Stacy94PGT

The Financial Times
By James Mackintosh, Motor Industry Editor
Published: May 20 2003

Ford said on Tuesday that fierce price wars in the US and Europe meant vehicle prices would fall further this year than it had planned.


However, the world's second-largest carmaker said additional cost cuts beyond its planned $500m would offset falling prices and allow it to reach its 70 cents a share full-year earni ngs target.

The warning came as US automotive industry executives grow increasingly concerned about the effect that generous special offers are having on profits - while their effectiveness at pu lling in customers drops.

In a presentation to investors, Ford said its net pricing - list price minus discounts - would fall in the US for the full year. It had hoped to keep US prices flat after a small rise helped it to a surprise $896m net income, or 45 cents per share, in the first quarter.

Ford expects European prices to fall more than 1 per cent in 2003, against a planned 1 per cent rise, as car sales drop and the battle for consumers intensifies.

In the first three months of the year, Ford's European net price fell 1.4 per cent.

Sir Nick Scheele, chief operating officer, said: "Competitive and economic conditions may put our pricing assumptions at risk in both Europe and the US but these would be adjustments not major detours."

He also echoed warnings from Rick Wagoner, chairman and chief executive of arch-rival General Motors, that discounts were having less effect, with overall sales falling.

"The return from these inflated incentives may be diminishing somewhat but we believe we are better positioned to take advantage of it," Sir Nick said.

GM started the price war after the September 11 2001 terrorist attacks in a successful attempt to bolster the market and gain share.

As a result, both Ford and Chrysler, the US arm of DaimlerChrysler, have been forced to follow suit, with the Detroit average cut reaching a record $3,310 per vehicle in April, accordi ng to research company Autodata.

Ford remains slightly lower than the rest of the "big three", but still gave customers an average incentive of $3,198 in April, up 45 per cent in 12 months.

Ford gave no indication of how large its additional cost-cuts would be. Allan Gilmour, chief financial officer, declined to elaborate on his previous guidance that the company would easily meet the $500m savings goal.

In the first quarter, Ford saved $638m but Mr Gilmour said extra costs later in the year meant this would not be multiplied by four.

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Stacy94PGT
My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.

My next Ford.....