Ford Warns "Used Car Prices Will Drop For Years"

Tyler Durden's picture

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...

Ford

 

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...

Ford

 

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

Ford

 

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

Ford

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hotrod's picture

However  THERE IS NO RECESSION

Dominus Ludificatio's picture

There is definetly no recession in the car industry right now.

GUS100CORRINA's picture

I want to SUGGEST something that is probably contributing to this in a BIG WAY.

Remember CASH for CLUNKERS!

In that process, DEMAND was PULLED FORWARD for YEARS.

I know there are other contributing factors, but this created the GLUT that is now coming to market.

JRobby's picture

Where is that large car market in the US? Oh, right, right, in CAtastrophe.

Where they try to push cars off the road with endless regulations and high insurance rates. How high? Higher than the car debt payment.

But don't worry about that, they are still behind NYNJCTMA area.

Dumb fucks careening down the roads at high speeds (late all the time) on phones the entire time they are in the car is why insurance will never be fixed. Ever.

tmosley's picture

Think this is bad? Wait until the self driving taxis start hitting major markets for less than the cost of ownership of a car per mile.

JRobby's picture

There will be corpses all over the highways (by design)

Chris Dakota's picture
Chris Dakota (not verified) JRobby Mar 24, 2017 6:16 AM

Ford said they weren't going to build any more cars with steering wheels, driverless cars.

the excuse will be these car attacks like in London.

pitz's picture

SDC's at a million or two bucks a piece won't be anything but a negligible chunk of the market.  If even.

JRobby's picture

Cash For Clunkers was a total fist fuck.

Proving once again everything GOVT touches turns to shit.

look up: average age (or year) of vehicles registered in the US

Nobodys Home's picture

I really missed out on that. I should have sold my "clunker" and bought a better "clunker". Now all the "clunkers" that I'd really like to own have become harder to find.

buttmint's picture

...Gus...I think Detroit is trying its "Cash for Clunkers" on housing---why else do so many Detroit home get burnt to the ground?

PROGRESS!

 

Forward Soviet!

JRobby's picture

Obama left everything in excellent order, especially the listening devices.

Selly2k's picture

Used car price always fall. Why is that so new to him?

Sonny Brakes's picture

Why doesn't Ford lend its brand to, let's say, a line of bicycles?

pliny the longer's picture

remember when jeep did exactly this?  except they were clunky, heavy lower grade than huffy POS bicycles.  in other words, exactly what you'd expect from an american label  

Sonny Brakes's picture

If done right, it could create brand loyalty. I'm sure they could create a superior product. One of the car brands will eventually do it and do it right.

Joe Sichs Pach's picture

I agree that the Jeep bikes were crap but there are some good US bike makers out there. Some guys still take pride in putting out a good product.

hsun85's picture

FUnny part is, ff you buy a new car now, you can still come out ahead in a few years than buying stocks.

Mr. Class and Quality's picture

At least unlike when the housing market crashed, you can drive from shanty town to shanty town in your debtmobile.

Joe Sichs Pach's picture

Staying one shanty ahead of the repo man of course

Bigly's picture

Just wait for those car loan defaults on the 8+ year loans for X5s that dummies making 40,000 a year purchased

Aubiekong's picture

With the price of new trucks going higher than my ability to pay I will just keep my 2007 used Truck...

biker's picture
biker (not verified) Mar 23, 2017 6:38 PM

"Used Car Prices Will Drop For Years"

Depreciation is the car business.

EXCEPT, when you buy a classic, 350hp POS and fix it up yourself, you can double your money all day.

serotonindumptruck's picture

Don't worry all you low-IQ proles.

Just stay focused on the whole false left/right paradigm.

Republican / Democrat / Libertarian / Independent (I'm special and I'm exempt from any negative consequences that might happen)

GooseShtepping Moron's picture

And this is apropos of what exactly?

Nobodys Home's picture

Really! Like, we're talking cars here. Man up!

Nobodys Home's picture

Don't worry. They'll find you too.

yogibear's picture

What do you expect? Raise prices from $24,000 to $37,000?

I'll keep mine until the wheels fall off.

Nobodys Home's picture

For many years now, that has been the only way to get the full value of your new vehicle purchase.

Used is a different story. IMO a better story with a happier ending. I'll never buy another new car. NEVER!

Nobodys Home's picture

I have a 95 Mercedes c220...body is in awesome shape. Looks like it's 3 years old. The interior is mint. It's got 169000 miles on it...will do 250000 easy. It doesn't have any of the weird screw ups that years model had. I paid $2,000 for it 5 years ago and have put another 2.500 into it since. Can't get a better quality car for a better deal than that today.

hotrod's picture

Imagine if the stock market dropped substantially.  That is really all there is.  The housing market is feeding off the stock market along with what ever consumer demand there is.

There is no organic growth. I guess Barrys 10 trillion finally runs out.

stant's picture

To bad none of them are worth a shit. I see nice looking cars junked because it too expensive to fix them. 350 $ fuel pump plus labour to pull the tank for 1500 $ car

Ban KKiller's picture

AND remanufactured engines and transmissions make real sense.  First my 200k Highlander has to break. 

Farmerz's picture

Defintely the way to go, most non-diesel reman. engines are 3grand or less. and A/Trans are 2500 or less.(Ebay) Using my 05 F250 V10 for example:

Parts and labor for engine and trans R&R                            ------$8,500

New paint 2-3000, new carpet  kit 2-300.                            ------$3,300

New windshield. tires, brakes, shocks.                                 ------$2,700

Lets go crazy and finish this and add 5grand more for misc items such as new fuel pump, engine control sensors, radiator, heater core and all hoses, new headlights, and maybe reupholstery of front seats.        ------$5,000

I left some stuff out I'm sure, and prices vary depending on quality of parts and where you buy them and who does the work, but for less than 20grand you could have a pretty much restored later model pickup.

Now, it is possible to find a creampuff pickup in the later model years for less than that of course, but your not always sure of what you are getting and many of the above items while perhaps still in good working order/condition, are 12 years old in my case.

 

Whodathunkit's picture

It's a game. My 19 yo 4Runner w 270k still runs. Even when the f'in zombies run into me. Oh well. I wuz thinkin the other day does the odometer actually go to 500k?

americanreality's picture

19 yo 4runner 270k,  just hitting middle age, congrats.  Last of the classics.  Old Mitsubishi Monteros,  r50 Pathfinders (with timing chains thanks Nissan) 4Runners, all great trucks. 

Shed Boy's picture

Ford sales are down in China because China is now building nicer cars. The new Havals are pretty nice cars and a LOT cheaper then the Fords.

 

Oh..and nobody drives Fords in China. The upper middle class all drive BMW's Mercedes, Porsches, and Jaguars and Volkswagens. The poor folk buy a Chinese car.

loveyajimbo's picture

LOL!!  Ford saying used cars are tanking... trying to unload their WAY overpriced NEW crap to the sheep...  $50,000 for a run-of-the-mill pickup?  BAH!!  Wait a few months... they will be selling them at half price.

scoutshonor's picture

I just came in from driving across half of Cali--central coast to the Colorado river--I saw many trucks that looked brand new on the side of the road "for sale by owner."

My guess is this is going to snowball.

Nobodys Home's picture

So the cars I like, are all pre 1996 computer crap...and even earlier without fuel injection, should be less expensive too right?....I like semi EMP proof vehicles.

1.21 jigawatts's picture

I wrap the flux capacitor in tinfoil for EMPs.

canisdirus's picture

I don't worry that much about EMPs. Cars are already faraday cages, most would survive with no problem even with modern computers (that are housed in super sturdy metal boxes). The shit that's at risk is all your computers (network cables, wifi antennas), personal wireless electronics like cell phones (antennas), and anything attached to the wiring in your house.

directaction's picture

Who would be stupid enough to buy a new POS American car? 
Oh. Nevermind. Some Americans would be that stupid.  

SilverRoofer's picture

I love my

1970 Dodge Challenger  convertible have owned it since 1982

Have no plans to get rid of it and it's great Prius Repellent

hairball48's picture

You don't need to read all these charts and graphs to understand why prices are  declining for cars, or anything else for that matter.

The bottom 50% of America is fuckin' BROKE, credit cards maxed, student debt, good jobs replaced by lower paying jobs.

The "consumer", especially consumers in the bottom 50% of earners, is fuckin' broke.

 

OCnStiggs's picture

hairball is correct.

In a recent survey, 70% of those surveyed said it would be difficult, if not impossible to come up with an extra $500 for an unanticipated expenditure.

If five Benjamins are out of reach, pretty much anything else is. No wonder sub prime loans are going south.

Just sayin'

Sledge-hammer's picture
Sledge-hammer (not verified) Mar 23, 2017 7:46 PM

Why the f*ck is Ford "warning" us that used car prices will drop?  Why does that require a warning?  What is wrong with consumer product prices dropping?  Christ, the Jew Matrix in which we live is so twisted and deceitful, that people still trapped in the Jew Matrix seem to think that lower prices for chewing gum to cars is a bad thing.  F*cking kikes.