Big Three Up Consumer Incentives

DETROIT December 9, 2002; Reuters reports that Ford Motor Co. raised incentives on some of its best-selling sport utility vehicles Friday, a day after a similar but more aggressive move by archrival General Motors Corp. to entice buyers in a weaker market.

Ford had already offered three-year interest-free loans for the purchase of its popular Explorer sport utility vehicle but charged interest on the longer-term deals that most consumers find more attractive. Under its new program, unveiled on Friday, Ford said it will now offer zero-percent loans toward purchases of Explorers for up to five years.

The world's second-largest automaker, which has matched most of GM's discount and vehicle financing incentives for the past year, also added a $1,000 cash rebate to its Escape and Expedition SUVs and F-150 and Ranger pickups.

The added cash raised rebates on the all-new 2003 model Expedition to a total of $2,000.

DaimlerChrysler AG's Chrysler arm has made no changes to its program for December, but added incentives to its SUV lineup in late November, including interest-free loans for up to five years.

Ford has been a reluctant player in Detroit's price war, which has kept auto sales unexpectedly high for most of the last year despite a tepid U.S. economic recovery.

But analysts had expected Ford to respond to GM's broader sweetening of incentives on Thursday, when it said it was offering new and extended interest-free loan deals on 13 of its SUVs.

"GM hit the panic button yesterday," said Ford spokesman Jim Cain.

"I wish I could understand what they're doing, I mean it looks like they're just after share and revenue at all costs," he said.

GM executives have set a goal for this year of posting the first back-to-back yearly gains in market share since 1976. Despite that goal, GM's market share fell to 25.2 percent in November, well below its goal. Ford's market share through November had fallen 1.8 percentage points from a year ago.

Even a fraction of a percentage point, when it comes to market share in the cut-throat U.S. auto business, can represent millions of dollars in revenues.

Fat profits from from pickups and SUVs allowed Detroit's automakers to shrug off an assault by Japanese automakers on the lower-margin car segment of the North American auto market during much of the 1990s. But the recent trend toward deep discounting on SUVs has eroded Detroit's bottom line at a time when Ford, which lost $5.45 billion last year, is struggling to return to profitability.