Ford to Incentivize New Mustangs- German Car Makers Increase Sweeteners

Dearborn April 18, 2004; Jeremy Grant writing for FT.com reported that Ford Motor Company plans to offer low-interest loans to encourage sales of the new version of its iconic Mustang sports car when the vehicle goes on sale this autumn.

Steve Lyons, president of Ford's "blue oval" division, told the Financial Times that such schemes could last from six to 12 months.

"We will probably launch with modest incentives but they'll probably be interest rate programmes," he said.

The disclosure is a further sign that Detroit's executives accept they are unlikely to sell a planned wave of new products in the US this year without resorting to some level of consumer financing incentives.

It is also another indication that, while incentive levels have moderated in recent months, US consumers still expect deals from carmakers.

Edmunds.com, a California-based automotive consultancy, is on Monday expected to release a report on incentives showing that Volkswagen and BMW, the German carmakers, increased such offers substantially in the first three months of this year after sluggish sales.

Jesse Toprak, director of the consultancy's pricing and market analysis, said Ford needed to offer some incentives on the new Mustang because the US sports car market was becoming more competitive.

Nissan, the Japanese carmaker controlled by France's Renault, and Hyundai of South Korea have launched new products.

He said: "There will be many loyal purchasers of the Mustang who'll buy without any incentives but the goal is to keep market share in the sports car segment so in order to stay competitive you have to lure buyers from your competitors."

Ford's new Mustang, the first new version of the car in a decade, accounts for less than 5 per cent of Ford's total US sales.

But the carmaker considers the vehicle vital to its efforts to attract customers to its full range because of the Mustang's resonance in US motoring culture.

Art Spinella, president of Oregon-based automotive forecaster CNW Marketing, said: "I think the Mustang will do very well so I'm a little surprised they'd be putting incentives on so quickly. But they obviously want a very strong start to the vehicle."

Ford is in the third year of a multi-billion dollar programme of cost-cuts and product launches it has said should deliver $1.5bn-$1.7bn in automotive earnings in North America this year.

The company has sold more than 8m Mustangs since the model was launched 40 years ago this week. According to Edmunds.com, the current model accounts for 27 per cent of the US market for two-door sports cars priced less than $35,000.

Ford has pledged to sell the basic Mustang, equipped with a V6 engine, for less than $20,000, making it one of the most affordable sports cars in the US.