escapes in the month of September versus competition it would have been more like 50/50. So we get a higher price and less incentives on our
2017.
Nick Bunkley - Automotive News - Media
Okay, I appreciate the info.
Erich Merkle - Ford Motor Company - U.S. Sales Analyst
Thank you, Nick. Kalia, we are going to take one more caller.
Operator
Keith Naughton, Bloomberg.
Keith Naughton - Bloomberg News - Media
Good morning. Mark, you mentioned a moment ago that when you started at Cadillac it was the big luxury sedans that were the hot sellers and
that market is kind of totally gone now. You guys are coming with your new flagship Continental; I see a few sales from September. Do you think
you will be selling -- I know it's a beautiful car, but do you think you will be selling that into a difficult market for big cars?
Mark LaNeve - Ford Motor Company - VP, U.S. Marketing, Sales, and Service
Keith, I think if you look historically, I believe in 1981 the entire luxury market was about 1 million units, maybe 1.1 million. They were all big sedans;
I mean that's all there was. Fleetwood Broughams, think about that name.
It's a much smaller part of the luxury vehicle market now and our expectations for volume for the Continental and for our MKZ are adjusted
accordingly. But they are still a critical part of the luxury car market, both from a standpoint of volume, profitability, and image. We have high hopes
for the Continental and know that it's going to do a lot for both the Lincoln brand, attracting new customers which we've already seen, and for the
health of our Lincoln dealers.
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OCTOBER 03, 2016 / 2:00PM, F - September 2016 Ford Motor Co Corporate Sales Call
So it's still a very important segment, albeit just at much smaller volumes, obviously, than it was 10, 20, certainly 30 years ago that segment.
Keith Naughton - Bloomberg News - Media
Great, thank you.
Erich Merkle - Ford Motor Company - U.S. Sales Analyst
Thank you, Keith. All right. Well, thank you, everyone, and appreciate you joining the call for the month of September. Have a great October and
we will look forward to speaking to you again next month when we host the October sales call. Thank you very much.
Operator
Thank you, ladies and gentlemen. That does conclude today's conference call. You may now disconnect.
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