Tuesday, October 25, 2011

Auto industry observations from the inside out

I spent last weekend car shopping and eventually wound up with a good deal on a nice little Mazda 3.  I noticed a few things that I thought I would relate.
  • Dealerships were busy, especially the Toyota dealer.
  • Inventories are fairly decent.  Maybe not as much selection as in years past, but definitely not to the point where you'd feel the need to wait a few months for the dealer to get the car you wanted.  The Honda dealership across the road from the Mazda dealer where I bought my car looked a little lean.  But while we finished up our paperwork, I noticed a United Road Services truck unloading some vehicles at the Honda shop, so I'm sure the dealers are doing what they can to have inventory to sell.
  • Prices are higher... in some cases waaaay higher than they were back in 2008.
Case in point, the Ford Focus I bought in 2008.  I bought a base model with manual transmission, no power windows, no power locks.  (But still with AC and a great stereo!)  I paid the dealer $10,566 for a brand new car back in December of 2008.  I wanted to look at the new Ford Fiesta, but couldn't find much under $15,000.  And this is the car that usually sells for $1,000 less than the Ford Focus!

Now, as the son of a Ford guy, I do have a warm spot in my heart for the Fords. Own some of their stock in fact!  But when my wife couldn't find me a deal online or in the paper... or anything remotely resembling a deal on the Ford Fiesta... I just said, "Bag it!"  The closest Ford dealer is now two towns away and not open on Sundays.  I'm glad my Ford stock is up, but I'm not sure how sustainable that will be... because either Ford or the dealers are asking more for their stuff than the competition.  For the same money, Mazda had a car that had more power and more options.   Ford makes pretty good cars now, but they're not so good I'm going to pay thousands of dollars more than I would for the Mazda.

Somehow Mazda is able to make a car in Japan, ship it here, and sell it at a price that is more than competitive with an American automaker... all of this while the Yen is worth more than it has ever been worth relative to the US Dollar.   I don't really understand that.  Can anybody explain how Ford can raise prices 50% in three years?  I'd say things must be improving out there, even if the west coast car haulers are still slow.

10/26/11 Addendum:
Ford stock fails to participate in recent rally after report of lower profits due to sales coming in at the low end of their projections.  Read article. 

10/27/11 Addendum:
According to a report by Automotive News, troubles with the MyFord Touch are among the primary reasons why Ford sank from 10th to 20th out of 28 according to Consumer Reports.  J.D. Power's "Initial Quality" survey also cited problems with this technology having a negative effect on Ford's ranking.

As a customer, I would have to say that by loading its vehicles up with unproven technology... or at least technology unproven to work in the hands of the intended customers... Ford blundered strategically.  They are trying to command higher prices for a product that has been compromised by the very technology that requires more money.  In my opinion, it seems that Ford loaded these up with technological innovation to appeal to the next generation of buyers, who perhaps are not quite ready to shell out so much dough for technology that is not quite ready for prime time.  Give them an "A" for effort, and a "C-" for execution.  Hopefully, Mr. Mulally will help them get it right by 2013.