UPDATED (see bottom): On Tuesday, Ford released Q1 results. Here is the New York Times’ take, emphasis mine:
Ford earned $2.55 billion in the quarter, a 22 percent increase from the period a year ago and the strongest evidence yet of its transformation from a company dependent on big trucks into one that can generate significant profit selling cars of all sizes.
The old Ford lost money on many of its cars, counting on sales of more expensive trucks to stay in the black. Today’s Ford, however, is able to persuade many of the drivers who buy its subcompact, the Fiesta, to save on gasoline to also spend thousands of dollars on amenities like heated leather seats.
I pulled up Ford’s 8-k that corresponds with this earnings release. The word “small” is mentioned exactly once, in the “first quarter highlights,” in the bullet point “Unveiled Ford B-MAX small car and Ranger Wildtrak pickup at the 2011 Geneva Motor Show.” Neither amenities nor heated leather seats are mentioned at all. “Fiesta” is mentioned only thrice (and only in that same section):
- Posted 16% increase in U.S. sales due to strong demand for fuel-efficient products such as Fiesta, Fusion, Edge, Escape, Explorer and F-Series.
- Increased Asia Pacific Africa share to 2.4%, fueled by Fiesta, Focus, Figo and Ranger; China sales increased 18%, India up 115%
- Fiesta became the first in its segment to earn top safety ratings in the world’s largest markets — the U.S., Europe, and China
Do you see how the Times’ story perverts the information in Ford’s release? There was not (necessarily) a shift to selling smaller, fuel-efficient cars. Neither the Explorer nor F-Series pickup trucks are small, not by any stretch of the imagination (nor would I consider them particularly fuel-efficient, but that’s Ford’s words, not the Times’). Why the Times’ focused on the Fiesta when its only one of many cars mentioned is beyond me. I’m also not sure from where the Times’ writer put that last highlighted sentence together. The only place the company mentions anything close is when describing operating costs, i.e. things that detract from profits, not add to them:
“The higher contribution costs were driven by higher commodity costs and material excluding commodities — primarily added content, technology and features for Ford’s new products.”
The slides that accompanied the earnings release contained a mention to small cars in relation to the business environment, “Higher fuel prices causing a shift in U.S. segmentation toward small cars.” This observation would be all well and good if my own research/analysis didn’t disprove it. Small car sales have a relatively strong negative correlation with gas prices (-0.79 from 1990-2009), i.e. sales of small cars have decreased even when gas prices rise, even when they spike, as they did in the summer of 2008. Additionally, across cars sold by all manufacturers in the U.S., fuel efficiency of medium-sized cars lags small cars by only 2.8% as of 2009, calling both the company and the Times’ assertions into serious question.
If you’re a journalist, even if the very words you typed were spoken verbatim by company executives on a call (conference or otherwise), it would behoove you to check your facts. If you’re an investor, let this be one of countless lessons to do your own research, and to check (as) primary (as possible) sources.
UPDATE: I just had a chance to review the transcript of the conference call, and while Ford execs did say/allude to some of the things mentioned by the NYT, the Times article is still reaching, severely, in its claims. The conclusions and “facts” I highlighted above are, as I suspected and my initial read confirmed, put together out-of-context. Ford execs, for their part, didn’t really say anything about anything in the Q&A session that came after the earnings release, in fact, all they really did was avoid providing any useful information.
Sadly, this is what I’ve come to expect from the New York Times business section. With the exception of maybe two or three people there, for whatever reason the average product they produce is just utter garbage.