Ford's New Model Sales Slower Than Planned

DETROIT February 11, 2005; Poornima Gupta writing for Reuters reported that Ford Motor Co.'s new vehicles have yet to meet targeted sales volumes, compelling analysts to question the success of models the automaker is banking on to stem its bruising U.S. market-share losses.

The second-largest U.S. automaker hopes to sell more than 200,000 of the new Five Hundred and Montego sedans, and the Freestyle wagon this year. But four months after their launch, the annual selling rate for the three cars built at Ford's Chicago assembly plant is only 167,000.

Rod Lache, an analyst at Deutsche Bank, said a bullish case on Ford -- that new products would drive improvement in market share, vehicle mix and pricing -- is losing steam.

"The trends on mix and share have been running counter to those assumptions, implying downside risk to earnings expectations," Lache said in a recent note to clients.

Ford's new vehicles are central to its strategy for boosting U.S. market share and increasing much-needed automotive profit.

The automaker had dubbed 2004 the "year of the car," but the new cars arrived at dealerships too late in the year to stop Ford's car sales from dropping 14.3 percent in 2004.

Ford ended last year with a U.S. market share of 18.3 percent, the lowest in more than three decades.

To reach the targeted selling rate for the new models, Ford needs to increase sales of Five Hundred, Freestyles and Montegos by 55 percent to at least 17,000 in February from 10,921 last month. U.S. sales of the cars increased 5 percent from December to January.

"Investors remain highly skeptical about the Chicago products," Merrill Lynch analyst John Casesa said in a recent note to clients.

FORD STILL OPTIMISTIC

Ford executives, however, are still optimistic about the vehicles.

"By some time this spring, we might reach our annual (selling) rate of 200,000," George Pipas, Ford's chief sales analyst, told Reuters.

The challenge for Ford, he said, was to convince consumers they can buy sedans at its dealerships, and not just noteworthy pickup trucks and sport utility vehicles.

One large Ford dealer in Texas said he saw a huge pickup in sales for the new vehicles in January, particularly for the Five Hundred.

"If you can get someone to drive the Five Hundred, our closing ratio is the best I have seen on any car," said Jerry Reynolds, owner of Prestige Ford, who sold 20 of the large sedans last month.

Another Ford dealer in California, however, said sales have yet to take off.

"They are moving very slowly," said Paul Malaty, general sales manager of Ford West in Bellflower, California. "Not many people are asking about it."

Some analysts say the new models, which compete in a market heavily dominated by Asian automakers, fail to make an impression on consumers because of their conservative styling.

By comparison, the boldly styled 300 sedan from Chrysler was dubbed a hit right off the mark when it was launched in April. Strong sales of the 300, which features a giant egg-crate grille, helped Chrysler increase its U.S. market share last year.

But JP Morgan analyst Himanshu Patel said that while heavy volumes continue to be elusive for the new cars, he was encouraged that Ford is managing to sell them without cash incentives to mostly retail customers.