Ford Plunges After Warning "We Don't See Growth", Warns US Auto Industry "Has Plateaued"

Tyler Durden's picture

The reason Ford stock is plunging this morning is not so much the company's earnings miss, when the US auto giant reported Q2 EPS of $0.52, below the $0.60 expected, but because in some startling language, CEO Mark Fields laid out a very gloomy picture of the future.

As the company reported in its press release, it told investors to "expect another strong year of results, and Ford committed to full year guidance of company pretax profit and operating margin equal to or better than last year; however, company now sees risks challenging achieving guidance. Entire Ford team working to mitigate the risks."

A key part of the problem is one shown here repeatedly over the past year, namely the troubling increase in auto inventories, which are now at 5 year highs, and the inventory to sales ratio back to levels seen during the last recession.

 

Whether the pile up of autos at dealers is the main threat to future sales, is not certain, as the company was relative vague about the risks facing it. What it was not vague at all, about, however, is that the company which until recently was the stalwart of the only US manufacturing sector to be humming along while the rest of US non-service industries tumbled, is that the future is suddenly very unclear and full of risks.

To wit:

“We’re committed to meeting our guidance, but it is at risk,” Chief Financial Officer Bob Shanks told reporters Thursday. The company now says it’s unlikely that U.S. vehicle sales will break last year’s record, and Shanks predicted further contraction in 2017. “We don’t see growth, at least in the near term.”

“We do think the U.S. is coming down from what we expected,” Shanks said. “We saw higher U.S. incentives - that was for the industry and for us. The industry increased and we increased in line with the industry.”

“We are working, as we did in the first half, to deliver profit improvement actions,” Shanks said. “We do have risks. We’ve seen those risks. We’ve addressed those risks in the first half. We need to continue to do that in the second half and deliver the guidance that we’re committed to do.”

“What we’re seeing is that over time, particularly as the U.S. industry has started to plateau, we’ve seen a very gradual, modestly rising incentive level,” Shanks said later in a conference call with analysts.

Ford lowered its estimates for full-year industry sales in the U.S. saying second half sales will be "much weaker than normal" and said next year's sales will be even weaker.

And while we know that there is a massive inventory build up, the question is why. One reason was presented here this Monday when we reported that "Subprime Snaps: Largest US Subprime Auto Lender Delays Earnings Due To "Accounting Matters." And while we await Santander Commercial to file its delayed, and adjusted, earnings report, it appears that even without the hard data one can conclude that the subprime driven auto-boom, which propelled the auto industry over the past two years, has finally ended.

For confirmation look no further than Ford stock, which this morning is tumbling by 10% as the market is suddenly repricing risk in the US auto industry.

 

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TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Jul 28, 2016 9:40 AM

Lower the legal driving age, loans to toddlers is our only hope.

Chris Dakota's picture
Chris Dakota (not verified) TradingIsLifeBrah Jul 28, 2016 9:41 AM

The most damaging email is largely over looked.

Why they took out Gaddafi.

The Foreign Policy Journal reports:

The email identifies French President Nicholas Sarkozy as leading the attack on Libya with five specific purposes in mind: to obtain Libyan oil, ensure French influence in the region, increase Sarkozy’s reputation domestically, assert French military power, and to prevent Gaddafi’s influence in what is considered “Francophone Africa.”

Most astounding is the lengthy section delineating the huge threat that Gaddafi’s gold and silver reserves, estimated at “143 tons of gold, and a similar amount in silver,” posed to the French franc (CFA) circulating as a prime African currency.

The email makes clear that intelligence sources indicate the impetus behind the French attack on Libya was a calculated move to consolidate greater power, using NATO as a tool for imperialist conquest, not a humanitarian intervention as the public was falsely led to believe.

According to the email:

This gold was accumulated prior to the current rebellion and was intended to be used to establish a pan-African currency based on the Libyan golden Dinar. This plan was designed to provide the Francophone African Countries with an alternative to the French franc (CFA).

(Source Comment: According to knowledgeable individuals this quantity of gold and silver is valued at more than $7 billion. French intelligence officers discovered this plan shortly after the current rebellion began, and this was one of the factors that influenced President Nicolas Sarkozy’s decision to commit France to the attack on Libya.)


Read more at http://thefreethoughtproject.com/declassified-emails-reveal-natos-true-m...

pods's picture

Not exactly a huge plunge.  I mean, back to the lows of what, 3 weeks ago?

pods

MFL8240's picture

Start building in the USA if you want people to buy your vehicles.  You cannot produce cheap in Mexico where there is no replacement of jobs in the US that pay good wages and expect growth!

JamesBond's picture

If all the current data are consistent with previous recessions, doesn't that mean we are in a recession?  Like using backward engineering or something...

NidStyles's picture

You can only sell so many new fangled cars that have nearly zero improvement over the last decade before everyone has a car already.

 

If they wanted to see real improvements, they would actually invent something new.

eclectic syncretist's picture

Looks like its about time to lay off some more robots.

tom stamps's picture

W/Cash for clunkers and 0% interest rates, how are the ever going to be able to keep up demand? I'm in the suburbs of maryland and almost all have nice new cars now!

Nylsaar's picture

2000 Fern Valley Rd

LouisvilleKY 40213
not dead yet's picture

Plenty of blather about buy American but what would happen if every country only bought what they made internally. The US is the worlds #2 manufacturer only recently passed by China contrary to the lazy idiots who don't do their homework before opening their mouths and claim the US manufactures nothing. Caterpillar, John Deere, Goodyear, Boeing, Cessna, Gulfstream, GE, Harley Davidson, and thousands of others that employ large numbers of people to make things to EXPORT. Not to mention all those white collar jobs in the US that supply services overseas. Plus we have Toyota with multiple plants. ditto Honda, BMW which makes for domestic and export, Volkswagan, Subaru, KIA, Bridgestone, Hyundai, and so many other foreigners that manufacture here and export too. Not to mention their local parts suppliers. Plus US farmers growing food for all those countries the World Bank and IMF screwed over and destroyed their agriculture or the US war machine destroying countries and their food supplies.

Iam_Silverman's picture

"Caterpillar, John Deere, Goodyear, Boeing, Cessna, Gulfstream, GE, Harley Davidson, and thousands of others that employ large numbers of people to make things to EXPORT."

I tend to agree for the most part with your assertion, but to make it absolutely correct, I would substitute the word "ASSEMBLE" instead of "MAKE".  Then, you need to discern how much of the finished product contains components produced here.  We do "assemble" quite a number of finished products, but the content in many cases can be shown to have lots of imported items.

inhibi's picture

The numbers you must be ooking at is related to export, not actual manufacturing numbers.

 

Yes, the US still produces some things, but by and large, industrial manufacturing is down 80% from 25 years ago, so when you say that the US employs "thousands", thats exactly the point: a couple thousand here and there means very little to a population of 300 million.

 

For example, silicon valley used to actually manufacture seminconductors and electronic components. That has ENTIRELY moved to Korea and Vietnam.

 

US Auto used to dominate the world stage. Japan overtook us when the US government decided to give money to Ford/GM/Chrysler to build hybrid cars, which they instead pissed away into corporate bonuses. Japan heard of this and thought they would literally be doomed, so they went ahead and made the first successful hybrid cars. Now Toyota and Honda, while they may have a few plants in Ohio, are still japanese owned and run, so of course the majority of their supply chain is Japanese companies. Same thing with Hyundai, just over in Korea.

 

On a side note, nothing makes me angrier than listening to GM explain about their woes. They were saved by the government, which poured billions into the defunct company. Then they decided to fuck the American people further by closing plants in the US, and opening up plants in China and Mexico. So when you say that the US us the #2 manufacturer, then I really have to question the data youre using, because by $ that may be so, but by volume, and by percentage of employed, the US is ranked around 15th in the world.

Colonel Klink's picture

Farcebook, Shitter, Snatch chat, Joogle, et. al. all manufacture data for the government.

OutaTime43's picture

Zerohedge is FULL of Hyperbole. Anything to get views to their increasingly spammy pages.

Killtruck's picture

Roll out the Cash For Clunkers 2.0. Throw those perfectly good used cars into the shitbag-inventory-destruction machine! Clear skies and followin' seas, me heartys!

ParkAveFlasher's picture

I'd still take a '91 Toyota Corolla over any of the crud the US puts out.  You get to 300k just by changing the oil regularly.

pods's picture

But you won't get that fancy matrix screen to allow you to facebook while in traffic?

I had a 92 Tercel that got 40 mpg, 4 speed manual, and no AC. It never died though.

pods

Killtruck's picture

How about those old Volkswagen Rabbits that were getting +50 mpg on a small diesel engine and no, read it ZERO, "hybrid" technology? Good thing we regulated the hell out of those things and chased them out of the country! We need you slaves BUYING GAS, not being efficient!

ParkAveFlasher's picture

All you younger guys reading, none of these vehicles tracked your location or recorded your conversations.  Your GPS was in the glove compartment, was made of foldable paper, and you upgraded it on-the-fly by downloading from a rack at the next gas station.  Your windows were muscle-powered which was a safety device if you drove off a bridge or into the ocean and lost electrical power.  You regularly drove around town with busted things hanging off but the police would not shoot you for it.  The car didn't complain when you refused to buckle up.  You piled in friends and the most popular apps that kept you entertained on the long drives into nothingness were the "joke" or the "story" or the "fart".

not dead yet's picture

Get near one of those today, especially when it's cold out, and you'll gag almost to death. Pollute like crazy. Same with many of those older diesel pickups. It's pretty bad when you're miles behind one of those and your still gagging. In colder weather that crap just hangs in the air. Gas mileage has not increased that greatly over the years as the Feds and their enviro nazis demand ever tighter emissions. We are to the point now where new cars are super squeaky clean but that's not good enough for the wackos as we're to the point that any improvements cost a lot of money. I'm willing to bet if they allowed cars to pollute more to get a drastic increase in mileage it would result in less pollution overall with far less gas used. But the wacks never compromise as they look upon it as a defeat. There are some enviros who will compromise and get far more done and faster but the wacks hate them with a passion as "they sold out".

NidStyles's picture

I want my '95 Civic sedan back. It was a fun spirited car that got 30+ mpg while driving with the larger CRV engine and an Integra GSR transmission and rock solid reliable.

 

Only reason I had to get rid of it, because I thought I would like a newer Civic more. Well, I have the newer Civic and it's nice, but it's not nearly the same experience.

 

This whole emissions plus "safety" regulations nonsense has dulled the driving experience for me. It's also made the cars ridiculously expensive and almost impossible to maintain due to the costs involved in keeping all of that extra crap in working order.

pods's picture

I hear ya. It is really tough to work on cars today.  Everything is a fancy ass multifunction part. Only thing you can do is replace.  

My friend had a mid 80s CRX with a different chip in it and man that thing flew. Got like 40 mpg.

Nowadays cars have to have 23 air bags, which have to be replaced every 6 years or so.

I won't buy a car with one of those matrix screens in them. Fuck that.  I will source, buy, and rebuild a 76 International Scout II before I do that. (I had a chance to pick one up when I was 16 for $750 and regret it)

pods

OldTrooper's picture

What did any of us know at 16.  Don't be too hard on yourself for that one, pods.

Agent P's picture

I'll see your '95 Civic sedan, and raise you an '85 Civic wagon.  It was white with black bumpers...we called her "The Shuttle".  My brother and I shared it growing up in Hawaii.  It was the ultimate beach car...it had about a half inch of sand on the floor and the cloth seats smelled of cheap beer and numerous lost virginities.  Best car I've ever owned.  

Indelible Scars's picture

You're nuts. I just sold an Escalade with 270K miles and I'd have driven it anywhere and ran over every Corolla I saw. By far, the worst car I ever owned was a Camry. That fucking piece of shit car was towed twice a year. Anecdotal, yes, but for fuck's sake don't even believe that was my first experience with cars. I also sold a Chevy p/u with 197K that was also a daily driver. Whatever. Jesus Christ.

Good To Great's picture

So you must be that obese black lady I saw yesterday trying to park.  Nice job, glad you finally were able to get it mostly into the space.

inhibi's picture

Look, Scars, the Escalade you are talking about was probably built at the time when GM owned Allison Transmissions, so the transmission in that car was literally truck/bus/ambulance grade.

 

Nowadays, you would be luck to get 50k out of an escalade without some kind of repair.

 

You need to realize that GM USED to be good, but is now a complete and utter piece of shit. The only othr car company that might beat them in the "shittiness" category is Jeep/Chrysler/Fat.

 

I test drove all the new jeeps (i used to work in the auto indusry as a engine and transmission engineer for many years), and they are all so underpowered and just....horrible in every way posible. Actually sickening what Fiat has done to the company.

ParkAveFlasher's picture

Nice point.  I do remember the old platform-like Chevy Suburbans of the brown/tan variety that ran until they disintegrated into a pile of rust and paint chips, and two little chrome knobs marked "AM" and "FM". 

Then again, I also remember my dad's '84 Oldsmobile Cutlass Supreme - landau roof - and the transmission that went out for a pack of smokes at 50k, and never came back, and the '80 AMC Concorde that caught fire, while parked, and the '81 Chevy Citation that wouldn't turn off unless you were turning left into oncoming traffic, and the '86 Cutlass Ciera that we called "Balls" because of the 3-second delay between flooring it and massive acceleration, and it didn't really have brakes.

I'd shell out $73k to start for an Escalade but for that money we should be talking about square footage, not mileage.

 

 

StagStopa's picture

Correct. Chrysler products absolute junk, aside from the Cummins powered trucks.

 

1996 Mazda 2300, 5 speed, 318k miles, daily driver, purchased new. Built 2 business with it, and my house.

1984 Chevrolet Corvette, 118 k miles, rock solid, performs, comfortable, reliable. 80 bucks a year for "registration", no smog required.

 

Roxi

InflammatoryResponse's picture

we owned a lexus es300 and a camry...

 

the engines/transmissions run great.  but every other @#$@#$@#$@#$ part on the cars break.  knobs fall off.  lcd displays go dark.

 

never buy another TOYmotor car again EVER.

 

In Ze No's picture

MIddle America can't afford new car prices.  Leasing is actually more expensive in the long run.

I had to help a relative get a new car.  Barely got him into a Sentra.  He's 6'4"  and it was the only car he could fit into that was even in striking dI stance of affordability.  Completely stripped down and used.  Maxed his pay period.  I don't know what he's going to do next time (in 10+ years.)  He'll have no money to rebuild his now clunker.  He'll probably have to take the bus.  He makes over $50k and lives very frugally.  No cell phone.  Should cut cable tho.

twerkerworker's picture

Thanks for this highlight! ZH reported the plot but it's nice to have official confirmation. Even Hillary can't warmonger all alone . . .

NMA's picture

Interestingly when north africans (who happen to be Muslim) are pissed and attacking the French - the response in the mainstream media is as if its a war of religions to keep the sheep busy thinking something else..... 

not dead yet's picture

Even worse it was in the works to establish 3 main banks to manage African affairs. Between that and the Libyan development fund that invested heavily in Africa The World Bank and the IMF must have been scared to death they would lose their power to destroy African economies so their cronies and money men could pick up those countries assets on the cheap and keep Africans barefoot and poor as they slaved for peanuts. Also the hit to the dollar.

MalteseFalcon's picture

So as always no self-determination for Africans or Arabs.

But, hey, now that we've destroyed your country, hows about a piece of the western welfare state?

Paul Kersey's picture

What's plateaued are the 8 year auto loans. Too many debtors are more than half way into those loans at a time that their vehicles have lost at least 40% of value. They are farther under water than the subprime mortgage debtors in 2007. The auto makers are running out of debt serfs.

techpriest's picture

Personally, I am surprised that anyone would think its a good idea to borrow for 8 years on a car. I'm guessing it's a matter of "But the payment is only $300 a month!" with no question about why it is so.

My two vehicles are 7 and 10 years old, run fine, and no payments. At this point we can pay cash for ~5 year old cars, drive them 5-7 years, then roll over to the next one. Pretty easy to avoid debt that way.

Wahooo's picture

I drive a 16 year old car. I paid $17K for it which includes the interest. I have spent $5,600 on all forms of maintenance. Why would I want a constant $300 monthly payment for the rest of my driving life?

Stanley Kubrick's picture

A couple of years ago, during $5/gallon gas prices, I bought a '92 GMC pickup with 40,000 miles on her....a garage-kept jewel.

Poor guy knew what he had, but since he was moving across the country he couldn't take it with him. I helped him out of it for $5,000.  I'll get another 150,000 miles out of her, over the next 30 years or so...

Did I tell ya that it's a 454 under the hood?

Thanks, Craigslist!

ejmoosa's picture

Can't afford to trade up.

Can't afford to trade in.

 

In Ze No's picture

You're looking at one variable when there are really so many.  Obviously income.  Where do you live and what is cost for basic housing?  And insurance?  I pay much less in upstate NY than I did on the coast.  

I pay double tho for my poor internet service because Time Warner refuses to connect the last 9 telephone poles.  So I'm with lying Windstream.  

I did try to go without just to spite those bastards.  That didn't really work.  Didyou know local libraries and schools block Zero Hedge and other non conformist thinking sites?

Good To Great's picture

Not surprised (about blocking).  If all you angry white dudes quit talking about n___ this and b____ that, maybe they wouldn't block ZH.

Beltain's picture

YA funny they never block "Old White Guy Patriarchy" This or "Racist White Cracker" That at those libraries and other places isn't it?

 

 

BigSwingingJohnson's picture

LOL - but, they must be self-driving like those tesla's.

 

not dead yet's picture

Ford and GM sell millions of cars and billions in profits and their stock goes nowhere or down. Tesla is currently begging for orders, loses money by the truckload, and is in the process of buying Solar City to keep it from going bankrupt and it's stock keeps going up. Elon calls a press conference and spouts a bunch of pie in the sky nonsense and Tesla stock goes up and Elon is called a genius. When someone asks the right questions like how you going to get it done and where you gonna get the money no answer is forthcoming but the stock goes up.

Stroke's picture

In certain sub-prime zip codes The parents are using the todlers social security numbers to obtain credit

Sometimes no credit is better than bad credit