Ford Motor Company (F): Doing It Right the First Time

Page 1 of 2

Often times the best way to do something is to do it right the first time. That statement holds especially true for Ford Motor Company (NYSE:F) and its relaunch of its luxury Lincoln brand. As Ford hoped, the MKZ sedan has been the most highly anticipated model from Lincoln since the Navigator in the ’90s. It was expected to hit dealerships in December and now, nearly three months later, is only beginning to roll into dealerships. That has forced management to offer multiple cash incentives on other Lincoln models, as well as lump sums, to aid dealerships that are financially hurting from the sedan’s delay. Let’s take a look at how large the incentives are and how it will affect Ford Motor Company (NYSE:F) and its investors.

Ford Motor Company (NYSE:F)Cause for delay
The MKZ delay began at the quality-inspection plant in Hermosillo, Mexico, where they implemented a new inspection process. Simply put, the plant couldn’t keep up with the cars coming off the line and forced management to ship about five weeks of production to a Michigan plant to help reduce the sedan’s delay. With the Lincoln relaunch gaining momentum from marketing campaigns, including a Super Bowl commercial, it was obvious the three-month delay would hurt dealerships with pre-orders. This put Ford between a rock and a hard place.

On one hand, a hiccup like this could hinder what pre-order momentum the MKZ had going early in its launch. On the other hand, if Ford Motor Company (NYSE:F) pushed the sedan out too fast it would risk following the Fusion and Escape, which combined for six recalls. It’s important that Lincoln’s vehicle launches have no recalls, even if it pushes back the release dates. To try and make the situation right, Ford/Lincoln has announced cash incentives to help dealerships during the delay.

Cash incentives
As an investor in Ford and General Motors Company (NYSE:GM) my heart skips a beat when I hear the term “cash incentives.” I automatically think back to the recession when automakers dished out insane incentives to compete for what little demand was available. Those huge incentives, in combination with terrible operation efficiency, made the automakers incredibly unprofitable. Eventually leading to the government bailout of GM and Chrysler, and causing Ford Motor Company (NYSE:F) to take a substantial loan on its own to stay afloat. When I heard that Ford would be forced to give cash incentives for the Lincoln delay, I was nervous. Let’s take a look at the details, and explain why investors can breathe a sigh of relief.

Ford/Lincoln dealerships will get $500 for the first MKT or MKS sold in February and March. If an additional model is sold the number increases to $750. For any model after that they’ll receive $1,000 in cash. These incentives don’t worry me in the slightest. The volume of Lincoln sales won’t allow these cash incentives to make a noticeable impact on Ford’s bottom line.

The next round of incentives could cost the company a little more. It will hand out a one-time cash lump sum to dealerships based on a formula that considers average monthly MKZ sales, and the percentage that represents in total sales. “For example, a dealer who averaged 10 MKZs a month last year and for whom the MKZ counted as 27 percent of sales would get a lump sum of $40,000,” according to Matt VanDyke, global director of Lincoln.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!