Two Analysts Question Boost From Ford's F-150 Redesign

CHICAGO July 11, 2003; Michael McHugh writing for Dow Jones reported that two analysts questioned Friday whether the redesign of Ford Motor Company's popular F-150 Series of pickup trucks will be the boon to the company's bottom line.

Both Gary Lapidus from Goldman Sachs and Rod Lache from Deutsche Bank Securities Inc. wrote in separate reports that the average consumer will to pay an $1,800 per vehicle more than the old, or heritage, version of the truck to counter the expected extra production costs associated with the new vehicles. It's generally agreed that the F-150 pickups are among Ford's most important products and key to its turnaround plans.

"Ford's expectation that the new F-150 will have a higher contribution than the one it replaces is plausible, but in our opinion, perhaps reflects a bit of 'sales and marketing optimism,'" Lapidus wrote.

The No. 2 auto maker said it hopes the higher sticker prices, combined with lower incentives and a better product mix, will enable the new line to produce higher profits than the one it replaces.

"If either of these don't happen, profitability on the new truck will deteriorate versus the old one," wrote Lache. "We are concerned about whether this plan will work."

The redesign is expected to cost Ford upwards of $1,300 more per vehicle to produce than the current models.

Lache said he is concerned about Ford's ability to get the higher selling price. While that may happen in the first couple months after launch, when inventories of the new model are low, "we suspect that competitive price actions from competitors will ultimately drive Ford's pricing down."

Ford shares are up 17 cents, or 1.5%, to $11.30 on volume of 2 million shares.

Goldman said in disclosures at the end of its report that it has received investment-banking compensation from Ford in the past 12 months, and expects to receive or intends to seek compensation in the next three months. Also, a director or employee of Goldman is a director of Ford. Goldman also makes a market in Ford securities.

Deutsche Bank disclosures said it owns 1% or more of Ford, has managed or co- managed a public offering within the past year and intends to seek additional compensation for investment banking services in the next three months.