This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Ford CFO: Better Cars Don't Come Free

DETROIT (TheStreet) -- Ford (F) continues to forecast a strong increase in U.S. auto sales in the second half of the year, but higher costs, largely related to its effort to make better cars, could diminish the benefit to the automaker.

On Tuesday, Ford reiterated its view that 2011 U.S. light vehicle sales will come in between 13 million and 13.5 million, well ahead of the July sales pace, estimated by J.D. Power to be around 11.5 million. In 2010, light vehicle sales totaled 11.6 million.

For the second half, "demand is there and as supply becomes available, following [recovery] from the Japan disaster, we expected to see [gains] in the third and fourth quarters," said CFO Lewis Booth, on Ford's earnings conference call.

Lewis-Booth
Ford CFO Lewis Booth

Moderating fuel prices are also a positive, Booth said. But he noted that recent economic weakness leads him to believe "the bottom end of the range [is] more likely now -- we were thinking the top end was more likely." That puts Booth closer to 13.1 million than to 13.5 million.

How much Ford shares can capitalize on the increased industry sales remains an open question, largely because Ford's costs are increasing. Cost increases were a big factor in second-quarter results, a strong quarter where sales increased, market share grew and Ford narrowly beat estimates, yet cost increases meant the company failed to surpass year-ago earnings.

The increases reflect, in part, higher commodity prices, but also Ford is spending more to enhance its vehicles. "The underlying thesis of the recovery at Ford is to have great products in all segments," Booth said. "As I've said all along, this stuff doesn't come for free. The only way to have great products is to have some additional costs." An example, Booth said, is the improved new Focus, built on a global platform. "You will not see us back away from world class products," he said.

Added CEO Alan Mulally, "We see generally an appreciation by the consumers of the content, no matter what the size of the vehicle is, whether F-150 or Fiesta or Focus."

In phrasing a question, Goldman Sachs analyst Patrick Archambault told Booth that while "for the last couple of quarters, you have offset costs with pricing, this quarter it does look like the leverage you would have gotten from the volume piece was offset by increases in fixed costs. What's going to allow you to outgrow fixed costs in subsequent periods?"

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,113.54 +61.81 0.36%
S&P 500 1,983.53 +9.90 0.50%
NASDAQ 4,456.0160 +31.3120 0.71%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs