Cleveland, Ohio – With May sales numbers out, Ford’s massive efforts to restore F-Series truck production, following an explosion at a supplier’s plant, come more into focus.
Despite work stoppages to three plants, F-Series truck sales climbed 11.3% in May, but those numbers took a giant bite out of dealer inventories. The reaction provides a case study in retail inventory management.
Some automakers, Toyota and Honda primarily, target low inventories, trying to limit dealer stock to as little as seven days of supply. Less inventory requires more frequent shipments from dealers, but it lowers storage and dealer financing costs.
Ford targets lower inventory figures for slower-selling vehicles (limiting cars to a 50-60 day’s supply), but it typically keeps more vehicles in stock. That’s especially true for trucks where it tend to keep 70-80 days of vehicles in dealer lots. Dealers have to borrow more to finance that large inventory, but when buyers with specific criteria come to shop (long-bed, blue, EcoBoost engine, 4×4 suspension), the dealer will likely have the truck they’re seeking.
A secondary benefit is protection against disruption to the supply of new vehicles. A few stats on what happened with F-Series in May:
- Inventories of trucks on lots or in-transit to lots: 275,661, a 16.4% decline
- Day’s supply of trucks (on lots or in-transit): 66, a 20.4% decline
- Vehicles in transit to dealers: 44,375, 12.3% lower than in May, 2017
That final figure, the decline in trucks in-transit, is significant because Ford’s truck plants in Michigan, Missouri, and Kentucky were back to production by the end of the month. However, supplies of magnesium castings are likely somewhat limited by the need to fly them to the U.S. from the U.K., instead of receiving trucked-in shipments from Michigan.
Industrywide this year, truck sales have been down slightly as General Motors and FCA US LLC bring new models to the market and as crossovers have become the dominant vehicle choices for American buyers. Ford’s rising F-Series sales have been an outlier. With increased competition on the way and supplies tightened by the outage, the company faces some headwinds.
However, Ford’s often-criticized inventory levels have protected its profitability for the near term, allowing it to grow sales of its most popular vehicle at a critical time.
Overall, May was the second consecutive positive month for the industry with strong gains from Ford, FCA US LLC, Honda, and Hyundai/Kia. Toyota and Nissan declined, and General Motors no longer reports monthly statistics.
About the author: Robert Schoenberger is the editor of Today’s Motor Vehicles and a contributor to Today’s Medical Developments and Aerospace Manufacturing and Design. He has written about the automotive industry for more than 18 years at The Plain Dealer in Cleveland, Ohio; The Courier-Journal in Louisville, Kentucky; and The Clarion-Ledger in Jackson, Mississippi.