Ford Hatches Employee-Pricing Incentive for F-Series
June 03, 2008
By Dale Buss
Ford Tuesday launched what could be seen as a desperate attempt to jump start sales of its F-Series pickup line by offering "employee pricing" to consumers for the rest of June. This is believed to be the first time since 2005 that any OEM has allowed consumers to pay only as much as its employees pay for a vehicle.
"This is a big deal for us," said Jim Farley, Ford's executive vice president for marketing and communications. "F-Series has spent 31 years running as the leading vehicle in the segment ... We think it's a really important merchandising tool that customers can buy an F-Series for the same price as a Ford employee."
Ford simply must move as many F-Series pickup trucks as it can for at least two urgent business reasons - and for another important reason that's a matter of pride.
The intangible but significant motivator is that F-Series seems destined to drop out of its long-time position as the best-selling vehicle in the United States. In May, it was dethroned as America's favorite vehicle by a car for the first time since October 1991. F-Series in May sold at only about 80 percent of the levels of both Toyota Camry and Toyota Corolla; Camry has been America's best-selling car for several years running. And Farley said that at least two other competitors' vehicles, in May, outsold F-Series.
"It's a significant development, but not surprising, given fuel prices," Farley said. And Farley conceded it was a "possibility" that Camry could knock off F-Series as the best-selling vehicle for all of 2008, because of the industry's huge segment shifts so far this year.
The first crucial business reason for Ford's new incentive program is that pickups are among it highest-profit vehicles, and pickup sales have fallen off a cliff due to the lightning-fast shift in segment preferences by the American car buyer, which accelerated in May.
F-Series sales plunged by 30 percent last month compared with a year ago, to just under 43,000 units, and are off nearly 19 percent on a year-to-date basis. That puts them at the center of an industry-wide trend in which pickups comprised only 9 percent of the total U.S. market for the first five months of 2008 compared with 14 percent of the market in 2006 and 20007, according to George Pipas, head of U.S. sales analysis for Ford. As recently as February -- before the recent huge run-up in gasoline prices - pickup trucks held 13 percent of the U.S. market.
The second source of urgency behind Ford's announcement of the new employee-pricing incentive is that the company is trying to clear dealer lots of existing versions of its F-Series to make way for the launch of its brand new F-Series vehicles this fall. "We want the sell-down to go smoothly," Farley said.
And while the "lifestyle" market for full-size pickups has nearly evaporated, Ford concedes, company executives believe that their newly recast F-Series will appeal heavily to those who remain in the pickup-truck market: largely, professional buyers.
Ford didn't immediately disclose how much more generous the new incentive program will be than the thousands of dollars in incentives, per vehicle, that Ford and its competitors already have been offering on full-size pickups. The only exceptions to the new plan are the Harley-Davidson and chassis-cab models.
General Motors, at least, wasn't budging for the moment. "We'll assess and respond accordingly," said Mark LaNeve, GM's vice president of North American sales and service. Sales of the company's full-size pickups, including the GMC Sierra and Chevrolet Silverado, have tanked as well.
"A basic employee discount is about 5 percent," LaNeve added. "Depending on other incentives with it, that may or may not be an escalation of incentives. It may be more of a tactical move [by Ford]. We'll certainly take a look at it."
Actually, it was GM that kicked off the industry's unprecedented, and highly successful, round of employee-price incentives in 2005. Ford quickly followed, and in July 2005, it sold 127,000 F-Series trucks. That marked the highest sales for any vehicle in modern U.S. history, the company said at the time, and the highest monthly sales for any vehicle since Ford's Model T cruised America's roads in the 1920s.
In May, large trucks like the F-Series, already had the highest average incentives of any vehicle segment, according to a forecast by Edmunds.com, parent of AutoObserver. The average incentive on a truck sold in May was $4,667, or about 14.4 percent of the sticker price. Even Toyota, which in general pays out little in incentives, had an average incentive of $4226 on every Tundra it sold, according to Edmunds.com's calculations.
Posted by Michelle Krebs at 12:26 PM under Analysis , Ford , Toyota | Comments (1) | digg this | Seed Newsvine
I don't know. I'm more of an add value guy than a drop price guy. Deep discounting the dollar amount for the same value product will boost sales in the short term, but difficult to sustain long term. Adding more value to the same dollar amount is slower to produce results, but is easier to discontinue and preserves value. As an alternative, how about offering a Focus or Fusion/Milan 4cyl at a very attractive payment. For example, Buy or lease a new F-series, get a Focus/Fusion/Milan for only $79 a month more. F-series resale/residual is preserved without hurting those values on the cars. In the mid-70's oil crisis, I remember reading of a Chevrolet/Cadillac dealer whom would throw in a Chevette when you bought a Fleetwood or Eldorado. It made national news. Hopefully all the Chevettes are gone by now.
Posted by: fulcrumb | June 06, 2008 at 10:52 PM