Ford Motor Co. (F) has stated that it foresees a strong rebound in industry sales for August. The company has attributed the possible surge in sales to the much-talked-about “Cash for Clunkers” program. The program, launched by the U.S. Government late July, allowed consumers to trade in their old gas-guzzling cars and trucks with a mileage of 18 miles per gallon (mpg) or less for a value of up to $3,500-$4,500.

According to Mark Fields, Ford’s president in the U.S., sales may rise to 13 million units on an annualized basis during August. The company itself has surpassed last year’s sales in August.

For July, Ford witnessed a 2% year-over-year sales gain — the first gain since November 2007.

The U.S. Department of Transportation reported that as many as 690,114 new cars were sold under Cash for Clunkers, reflecting a $2.88 billion in rebate applications, which is close to the program allocation. The average fuel-economy of the vehicle purchased was 24.9 mpg in combined city and highway driving compared to 15.8 mpg for vehicles being traded in. This reflects an average fuel-economy improvement of 58%.

Two of the Ford’s models were among the top-10 buy list under the program. They are Ford Focus (ranked fourth; 30 mpg) and Ford Escape SUV (ranked tenth, 24 mpg). Ford also expects its mid-size 2010 Fusion sedan (although not in the top-10) to set a monthly sales record in August for the fifth consecutive month. Fusion delivers 24 mpg.

We continue to recommend the shares of Ford as Neutral with a target price of $8.
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