General Motors Company (GM), And Ford Motor Company (F)’s Debt Problem

Fleet sales
When most investors discuss Ford’s fleet sales, it’s treated like an infectious unprofitable disease that accounts for 30% of sales — and again, that’s far from the truth. Sure, there was truth to it a decade ago, when Ford had to produce a ton of extra vehicles to keep its plants at a high enough capacity to break even and was forced to sell these vehicles in masses to fleet customers. That isn’t the case today, because of one big reason: People actually want to buy Ford vehicles!

What you don’t want to see in fleet sales is a big increase in rental sales — which are generally less profitable and can reduce residual value on the vehicles — and Ford Motor Company (NYSE:F) has avoided that problem. When you break the fleet sales into categories through August, only 12% were from rental sales in the U.S. market. The good news continues, as the trend is similar in Europe. Ford has reduced its rental sales by 10 percentage points while improving its retail sales.

Bottom line
Ford is no longer the Detroit automaker that’s churning out thousands of vehicles no one wants to buy. It’s also no longer a company saddled with excess debt, even though some analysts don’t realize it. Ford is in better financial shape than it has been in roughly a decade and is on the road to a brighter and more profitable future.

The article Debunking Ford’s 2 Biggest Misconceptions originally appeared on Fool.com and is written by Daniel Miller.

Fool contributor Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors and owns shares of Ford.

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