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Old 05-02-2006, 06:38 AM   #1
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New Ford tactic: Sticker slashing

Hey, a sign that someone is maybe starting to get a clue in Dearborn!

New Ford tactic: Sticker slashing
'07 models will also get more standard features


Bryce G. Hoffman / The Detroit News

Ford Motor Co. is shifting its marketing approach by lowering sticker prices on several 2007 model vehicles and adding more standard equipment to some cars and trucks.

Like General Motors Corp., Ford is trying to find new ways to reach customers other than fire-sale discounts that hurt resale values.

The changes were outlined in a letter Friday to dealers from Al Giombetti, president of marketing and sales for the Ford, Lincoln and Mercury brands.

Giombetti also told Ford dealers their profit margins will be reduced on some vehicles. The changes will be rolled out over the next few months, though some changes will be immediate.

This morning in Dearborn, for example, Ford will announce it has decided to add more standard equipment on its new Ford Edge crossover vehicle, which debuts this fall. Full side-curtain air bags and roll-stability control will now come standard on the base model.

"Being competitive in today's marketplace requires competitive content and competitive pricing," Giombetti wrote in his letter to dealers, a copy of which was obtained by The Detroit News. "We believe we have an outstanding plan to stabilize and regain sales and market share."

The lower base price makes sense in an era of online comparison shopping. Giombetti said 75 percent of new vehicle buyers use the Internet to price vehicles, but only 15 percent look up what incentives and other discounts are available.

He also noted that other automakers have started adding content to their vehicles with little or no price increases to make their cars and trucks more attractive to consumers.

"In light of this situation, we need to continually evaluate our content and visual pricing," Giombetti said.

GM cited similar concerns when it lowered prices earlier this year. Ford is following suit, at least with its 2007 model vehicles.

Ford will drop the manufacturer's suggested retail price on its Ranger pickup $1,000 for super cab models and $590 for regular cab models. Giombetti said that will make the Ranger the lowest-priced compact pickup on the market today.

Ford is also reducing the MSRP on its Escape Hybrid SUV $1,000 in an effort to shrink the gap between the hybrid and the standard versions of the popular sport utility vehicle.

The company hopes that will encourage more consumers to step up to the hybrid model -- particularly in light of recent tax incentives for hybrid purchasers.

The automaker also plans to add more features to the base model Five Hundred and Freestyle in an effort to make them more attractive to consumers.

While Ford will bear some of these costs itself, it also is reducing the margins on a number of vehicles, meaning that dealer's will absorb some costs.

Not all dealers are happy about that.

"They're putting too much on the dealers," said Kenny Shreve, of Kenny Shreve Ford Mercury Inc, in Mcleansboro, Ill. "We can't structure deals anymore."

Shreve said Ford has already cut margins on many of its vehicles, leaving dealers with less room to negotiate.

"Ford is trying to go to one-price selling," he said. "We all know Saturn tried that, and it didn't work."

But Ford believes its new pricing strategy can be a win for dealers, too.

"The full package of all these changes will improve our business and dealers' business too by creating a better value for the consumer," said Ford spokesman Jim Cain. "Last year, when we adjusted margin on the F-series, we actually saw dealer grosses improve slightly."

Ford also plans similar pricing changes for its Mercury and Lincoln brands.

The new pricing scheme represents a departure from Ford's previous strategy, in which features were gradually stripped from older vehicles to allow for deeper and deeper price cuts. That hurt residual values, which also hurt Ford's brands.

Ford wants to craft a simple pricing strategy where the transaction price more closely matches the vehicle sticker price. The plan also calls for Ford to give its customers more in the way of standard features.

The automaker is doing just that by adding roll-stability control and side-curtain air bags to the Edge. The lack of those features had been seen as a deficiency in an otherwise promising vehicle by several product analysts.

"This vehicle is bold looking, it's a blast to drive and we're not going to go to market with only five bullets in our six-gun," said Cain, who confirmed the changes to the new crossover. "We are looking to make our vehicles a better value for customers, improve residual values and break out of the old business-as-usual mind-set."

Other changes are also in the works.

During the same meeting with dealers, Ford unveiled a new "Bold Moves" advertising campaign, the details of which will be officially announced later today.

As The News reported last week, that campaign features a new slogan and a new Ford anthem performed by Kelly Clarkson that will premier during tonight's airing of "American Idol."

It also includes a series of commercials focused on "everyday people" making some bold moves of their own. Ford is also planning a reality television show that would challenge aspiring designers to come up with a hot new concept car.

"This is not a short-term campaign," Giombetti told dealers. "It is a long-term initiative designed to strengthen our brand, emotionally connect with our customers and make the most out of our marketing activities."

Ford is also encouraging dealers to focus on core vehicles like the F-series pickup, Escape SUV and Fusion sedan in their own advertising.

All Ford dealers will be briefed on the new campaign and new pricing scheme later today.


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Old 05-02-2006, 06:49 AM   #2
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it took me like 3 hours to read that but thanks for the info. If what they say applies to the focus then looks like ill be getting a new car within the next year
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Old 05-02-2006, 07:50 AM   #3
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Well that's all well and good, but it's the same tactic Chrysler touted a year or so ago, and they're still whoring out their products, for lack of a better word. The consumer has gotten so used to mega-rebates, huge money off sticker, etc. And the Big 3 has no one to blame except for themselves. It's going to be a hard ship to turn around, so to speak, but I wish them luck.

All manufacturers are making the margins for the dealers smaller, and dealers are simply having to rely more on used car profits, service/parts dept profits, etc. There isn't NEAR the money being made on the new car side of things as there was even 5 years ago.

Subaru has done the same thing - kept the MSRP in check, with very minimal increases over the years, however the dealer's cost has risen dramatically over the same time period. Fortunately we've not had to be in "fire-sale" mode, and we really do promote the quality product, not the incentive of the day.
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Old 05-02-2006, 08:41 AM   #4
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I don't even try to sell people new anymore. If anything, I try to switch them to something maybe a year old with 15,000 miles on it so I can actually make some money. Give you an example. The way we get paid as salesmen is the we get 20% of the profit made by the dealership. So if we get a car at a sale at an auction for 10,000 and have to put another 1,000 in it to get it ready for the lot and sell it for 15,000 then the dealership just made 4,000. I get 20% of that 4,000 which is 800 bux. Not bad. No new vehicles is the same way. Such as base model ranger, just AC nothing else is 15,085 according to ford .com. We pay ford 14,800. So we've got less than 300 dollars we can IF we don't have to come off the price any. That's why the dealership I work at doesn't carry any base model new cars. The only money in new vehicles is in options now. But an even better example, A new taurus SEL is around 26,000. We sell used 06' SEL Taurus' for 13950. Half price basically. WE STILL MAKE MORE ON THE USED ONES THAN ON THE NEW ONES EVEN THOUGH THEY'RE MARKED HALF OFF. There is NO profit in selling new vehicles anymore. I try to flip EVERYONE to a used, unless it's a new lincoln. Lincoln offers some incentives and things, such as if I sell a new zephyr, I can't make less than 500$. But ford and mercury, screw those new ones, not worth the work for the pay we get.
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Old 05-02-2006, 08:50 AM   #5
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But Chrysler is not Ford or GM.. DCX, like Hyundai feel that anything is worth market share increase. even ridiculous discounts and whoring out the cars to Fleets.... the fact that they have their profits to invest in this is what makes them different from ford anf GM.. Ford and GM do not have their profit nests, so they are reducing their losses b selling less cars for better money...

Finally, i think wth GM not promoting fire-sales, Ford is in a much better position to do it.. they are basically working together on this, helping each other out... GM has shows in the past 5 months that they can resist many discounts, they had incentoves well in check and well below Ford ... and now Ford is following GM's lead and doing the same thing...

I wonder whether there is any actual coordination going on or not.


What superised me, however was the mention of the one-price.. I wonder whether ford is really flirting with a full fixed price idea, or it was jsut dealer exaggeration.

I am happy with all the recent news from Ford.
- potentially well designed campaign (will see later toda)
- new proven designers on board
- better pricing strategy
- better value strategy...

Now we need new products... but as I said, if 12 moths is what Feilds needs to put all this in cplace and get it all running, I am happy to wait... especially if the new products will better represent the new strategy, not only half way like the Fusion...

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Old 05-02-2006, 09:10 AM   #6
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I totally hear you, slickirish...though my primary job is new Subarus, I definitely do my best to move 5-7 used cars a month too. It's where most of my income comes from. The saving grace is that Subaru pays us "telecash" for every new car sold..some products are currently at $50, the rest are at $100 or $200. So that adds up over the year.

Our pay structure is similar, though we get 30%, after pack. It increases to 35% at 12 units, retro to unit #1..but if we have a heavy new car month, the income just isn't there.

Sorry for taking the thread off topic...I really do wish FoMoCo the best with their plan, but I have always said and always will truly believe that it's product, product, product...until they have that sorted out, it's going to be business being done the same way, just to (hopefully) a lesser degree. You can't drive a rebate, incentive or interest rate, but sadly, that's what it seems the market has evolved to.
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Old 05-02-2006, 09:26 AM   #7
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ours is 20%, at 9 units for one month it's 25% retro to first sale, at 12 units it's 30% retro to first and 300$ bonus. We make a minimum of 50$ on a new car, and 100$ on new. Then our dealership will do some "hot picks for the month" that might be 250$ minimum. But used is where it's ALL at.
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Old 05-02-2006, 09:32 AM   #8
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Quote:

Sorry for taking the thread off topic...I really do wish FoMoCo the best with their plan, but I have always said and always will truly believe that it's product, product, product...until they have that sorted out, it's going to be business being done the same way, just to (hopefully) a lesser degree. You can't drive a rebate, incentive or interest rate, but sadly, that's what it seems the market has evolved to.
I think both GM and Ford jsut arerealizing that... and but you know .. it takes time to deliver product... I am really bummed Foields didn;t come aboard at least t;a yera earlier than he did... All these producs were on the way, but I can imagine them being mediocre again... Him being there before Ford decided to produce a lot of new productswould have probably make them better and delivered faster..... I know it is necessary to wait this year out, but I am getting tired of waiting ... and Fields has been in office not even 6 months yet.


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Old 05-02-2006, 09:36 AM   #9
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Lets all hope they follow thru and we get the product we deserve, right ? I think Fields is the right person for the job too. I just hope the board actually allows him to do it, when it comes down to making some product decisions.
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