Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.
1st Gear: Ford Is Less Than Optimistic
Second-quarter profit reports continue to roll in, and Ford announced a 9 percent decline along with a warning that third-quarter numbers might be even weaker.
Automotive News reports the quarter was still a strong one for Ford overall though, but sales targets are being revised downward as U.S. demand “softens.”
Are we finally seeing the beginning of the end of record new car sales?
Ford reduced its full-year U.S. sales outlook to between 17.4 million and 17.9 million vehicles, including medium and heavy trucks. Its previous forecast range had a midpoint of 18 million. Most of the new range is below last year’s industry total of 17.8 million units.
“We’re starting to see a maturation of the economic cycle,” [Ford CFO Bob] Shanks said. “We’re at a strong level. I think that will continue.”
But, he added, “we don’t see growth in the near term.”
The story says Ford will attempt to boost profits in Q3 and Q4 by “reducing costs in manufacturing and other operations.” But sales figures and profits the rest of the year will be very interesting to watch.
2nd Gear: Meanwhile GM Ramps Up Truck Production
Key to the explosive new vehicle sales we’ve seen over the past two years or so has been TRUCKS, TRUCKS and MORE TRUCKS. (Also CROSSOVERS but you get the idea. Not-cars.) And over at General Motors, in an attempt to finish strong in 2016, the answer is gonna be STILL MORE TRUCKS. Via Automotive News again:
GM North America President Alan Batey said the automaker has been scrambling to make enough Chevrolet Silverados and GMC Sierras, and acknowledged that the tight supplies have probably cost GM some sales.
“We wish we had a little bit more inventory right now,” Batey told reporters during a roundtable interview. “We’ve got a slightly better production plan in the second half than the first half.”
The second half of the year is the most important for truck sales, Batey said, typically accounting for 60 percent of the year’s sales.
Many dealers say they could be doing better if the factory got them more pickups. As of July 1, there was an 83-day supply of Silverados on dealer lots or en route to stores, the same level as a year earlier. Ford dealers had a 105-day supply of F series pickups.
If a decline is in fact coming, they better get in while they still can.
3rd Gear: Things Are Predictably Shitty At Volkswagen
Month eighty seven, or whatever it is, of Dieselgate continues to take its toll on Volkswagen’s global sales and profits. Profits at VW (the brand) were down 12 percent in Q2, Reuters reports.
The German company published headline first-half numbers last week, saying underlying operating profit of 7.5 billion euros ($8.3 billion) beat analysts’ expectations largely due to improvements at its mass-market VW brand.
The brand, Volkswagen’s largest by revenues, saw profits plunge 86 percent in the first quarter.
However, some analysts said the drop in the division’s second-quarter earnings showed there was still much work to do.
“Some of the details are mediocre, especially the VW brand result,” said Commerzbank analyst Sascha Gommel of the company’s full first-half earnings release.
4th Gear: And Yet Toyota Lags Behind... Volkswagen?
You would think that amidst the diesel crisis a big rival automaker like Toyota could easily surpass Volkswagen. That would be wrong!
It turns out Toyota lags behind VW in new car deliveries this year because the all-new Prius is falling flat in a market where trucks and SUVs decimate hybrid sales. Via Bloomberg:
Despite introducing a new-look sedan model featuring improved mileage and a higher-tech interior, U.S. deliveries of Toyota’s Prius hybrid line plunged 25 percent in the first half of the year. That held Toyota back from regaining its global sales lead after suffering a series of production disruptions in the first quarter.
Volkswagen is threatening Toyota’s four-year reign as the world’s largest automaker even as it deals with the rising price tag for having installed cheating software in about 11 million vehicles worldwide. The company has set aside more than 18 billion euros($19.9 billion) to cover costs arising from the scandal.
The Prius line fell behind Toyota’s Tacoma pickup by U.S. sales during the first half, as low fuel prices boosted demand for trucks and SUVs.
“We’re trying to sell cars in a truck industry,” Paul Holdridge, vice president of Toyota division sales in the U.S., said on a conference call earlier this month to discuss the company’s 2.7 percent drop in first-half deliveries. “With gas prices on hybrid vehicles, it’s making it a challenge for us to sell the Prius.”
5th Gear: Soon FCA Will Only Build Jeep, Ram And SUVs In America
And on that note, Fiat Chrysler is basically becoming “the truck and SUV brand.” Especially when it comes to vehicle production in the U.S. Soon all small car production—whatever’s left of it, anyway—will be outsourced to other countries or automakers, reports The Detroit Free Press.
Ending passenger car production in the U.S. is part of FCA CEO Sergio Marchionne’s multibillion-dollar plan to increase profit margins to match competitors. It’s a bet that recognizes the growing popularity of SUVs in America, low gas prices and lower cost of producing vehicles in Mexico.
“By the time we finish with this, hopefully, all of our production assets in the United States — if you exclude Canada and Mexico from the fold — all those U.S. plants will be producing either Jeeps or Ram,” Marchionne said Wednesday during a conference call with Wall Street analysts after the automaker reported second-quarter earnings.
The Jeep and Ram brands have been driving sales gains recently, with the Dodge Dart and Chrysler 200, highly touted when they were launched, have been disappointments.
All of this makes you wonder what will happen when gas prices go up again, and/or the next economic downturn happens.
Reverse: Suck It, Hitler
Neutral: Are We Headed For A Downturn?
And what will automakers do if that happens?