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Incentive costs will top price increases, Ford says

Tuesday, May 20, 2003
By Bill Koenig / Bloomberg News

DEARBORN -- Ford Motor Co., the world's second-biggest automaker, won't be able to raise prices enough this year on Ford, Lincoln and Mercury vehicles sold in the U.S. to make up for the amount it spends on incentives.

Sales will fall short of "0% net pricing," Ford said in a slide available the company Web site. In January, Ford said it was planning for break-even net pricing, defined as prices after the amount that it spends on rebates and low-interest loans.

Competition on incentives "is even more intense" than executives expected, Chief Operating Officer Nick Scheele said at the start of an analyst meeting. Increased cost-cutting "will make up for" the increased incentive costs, he said. "It's an adjustment, not a detour."

The automaker also said an "escalation of competitive marketing incentives will lead to net pricing below" 1 percent for Ford-brand cars and trucks sold in Europe this year, according to the slide. In January, Ford said net prices in Europe would rise 1 percent.

General Motors Corp., the world's largest automaker, has been extending incentives to revive U.S. sales. Ford's bigger rival is waiving remaining lease payments for customers who buy another of its new models.

GM so far this month has given more than 300,000 discount coupons to employees and is offering six-year vehicle loans at 1.9 percent. It had an 8.6 percent drop in sales in the first months of 2003.

Ford reiterated its forecast for full-year earnings of 70 cents a share. The company had first- quarter net income of $896 million, or 45 cents a share. It had a net loss of 54 cents in 2002.

Ford spokeswoman Jennifer Flake confirmed the authenticity of the slide.

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.....
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