Cars Anyone?

Ford must be wondering: What did we do wrong? Personally, as you’ll read below, I’m not sure if Ford really did anything wrong.

Ford reported a 7% decline in September 2004 vehicle sales, compared to September 2003. After adjusting for an extra selling day in September, Ford actually sold 22% fewer cars in September than it did a year ago.

The company is trying hard. It’s been offering about $4,000 a car in cost incentives for the majority of the year. This September, like GM, Ford was offering zero percent interest on 72-month financing agreements for most leftover 2004 models. and if you’ve seen any of the new Ford models, you may agree that it is presenting some very exciting new products.

But the real problem, I believe, is not Ford, but weak consumer demand.

September was the seventh time this year that Ford reported its monthly sales were below year-ago sales. And the sales decline was not restricted to the U.S. In Canada, Ford’s September total sales fell 17%.

An auto analyst at Burnham Securities said it best, “Consumers are stretched because they have debt-levels that are too high now.” In other words, the party is over.

While I’m a strong believer in the stock market being the best indicator of things to come, many analysts were dumbfounded in June 2001 when Ford’s stock started its quick decline from $30 a share (it’s $14 today). But we now know what the market was telling us: Consumer demand for autos would decline.

The bottom line is, consumers are tapped out… they have no money left and no more room left on their credit report for additional borrowing. Today, consumers don’t want cars anymore. Who knows, maybe tomorrow they won’t want houses either.