Ford Brings Back Interest-Free Loans

DETROIT Reuters is reporting that Ford,is following the lead of cross-town rival General Motors Corp. and is reviving interest-free loans to lure customers into showrooms amid an uncertain economic climate.

The announcement came just one day after GM, the world's largest automaker, said it was reintroducing the "zero percent" financing deals that it used to draw customers into showrooms after the Sept. 11 attacks.

On Tuesday, the Chrysler arm of DaimlerChrysler AG matched GM's move, which has intensified Detroit's already brutal price war. Ford's decision to follow suit had been widely expected.

"One thing that's certain is that Ford will be competitive," Steve Lyons, a senior Ford executive, said in a statement. "As the competitive landscape changes, we will answer."

The incentives put the Big Three at a competitive disadvantage to Japanese, South Korean and many European automakers, which have managed to maintain sales with much lower marketing costs.

But Detroit executives argue that cheap loans and other deals, which are now averaging more than $2,200 per vehicle, are less expensive than the cost of idling assembly plants and laying off workers under generous North American labor contracts.

GM ended its free financing deals in January, but restored them later on a limited basis. It eliminated them again in late April, when industry sales were running stronger than expected.

The return of the deals, amid growing uncertainty about the fledgling U.S. economic recovery, follows a drop in U.S. auto sales in May to a seasonally adjusted annual rate of 15.7 million vehicles, the slowest pace in nearly four years.

Data released on Tuesday showed June sales rebounded to an annual rate of 16.5 million vehicles. But GM was alone among Detroit's Big Three automakers in reporting a modest gain in sales from June 2001, and automakers clearly want some reassurance that American consumers will be willing to spend during the key summer selling season.

Besides interest-free loans on many 2002 vehicles, Detroit's automakers are also offering hefty cash rebates on many models.

Ford's stock was down 41 cents, or 2.6 percent, at $15.35 in afternoon New York Stock Exchange trade.