Why are Ford's sales slipping?

Ford (F) said on Thursday that its U.S. sales were essentially flat April, down 0.7%.

That was below analyst estimates, which called for a gain of about 3%. And it came as most of Ford's rivals posted modest gains for the month.

Not all of Ford's products had sluggish sales. For Ford at least, trucks sold well in April, up 8% -- but its car sales were down 9%. What's going on?

Why were Ford's car sales down?

On a conference call for analysts and media on Thursday, Ford sales analyst Erich Merkle attributed the decline to a couple of different factors.

First, the whole industry is seeing a consumer shift away from cars and toward crossovers and SUVs, he said. Ford's overall SUV sales were flat in April, but its family friendly Explorer saw a 17% year-over-year sales increase.

This isn't just Ford: A similar trend played out at rival General Motors' (GM) Chevrolet brand, where sales of the Cruze compact and Malibu sedan both fell, but sales of the Traverse crossover and Tahoe SUV were both up.

Second, Ford is deliberately decreasing its sales to rental-car fleets -- they were down 24% in April. Why would it do that?

Why Ford is happy about declining rental-car sales

While Ford considers some fleet business -- sales to commercial and government fleets -- to be good business, rental-car sales are seen as less good.

Rental-car sales aren't entirely bad. They can be good marketing: Someone who hasn't driven a Ford in years, but rents one while traveling, might be impressed enough to stop by a dealer after they get home.

But they're seen as less desirable than other kinds of fleet business for two reasons: First, the deep discounts required when selling cars in bulk to daily rental companies erode Ford's profit margins. Simply put, Ford can make more money selling the same cars to retail customers.

Ford will probably always have some rental-fleet sales. But when its factories are busy, as they have been lately, trying to boost rental-fleet ! sales doesn't make a lot of sense.

Second, rental-cars hit the used-car market after a couple of years, where their sheer numbers erode resale values. Automakers use those resale values to set leasing terms; they can offer you a lower, more competitive lease deal on a new model if they know that its resale value at the end of the lease will be higher.

Ford's increasing reluctance to sell to rental-car fleets were the main driver of its year-over-year declines on some models, Merkle said. For instance, sales of the compact Focus were down 18.6% overall -- but retail sales of the Focus were down just 4%, which he characterized as roughly in line with industry trends.

Of course, there's probably another factor at work when it comes to the Focus: Toyota (TM) has an all-new Corolla, and its sales were up 20% in April. Strong new products generally steal sales from less-new rivals, and the Focus has been essentially unchanged since 2011. Ford will release a refreshed version later this year.

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Meanwhile, steady strength for Ford's high-profit F-Series pickups

Ford's car sales may have been sluggish in April, but its trucks did well. That's good news: Ford's F-Series pickups are its most profitable product line, and strong U.S. pickup sales have been key to Ford's good results in recent quarters. That strength continued in April, with sales up 7%.

It's also encouraging because Ford's mainstay F-150 pickup is set for replacement later this year. As a dated model competing against recently refreshed entries from both GM and Fiat Chrysler (FIATY) , it would seem to be at a disadvantage -- at least on paper.

Some analysts expected that Ford would have to crank up its discounts to keep pace in the current F-150's last year, eroding its strong profit margins. But so far, that hasn't happened: Ford said on Thursday that its incentives on the F-Serie! s pickups! (which includes the F-150 and its Super Duty siblings) were actually down about $210 per truck in April from what Ford spent in March, to around $3,700 -- and down about $380 from a year ago.

Chrysler has been aggressive with incentives on its Ram pickups, and GM has been using carefully targeted incentives to try to keep pace.

But Ford says it didn't feel the need to boost its pickup discounts last month, and that bodes well for profits as the second quarter unfolds.

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