Analysts advise incentives as automaker loses market share for eighth year in a row
By Eric Mayne / The Detroit News
DEARBORN — Ford, the best-selling automotive brand, will lose U.S. market share for the eighth consecutive year in 2003 despite strong sales of its redesigned F-150 pickup.
Ford Motor Co.’s leading brand will capture about 17.2 percent of the U.S. car and truck market this year, short of the automaker’s projected share of 17.6 percent, said Ford Division President Steve Lyons.
The Blue Oval brand has lost market share steadily since 1995, when it controlled 21.8 percent of the U.S. market. The decline comes as today’s increasingly competitive, incentive-rich market presents a huge challenge for Ford Motor as the automaker struggles to meet a target of $7 billion in annual pretax profit by mid-decade.
The Ford brand has captured 17.4 percent of the U.S. market this year through November, down from 17.8 percent in 2002, according to statistics compiled by Autodata Corp. General Motors Corp.’s Chevrolet brand is second with 15.7 percent of the market, followed by Toyota with 9.7 percent, Dodge with 7.4 percent and Honda with 7.2 percent.
Lyons blames Ford’s market share decrease on a decision to offer less generous rebates and a decline in sales to fleet and rental customers. In 2004, Ford says the division’s market share should stabilize at 17.2 percent, helped by new sedans and the all-new Mustang coupe.
"Everybody thinks, well, retail-wise, we’re not in the ballgame," Lyons said. "But that’s not the case. We’ve decided to pass on some rental car business because the incentives there have gotten to the point where it’s just marginally profitable, if profitable at all."
Ford is not alone. Chevrolet and Dodge also have lost share in recent years, though both have seen increases in the last 12 months.
For Ford to increase market share it will have to pour on the incentives, analysts said.
"They can certainly increase market share if they want to buy it," said Burnham Securities analyst David Healy.
On average, Ford Motor Co. spends $3,056 per unit on incentives for its Ford, Lincoln and Mercury brands. General Motors Corp. and DaimlerChrysler AG’s Chrysler Group, according to Autodata, spend $4,036 and $3,731, respectively.
"Ford will close up the gap some," Healy said of incentive spending.
Don’t bet on it, Lyons said.
"We do a lot of revenue management here and what we look at is what our product is and what the demand for it is," Lyons said.
Consider the flagship F-150 pickup. Ford has recorded double-digit sales hikes every month since the redesigned truck was launched in September. And the average incentive — $2,045 — is well below those paid out on competitive Chevrolet and Dodge products: $3,340 and $3,366.
Lyons said the new products planned for 2004 could allow greater profitability without share growth.
"What we’re going to do is improve the quality of share," he said, outlining a strategy that will see Ford surrender a significant slice of its rental car and other fleet business next year in favor of a bid to bolster more lucrative retail sales.
Nearly 60 percent of Ford Taurus sales are discounted for fleet customers.
"What we’re doing is trading Taurus fleet sales for Five Hundred retail sales," Lyons said, referring to the new, larger sedan Ford will introduce next year as an ’05 model.
The Taurus is currently built in Chicago and Atlanta. But production volume will be reduced by half in April when Ford’s Chicago assembly plant begins building the Five Hundred and its mechanical cousins: the Mercury Montego sedan and Ford Freestyle, a minivan-sport utility vehicle hybrid that will compete with the Chrysler Pacifica.
Product introductions are another linchpin of Ford’s revitalization plan, but they also will disrupt production next year. While Taurus production in Chicago is scheduled to end in April, the Five Hundred won’t debut until the third quarter.
The redesigned Ford Mustang will bow about the same time at AutoAlliance International Inc. in Flat Rock — several weeks after the nameplate’s ‘04 model goes out of production at a Dearborn plant.
Similar disruptions could occur in midsummer when the automaker’s St. Louis factory, one of two Ford Explorer production sites, goes from two shifts to one. Meanwhile, Ford Ranger output is scheduled to be consolidated in St. Paul-Minneapolis when a New Jersey plant is permanently closed.
The reduction in capacity is part of Ford’s revitalization plan, which calls for eliminating 1 million units of output by middecade.
Dealers are wary.
"The product is in the pipeline, but it’s not at the dealerships," said John Daoud, president and CEO of Al Long Ford in Warren.
"Ford has weathered a lot of storms, but they’ve got a grip on most of them now. The (Firestone) situation is past. They’re not buying other automotive companies anymore. They’re sticking with their truck line, but they’ve stopped abandoning the car side. We’re just waiting on the product."
Lyons said Ford is still on track to sell 1 million pickups in 2004 — F-Series and Rangers combined. Sales of F-Series pickups alone, he projects, will exceed the high-water mark they reached in 2001 when there were 911,597 units sold.
"You can write that down," he said.
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