Ford Motor's Management Presents at June 2013 U.S. Sales Conference (Transcript)

Seeking Alpha

Ford Motor Company (F)

June 2013 U.S. Sales Conference Call

July 2, 2013, 10:00 am ET

Executives

Erich Merkle - U.S. Sales Analyst

Ken Czubay - Vice President, U.S. Marketing, Sales & Service

Jenny Lin, Senior U.S. Economist

Analysts

John Murphy - Bank of America Merrill Lynch

Suresh Patel - Credit Suisse

Brian Johnson - Barclays Capital

Joe Spak - RBC Capital Markets

Rod Lache - Deutsche Bank

Alisa Priddle - Detroit Free Press

Brent Snavely - Detroit Free Press

Dee-Ann Durbin - The Associated Press

Jaclyn Trop - New York Times

Mike Ramsey - The Wall Street Journal

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Ford monthly sales conference call. My name is Kim and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions).

I would now like to turn the conference over to your host for today, Mr. Erich Merkle, U.S. Sales Analyst. Please proceed.

Erich Merkle

Thank you, Kim, and good morning and welcome to Ford’s June 2013 sales call. June was a strong month for the U.S. industry and for Ford. With the review of preliminary sales data this morning, we estimate that total vehicle sales including medium and heavy trucks came in at approximately 1.43 million in June. This would provide us with a total SAR in the low 16 million vehicle range for the month, representing an approximate 8% to 9% raise compared to June of last year.

This would be the first time that the industry has registered a 16 million vehicle SAR since December 2007. We estimate the retail SAR to be around 13 million to low 13 million vehicle range, again a very strong month.

Taking a look at some of the segment details, last month we talked about two very different vehicle segments that are growing, small vehicles and full-size pickups. We believe this dynamic is likely to be in place for an extended period of time as retail consumers continue to move toward downsizing their vehicle choices and strong pent-up demand continues in the full-size pickup segment, fueled by a larger cyclical recovery driven by construction. Consumer appetite for small cars and utilities began in 2004 and has expanded as the aging boomer and maturing millennial shop for new vehicle.

Last month, small cars represented more than 22% of the industry, which is very high by historical standards. Small utilities represented almost 15% of the industry in June. At the same time, we continue to see a sizable cyclical rebound in full-size pickups. Full-size pickups represented approximately 12.2% of the industry in June with the segment posting an estimated 24% increase over last year.

Here to provide you with a little more perspective from Ford in the dealership is Ken Czubay. Ken?

Ken Czubay

Thank you, Erich and Happy Fourth of July week everyone. With 235,643 vehicles sold, Ford Motor Company delivered a 13% year-over-year gain, our best June sales performance since 2006. At retail, Ford Motor Company also increased sales by 13% selling 153,536 vehicles for the month.

The strong story for Ford this month is our continued product momentum and share gains particularly on the coast. Based on the latest Polk registration data, Ford brand retail share is up almost a full percentage point on the East and West Coast. Ford coastal share is growing faster than any automotive brand in the U.S. and is being driven by Fusion, Escape and our other small cars.

We are also seeing strong conquest activity by our hybrids. Ford's small cars including Fiesta, Focus, and C-Max Hybrids totaled 35,851 vehicles, representing a 39% gain over last year. This represents our best June small car sales in 13 years. Our largest market for small cars is now the Los Angeles region. For the first six months of this year, our retail sales for small cars are up 39% in the LA region. Our fastest retail growth area for small cars is the San Francisco area which was up 48% in the first half at retail, followed closely by Seattle where retail sales are up 41%.

Fusion had an incredible month with 24,313 vehicles sold. This was only 120 vehicles shy of last year's monthly record. This was accomplished within stock levels, including some regions now under a 30 days supply. As we have said on previous calls, the summer months will be tight for Fusion until production at our second Fusion assembly plant in Flat Rock, Michigan comes online this fall.

As we look at our utility sales for June, Escape had yet another record month reporting its best June sales month ever, with 28,694 vehicles sold. Escape's retail share of the small utility segment on the East and West Coast has increased more than two full percentage points this year. It has helped propel our overall retail utility share on the coast to approximately 14%, in line with Toyota in the coastal regions and just one point away from Honda.

In trucks, we again saw a strong demand for the F-series in June with 68,009 sold, an increase of 24% compared with a year ago. So the last two months, our dealers have delivered just shy of 140,000 F-series, great performance from America's number one selling truck and vehicle. Equally important to note, we have now sold more than 350,000 EcoBoost-equipped F-150s since introducing this fuel saving engine two years ago.

Finally, we had another strong month for the Lincoln MKZ, which posted its best June sales performance ever with 3,180 vehicles sold. We said earlier in the year that the second quarter would be our best proof point for the momentum building around the MKZ and the reinvented Lincoln brand. We are pleased to report that the second quarter marked an all time best ever quarter for the MKZ. It also was the first time the MKZ surpassed 10,000 sales in a single quarter. Of particular note, with very strong demand for the MKZ Hybrid, we ended the month with a 28 days supply on this vehicle.

So that’s a look at Ford Lincoln. Now I would like to turn things over to Jenny for an update the economic front. Jenny?

Jenny Lin

Thank you, Ken. Since our last monthly sales call in early June, economic indicators continue to improve. The manufacturing sector moderation maybe coming to an end. Housing sector recovery looks to continue. Consumer spending growth pace is slowly picking up. On net our outlook for the U.S. economy remains in the same range of 2% to 2.5% this year with growth risk from fiscal drag diminishing.

Here are some of the details. Manufacturing production rose 0.2% in May sequentially. Year-to-date, it was up 2.3% over last year. Yesterday, we saw two commonly followed measures of purchasing managers indices suggested that modest expansion in the manufacturing sector, while market PMI is down slightly 0.4 percentage point from May to 51.9, ISM PMI moved up above 50% to 50.9%. New orders and production sub indices in both PMIs are indicating growth in this sector.

Meanwhile, nondefense, excluding aircraft capital goods orders are experiencing a moderate recovery, rising 3.1% in May. This suggests that the business spending likely will be picking up. Housing related data demonstrates the upturn in housing sector is gaining strength. Home prices represented by the Case-Shiller Home Price Index rose by 12.1% in April as compared to a year ago with all 20 cities covered in the index posted year-on-year increases.

The medium sales price for all existing homes also continues to firm advancing 15.4% in may compared to the prior year. New home sales grew by 29% in May, averaging 29.5% during the first five months of this year. Note that this growth is supply constrained as months supply is now at low 4.1 month, about two months tighter than the historical average of 6.2 months of supply. For existing home sales, May was another good month with sales up 12.9% compared with a year ago. Supply is also tight at 5.2 months. Housing starts and permits are also trending higher with increases of 28.9% for start and 25.1% for permit, again on a year-over-year basis during the first five months.

The final June University of Michigan Consumer Sentiment reading is stable at 84.1, after recent episode of volatility between early and final readings. The recent optimism can be attributed to rising home value and equity wealth as well as improving job market. Most recent four week moving average initial jobless claims are at 346,000 in the week of June 22, indicating the job market is firming. Consumer spending grew at a rate of 1.8% from a year ago in May. Spending on durable goods was up by 8.8%. Low borrowing costs and rising consumer wealth should continue to support spending growth going forward. On net, the U.S. economy is projected to grow between 2% and 2.5% this year.

To recap, as Erich mentioned earlier, June total industry sales were estimated in the 16 million unit range, at seasonally adjusted annual rate, including medium and heavy-duty trucks. Our full-year call for the industry sales remained at 15 million to 16 million unit range.

With that summary, let me turn it back to Erich. Erich?

Erich Merkle

Thank you, Jenny. To go over a few housekeeping items, we will start off here with gross stock inventory. When we take a look at June 2013, we had in gross stock cars at 164,000, trucks at 250,000, utilities at 138,000, providing us with a total of 552,000 representing 59 days supply. This compares to May 2013 when cars were at 163,000, trucks were at 258,000, utilities were at 137,000 providing us with a total for May 2013 at 558,000 vehicles translating into 59 days supply.

When we take a look it compared to year ago June 2012, for cars, we had 144,000 in gross stock, trucks 201,000, utilities 114,000, giving us a total at the time of 459,000 in gross stock. This translated into 57 days supply.

When we take a look at our fleet as a percentage of sales, our total fleet as a percentage of sales in the month of June was 35%. The breakdown on that for commercial was 13% 13%, government was 6%, rental was 16%. If we compare this to June of last year, we are same number at 35%, very consistent year-over-year. Commercial was 13%, government was 7% and rental was 15%.

Taking a look at calendar year-to-date, when we look at our fleet as a percent of total sales, June 2013 year-to-date, it is 32%. The breakdown on that is 13% commercial, government 5%, rental 14%. When we compare this to June 2012 year-to-date the same period a year ago, we were at 33% for the total, in terms of a percent of total sales. The breakdown on the fleet number was commercial, 14%, government 5% and rental 14%. Again very consistent on a year-over-year basis.

So with that out-of-the-way, Kim, we are going to start with the calls from investors first. So if we could take our first investor call please.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of John Murphy, Bank of America Merrill Lynch.

John Murphy - Bank of America Merrill Lynch

All right, first one was Joe Hinrichs had made some comments during, I think the third week of the month, the traffic had slowed. I am just curious what you saw there in general? Was the pickup in sales because of a direct pickup in showroom traffic? Or was there an increase in close rates on financing to prime and subprime consumers?

Ken Czubay

Hi, John. This is Ken. I think what Joe was indicating and it’s a pattern that we often times see, is there is a ramp up to the pace of the month. It did slow a little bit. We have no evidence that it was caused by the Fed comments. I think the Ford and Lincoln buyers aren’t overly influenced by that. There also was a strong close. We had excellent weekend, this weekend and our buy rates, as reported by our terrific partner at Ford Credit, were right on. They did about 50%, a little under 50% of our business for the month and they are a little 50% year-to-date. The conversations by the Fed has had no impact on our market rates. So I don’t think that had any influence on our business. Just the normal monthly pace of business.

John Murphy - Bank of America Merrill Lynch

Just a second question on the F-series. That’s running really hot right now. It looks like, on a run rate basis, you guys might even be north of 800,000 units. Just wondering where you are on capacity on the F-series if we remain in a very hot truck market.

Ken Czubay

We are in good shape on capacity. We have match the demand. We are very pleased, as Jenny reported that the underlying demand continues to be strong and our offerings, America's number one selling vehicle for over three decades. So that’s good. We have got excellent matchup. We announced in May that we were adding capacity and that’s coming online shortly. So we are in good shape.

John Murphy - Bank of America Merrill Lynch

Great. Thank you very much.

Erich Merkle

Thank you, John. Kim, would we take the next caller please?

Operator

Our question comes from the line of Chris Ceraso, Credit Suisse.

Suresh Patel - Credit Suisse

Hi, this is Suresh, on for Chris. I had a question, just first on ATPs and incentives. Could you give us any comments on how that turned it for Ford and the industry in the month?

Erich Merkle

Sure, I could do that, Suresh. If we take a look at the overall incentives, Ford's overall incentive spend in June was competitive. We were up about $100 compared to last year and down almost $100 compared to May. So very consistent. Compared to May, this is roughly in line with the overall industry which was down slightly due to some pullback in incentive spending, particularly in the full-size pickup truck segment. And as it relates to the overall industry, the overall industry is still running. It is down about $100 sequentially and roughly in line maybe down a little bit year-over-year.

Suresh Patel - Credit Suisse

Okay, that’s on incentives?

Erich Merkle

That’s on incentives. Yes.

Suresh Patel - Credit Suisse

Okay, and I guess just one last question. I am just wondering how much of the trend that you are seeing in ATPs, how much of that is being driven by a stronger mix of pickups and how much of it is being driven by just underlying performance on each of the individual vehicles?

Ken Czubay

This is Ken. We are finding, it is clearly the trucks are doing well. We just talked about almost 70,000 in each of the last two months. So that is driving up the ATPs and we have strong performance within the higher series within all of our cars throughout the mix including Fusion, including MKZ. So high demand for technology, high demand for EcoBoost. So I think it’s a little bit reflected by both those elements.

Suresh Patel - Credit Suisse

Okay, thanks.

Erich Merkle

Okay. Thank you, Suresh. Kim, next caller please?

Operator

Our question comes from the line of Brian Johnson from Barclays Capital.

Brian Johnson - Barclays Capital

Good morning. The Focus had a pretty dramatic bump up in sales. The Fiesta, excuse me. A little bit in the Focus as well. A couple things. One, just in terms of housekeeping, what's the fleet retail on the Fiesta this year versus last? Then second, what's driving this kind of increase? Is it people who couldn’t get a Fusion going over to a Focus or Fiesta?

Erich Merkle

Well, certainly when you start taking a look at Fiesta, we are transitioning to the new model right now. So we had about 60% of our sales were the old model and 40% were made up of the new model. You are correct. We are seeing some strong push there. Focus did very well. Also, t in our small car segment, C-Max did very well. So when you start taking a look at, not just the month, Brian, but when we start taking a look at it in terms of year-to-date, these vehicles, our small cars have been performing well, not just for the month of June but for the first half of the year. So our retail sales in many of our region such as Los Angeles was up 39% in the first six months for small cars.

Brian Johnson - Barclays Capital

And in terms of fleet versus retail?

Erich Merkle

We never breakout fleet versus retail on any models.

Ken Czubay

This is Ken. So Brian, I think your observation is right on. We get movement between Fiesta, Focus and Fusion depending on some availability. I mentioned in my comments the Fusion is tight right now, very high demand, very steady production. We eagerly await to Flat Rock coming on in the fall. We get movement between them from month-to-month but I did some quick math and when you add them up, there was about 50,000 of those three vehicles sold last year and about 57,000 to 58,000 this year. So solid improvement across the board. Next month, we may get some other movement.

Brian Johnson - Barclays Capital

And Touch and SYNC, is that driving sales here? Do you have idea?

Ken Czubay

That’s part of the technology. We find that it’s a driver of people are coming back to Ford and people are coming to Ford for the first time in a long time, the advances in technology. So it’s a very strong motivator right after fuel economy on why people choose Ford.

Brian Johnson - Barclays Capital

Okay, thanks.

Ken Czubay

Thank you.

Erich Merkle

Kim, next caller, please.

Operator

All right. Our next question comes from the line of Joe Spak, RBC Capital Markets.

Joe Spak - RBC Capital Markets

Thanks for taking my question. I also wanted to go back to a comment Joe Hinrichs made earlier a couple of weeks ago. He mentioned pickups are on the pace for about 2 million this year which I think peaked at 2.5 million last time around. First, if you could just comment on how sustainably you think we could stay at that level? Then secondly, I just wanted to put that in context of your current view for total U.S. sales because that would sort of imply at least as a percentage of the light vehicle market, it would be in the high 12% to 13% and year-to-date, I think we are running maybe at about 12%. So what's really causing the acceleration in pickup mix in the back half of the year?

Ken Czubay

Well, this is Ken. So let me comment on the first part and then I will let Jenny comment about the industry. First off, the pickup business for Ford has been very strong. We have been a leader in it, like I mentioned, for decades. I think the underlying pinning of that business including the housing is very strong. The other area is the age of the fleet and I had mentioned that in previous comments. There is over 4 million vehicles that are over 12 years old in the truck pickup segment alone and over half of the fleet is over 11 years old. So there is very strong demand from replacements. It is also fueled by low interest rates and that makes them very desirous as well as the high fuel economy that we are getting from the current models led by our EcoBoost technology. So its all of that coming together.

Jenny, do you have anything to add to that?

Jenny Lin

I think you covered it all, Ken, that the age of fleet and the recovery which is underway in the construction and energy sectors and also the improvement in fuel economy all created an upswing in the full-size pickup and also particularly the full-size pickup. So in terms of the industry sales going forward, we see some positive turns here in terms of economic fundamentals. So with the better economic fundamentals and improvement in job markets, we think this is will be supportive of our industry strength going forward.

In terms of our full-year guidance, we will give you an update in our second quarter earnings release which will coming in late July and at that time we will provide an update to this particular guidance which we are currently still at 15 million to 16 million units.

Joe Spak - RBC Capital Markets

Okay, then also, I noticed you made an announcement on the Tremor, the F-150 variant and I assume dealers I have spoken to have lamented loss of the Ranger. Is that a vehicle you think you can slide into to replace some of that demand?

Erich Merkle

I think that its meant for a different consumer. We are very excited about them. Matter of fact, we were a little overwhelmed with all the great coverage that we got but you know it just is another one of our specialty vehicles that appeal to a great segment of our loyal Ford owners. It goes to Raptor to off road and we want to make sure that we accommodate every sector of that truck business.

Joe Spak - RBC Capital Markets

That’s it. Thanks a lot, guys.

Erich Merkle

Kim, we are going to take one more call from the investor community and we are going to turn it over the folks in the media. Okay?

Operator

All right. Our next question is on the line from Rod Lache, Deutsche Bank.

Rod Lache - Deutsche Bank

Good morning, everybody. I have got a couple questions. One is, can you just a little bit talk about how financing rates are trending in the retail market and just some broad thoughts about how you expect the industry to manage the higher benchmarks that we are seeing?

Erich Merkle

Yes, Rod, I mean anecdotally, auto loan rates have generally been holding fairly steady. So even though we have seen some gyrations here in the month around interest rates as it relates to the market, auto loans have been pretty steady.

Rod Lache - Deutsche Bank

Okay. So whatever changes in benchmark rates are just being absorbed at this point at least. In terms of the SAR, these is kind of small numbers obviously could have a meaningful effect on the overall SAR but this is a pretty good uptick from what we saw year-to-date. I was hoping you could just maybe address what you think may have led to that. Do you think that that pace is sustainable through the second half or would higher rates or a little bit lower used vehicle prices create a little bit of a headwind?

Erich Merkle

Well, I think when you look at the consumer sentiment, it has certainly been improving. When you look at, as Jenny mentioned, the property values, I think are very important part of that. So no question, it was a very good month in June and we are going to be watching them closely as we get into the second half of the year and we will have more updates in terms of our guidance when we get to our earnings announcement here at the end of month.

Ken Czubay

And Rod, this is Ken, I would just add to that. I mean there is always a little bit of ins and outs, headwinds and tailwinds, but right now I think the tailwinds continue to be strong and that is a good sign and they are pretty forceful. I mean this replacement demand, historically low interest rates, irrespective of the conversation surrounding the Fed, we are finding at retail and the dealers are telling us that demand is still very, very strong. So I think the tailwinds are going to push this forward. And as Jenny mentioned, we will have guidance a little bit later on that.

Rod Lache - Deutsche Bank

Okay, and you guys pointed to the strength in the pickups. I think you said that the incentives in pickup trucks had moderated sequentially. So that was despite the moderation in incentives. Is that right?

Erich Merkle

Yes, you are exactly right. And the full-size pickup truck segment, it continues to do very well and what's happening, Rod, is you are getting the full-size pickup truck buyer that has been holding off, they are now coming back in the market. So that pent-up demand is now starting to be realized.

Rod Lache - Deutsche Bank

Great. Okay. Thank you.

Erich Merkle

Thanks, Rod. Okay, Kim, we are going to take our first call from the media.

Operator

(Operator Instructions) Our first question comes from Alisa Priddle, Detroit Free Press.

Alisa Priddle - Detroit Free Press

Good morning, gentlemen.

Erich Merkle

Good morning.

Alisa Priddle - Detroit Free Press

Just wanted to make sure you were there.

Erich Merkle

We are here.

Alisa Priddle - Detroit Free Press

That’s good. On the Fiesta, so you are running out the old inventory. How much more do you still have to go? And are you going to have to, are you sort of putting good incentives on that to run that out?

Erich Merkle

There is no question. We have a sell down going on number 13, but we have also got a very strong launch of the 14s that are coming online. As I said earlier, it is about 60/40 split. 60% are in the month of June where the 13 model year Fiestas and 40% were the 14 model year. But keep in mind, though, when we do start taking a look at our small cars overall, we were up 39% for the month. And you know as we mentioned earlier, this really hasn’t been a one-month phenomenon but it has really been something that’s been with us for the for the first half of the year.

Alisa Priddle - Detroit Free Press

How much of an impact is the capacity constraint on Fusion? If you could build more, do you have any sense of how much more you would be able to sell?

Ken Czubay

Well, I can't put a number on it Alisa. This is Ken. The cars are incredibly popular. The dealers are telling us the traffic is very, very strong. So we could have sold more and we eagerly wait for the fall launch of the Flat Rock assembly plant to support those sales.

Erich Merkle

And when you look at some of our days supply, the lowest is really on the coast. So we could certainly use more Fusions on the coast. We are going to be working hard to get them there.

Alisa Priddle - Detroit Free Press

Okay, so low day supply is just on the coast. Do you know what the overall day supply is on Fusion? The total?

Erich Merkle

Its right around under 40 days supply. Okay. All right. Thank you, Alisa. Kim, next caller please.

Operator

Our next question comes from the line of Brent Snavely, Detroit Free Press.

Brent Snavely - Detroit Free Press

Hi, guys. I was looking at year-to-date sales through May because at first we don’t have full results for June. Ford has gained a little bit of market share for the first five months of the year. I was wondering if you think that, given the strong pickup sales and strong car sales in June, will that continue in June and will you continue to gain market share for the year?

Ken Czubay

Hi, Brent, this is Ken. Number one, this is an industry that a 10th of a point is important. We gained one percentage point. So it’s a very strong year of progress for us. We really can’t predict yet because all the numbers aren’t in. As you know, they come in a bit later this morning but we were pleased with our 13% gain and we will have its math and we will have that number. but I would hope we would continue the upward trajectory that we have had so far this year.

Brent Snavely - Detroit Free Press

Thank you.

Erich Merkle

Okay, thank you, Brent. Kim, next caller please.

Operator

Our next question comes from the line of Dee-Ann Durbin, The Associated Press.

Dee-Ann Durbin - The Associated Press

Hi, thanks for taking the call. Erich, you mentioned auto loan rates have been holding pretty steady and I am wondering why, as home mortgage rates are going up. If you can just explain why they are holding steady and if they go up, how do you think that would impact sales? Would there be a rush to buy or would some people be basically kicked out of the market because they can't get that rate anymore?

Erich Merkle

Yes, Dee-Ann, I can't really give that level of granularity as to what would happen if rates were to pick up a little bit but for the most part when you look at financing companies broadly across the market, they have been holding their rates where they are currently at. So that’s what we are seeing right now. And that’s about all I can comment on that.

Ken Czubay

The only thing I would add is, that’s one factor. I mean, by far, these are the lowest rates in recent history. But I want to go back to a replacement demand. I want to go back to advances in fuel economy. I want to go back to advances in technology. So they are all elements in what is driving consumers to the Ford showroom. But, as Erich mentioned, the Ford Credit rates have been very steady so far.

Dee-Ann Durbin - The Associated Press

Okay.

Erich Merkle

Thank you, Dee-Ann. Kim, next caller please.

Operator

Our next question comes from the line of Jaclyn Trop, New York Times.

Jaclyn Trop - New York Times

Good morning. Ken, earlier you mentioned conquest activity for hybrids. What more can you tell us about that?

Ken Czubay

Well, they have been significant. We have been very pleased with our power of choice offerings particularly through C-Max and we are finding that consumers are coming to the Ford showroom who haven’t been there in a long, long time. They have been experiencing hybrids from our competitors, but they want something new in styling. They want a more balanced approach. They want a bigger vehicle, for example, and we are seeing the customers in trade-ins that at some of the highest levels ever. For example, on MKZ, its 50% of our business. Again, we are seeing consumers that we haven’t seen in premium market. So its all good news for Ford and Ford dealers and the consumers.

Erich, did you have anything to add to that?

Erich Merkle

Yes, I did, Ken, and really we are seeing tremendous conquest if you take a look at Fusion and C-Max. Fusion is running the conquest at almost 70%. It is in the high 60s and C-Max is in the mid-60s. So we continue to see great conquest numbers coming out of our hybrids.

Jaclyn Trop - New York Times

Thank you.

Erich Merkle

Okay. Thank you, Jaclyn. Okay, Kim, next caller please.

Operator

Our next question comes from the line of Mike Ramsey, The Wall Street Journal.

Mike Ramsey - The Wall Street Journal

Good morning. I am trouble with the idea that there is capacity constraint at the same time that the company is putting 35% of its sales in the fleet and 16% into rental. Can you help me square how you could be out of cars and selling that many to commercial customers? It doesn’t make sense to me? Can you help me understand that?

Erich Merkle

Sure, well, Mike, commercial is a very strong business for us. So we are filling those orders based on demand. You know, our daily rental business, as a percentage of our fleet is as you just mentioned. It is quite low.

Mike Ramsey - The Wall Street Journal

Well, 16% of your total sales was daily rental. That’s like Toyota does 10% of their entire sales or fleet. It just seems like a really high number if you are running out of vehicles on dealer lots.

Erich Merkle

Right, if you take a look, for instance, and you look at Fusion and you look at our daily rental, it is in line with Camry.

Mike Ramsey - The Wall Street Journal

Okay.

Erich Merkle

So it is consistent.

Mike Ramsey - The Wall Street Journal

Can you give me a sense of what is going into, is it this Fiesta, the sales doubled there? Is that the reason? The lot going nicely?

Erich Merkle

Yes, and the other thing is, when you look at commercial, we have also full size pickups which are a big, big commercial component for us. So keep that in mind. And if you take a look then also, you mentioned Fiesta, no, its really when we look at it, we have great retail sales with Fiesta as well. As we had mentioned, our retail sales being up, in many markets. So our mix with Fiesta is right where we want it to be.

Ken Czubay

So, Mike, let me just closes this subject because we talk about it from time to time. Our commercial business is the long-standing relations. We have a very loyal owner body. It is a very good part of our balance business. We are very pleased happy and proud of those relationships that we have. So there may be some ins and outs in the marketplace but we are very consistent with it. In particular, as Erich pointed out, the commercial business is different than the rental business. And the commercial business is growing because of the basic economic factors that Jenny pointed out. The rental business is a very solid with us and its high demand for our products. So we are very pleased with the balance of our business.

Mike Ramsey - The Wall Street Journal

Okay. All right, thanks.

Erich Merkle

Thank you, Mike. Kim, we are going to take one more caller and we are going to wrap things up.

Operator

Okay, and at this time they are no more questions from the media.

Erich Merkle

Great. Well, thank you, everyone and we appreciate your joining us today for the June sales call. We look forward to talking to you again next month.

Operator

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.

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