Post by TonyV on Mar 8, 2010 21:00:56 GMT -5
Posted: 1:17 p.m. March 8, 2010 | Updated: 7:29 p.m. today
Ford expands no-interest financing
Move raises profitability concerns
By BRENT SNAVELY
FREE PRESS BUSINESS WRITER
Ford’s first-quarter profits are likely to be challenged by $200 million because the automaker has been drawn into an incentive war with Toyota and General Motors, one analyst said in a report today.
Ford last week began offering zero-percent financing for 60 months on the Ford Focus, Ford Fusion and Mercury Milan, as well as free financing for 72 months on Ford Explorer, SportTrac, Ranger and Mercury Mountaineer.
Ford introduced its offer Wednesday, a day after Toyota announced zero-percent financing for 60 months on 10 models and GM followed suit with similar zero-percent financing deals.
“Ford is likely to show a roughly $200 million pricing headwind,” Barclays Capital analyst Brian Johnson wrote. “What is troubling is that Ford is increasing incentives on some of the core cars that have seen improved pricing over the last year — posing a risk to its overall positive pricing trend.”
Ford has worked for years to reduce its inventory and incentives to more healthy levels that wouldn’t erode profits. In February, Ford’s average incentive was $2,816, or 13.9% lower than in the same month last year, according to Autodata.
“Our incentive strategy hasn’t changed,” said Ford spokesman Steve Kinkade.
Despite his concerns, Johnson said Ford’s new incentives shouldn’t scare investors away from Ford’s stock, as the automaker has been on a roll of successes. In January, the company reported its first profit, of $2.7 billion, in five years.
In February, sales of Ford’s cars and trucks increased 43.4%. On Friday, Ford’s stock hit $13.04 — its highest mark since Feb. 17, 2005. On Monday, it closed at $12.93 per share.
Contact BRENT SNAVELY: 313-222-6512 or bsnavely@freepress.com.
Ford expands no-interest financing
Move raises profitability concerns
By BRENT SNAVELY
FREE PRESS BUSINESS WRITER
Ford’s first-quarter profits are likely to be challenged by $200 million because the automaker has been drawn into an incentive war with Toyota and General Motors, one analyst said in a report today.
Ford last week began offering zero-percent financing for 60 months on the Ford Focus, Ford Fusion and Mercury Milan, as well as free financing for 72 months on Ford Explorer, SportTrac, Ranger and Mercury Mountaineer.
Ford introduced its offer Wednesday, a day after Toyota announced zero-percent financing for 60 months on 10 models and GM followed suit with similar zero-percent financing deals.
“Ford is likely to show a roughly $200 million pricing headwind,” Barclays Capital analyst Brian Johnson wrote. “What is troubling is that Ford is increasing incentives on some of the core cars that have seen improved pricing over the last year — posing a risk to its overall positive pricing trend.”
Ford has worked for years to reduce its inventory and incentives to more healthy levels that wouldn’t erode profits. In February, Ford’s average incentive was $2,816, or 13.9% lower than in the same month last year, according to Autodata.
“Our incentive strategy hasn’t changed,” said Ford spokesman Steve Kinkade.
Despite his concerns, Johnson said Ford’s new incentives shouldn’t scare investors away from Ford’s stock, as the automaker has been on a roll of successes. In January, the company reported its first profit, of $2.7 billion, in five years.
In February, sales of Ford’s cars and trucks increased 43.4%. On Friday, Ford’s stock hit $13.04 — its highest mark since Feb. 17, 2005. On Monday, it closed at $12.93 per share.
Contact BRENT SNAVELY: 313-222-6512 or bsnavely@freepress.com.