In amongst the tedious facts and figures of the Ford analysts’ conference yesterday was a good question, writes Rob Golding. The man from Merrill Lynch asked: “What is the point of owning Hertz?”
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The top men on the panel were Bill Ford himself, Jim Padilla who runs automotive and Don Leclair the CFO. It felt as if they might have prepped the answer to that question.
It made sense that they should have done so. For many minutes previously they had been banging on about the task of getting more cash per unit and withdrawing from the crazy deals offered by the daily rental fleets. That meant starving their own subsidiary of cheap product
Hertz is the best in its field, they said. It was “very trusted” and had a “great bottom line.”
But they had plans to make it an “even better company” and were very pleased to have it in the group. It was not so many years ago that Ford was hawking the company round as a stock market flotation prospect. One wonders if that might come again.
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By GlobalDataThe point of the Ford policy of getting out of daily rental business was that they have a strong belief in the new products that are coming out, and pure volume was not the answer to making the most money. Fewer cars at higher prices is the plan, and it’s already working apparently. They disclosed an interesting statistic on one of the fact-packed slides: the revenue per unit sold improved by $745 (to $22,475). That’s the best uplift in five years. The residual values are also better. A one year-old Focus is selling $1,045 better than in the previous year. The cost: a 1.2% dip in market share in North America and that was “almost all poor quality rental business.”
The drive for better price has been underpinned by reducing stock (there was a substantial purge on Jaguar stock worldwide in the last quarter of last year) and cutting capacity. There is not a lot of point in planning to sell fewer cars if the factory is still cranking them out. More than 900,000 units of capacity is coming out of North America alone. Extraordinary; and long overdue.
Jim Padilla became almost fevered with excitement during his own presentation. At one point he reported that at the launch of the new Lincoln recently, dealers were rushing on to the stage to “kiss the hood” of the new car. And while dealing with the capacity cuts he felt it right to make an enthusiastic return to the battle of Dagenham: “Dagenham does not make cars any more gang; first time in 60 or 70 years.”
Is there no respect for history in this breathless drive for profit?
Rob Golding
