Is Ford’s Lack of Fusion Supply a Concern?
The 2013 Ford (NYSE:F) Fusion is up 22 percent compared to last year as the popular midsize sedan continues to be a hit with consumers. Unfortunately for Ford, low inventory levels may put a stop to that momentum after the Fusion had its best ever May.
The Detroit News reports that Ford currently has a 39 day supply of Fusions — a healthy supply of Fusions would call for 60 days. If Ford were to put a hold on production, the supply would be sufficient for only five weeks of sale given its demand. “Inventory is going to be real tight during the summer months,” Erich Merkle, Ford’s U.S. sales analyst, explained.
If Ford is unable to meet demands for their midsize sedan, it could open the opportunity for Toyota (NYSE:TM) and Honda (NYSE:HMC) to pull further ahead in the midsize category. It could also allow Nissan to catch up to Ford with its rapidly gaining Altima.
Ford’s recent success has resulted in a tightrope act between supply and demand. If supply is low, sales can be lost because dealers don’t have vehicles to sell. If supply is too high, Ford loses money due to costs of maintaining unsold inventory and new incentives aimed at selling cars to consumers. Due to the demand for the Fusion, production will have to be kept high as Ford is having trouble bringing up its inventory.
Despite the problems with their supply of Fusions, a high demand for its cars is not the worst problem Ford could have considering their record-setting sales this month. Ford’s recent success also extends beyond its popular Fusion line. Last month, Ford reported that overall sales were up 14 percent, bolstered by the best May sales since 2006.
The Escape had its best month ever, up 26 percent year over year. The F-Series, America’s best-selling pick-up truck for 36 years, posted a 31 percent increase representing its best May sales mark since 2005 and the first time it’s broken the 70,000 mark since March 2007. The Lincoln MKZ, a member of Ford’s luxury brand, also produced its best May sales performance ever.
Overall, third-quarter production is up 10 percent from the same time-period last year resulting in the production of 740,000 vehicles. Now Ford just needs to find a way to meet the demands of consumers.