FORD Motor Co's plan to morph itself from a truck to a car company in North America is backed by market research showing that a new line of global small cars will be well received in the United States when they go on sale in 2010, company executives said.
But getting from now until then will take more cash incentives in a shrinking US market with fearful consumers and tight credit, the auto maker's top marketing executive said.
Ford, trying to allay concerns about how it will be profitable as its primary market shuns high-dollar trucks and sport utility vehicles, on Monday put three top executives before reporters inside the factory in Detroit that made the first Model T almost a century ago.
Tight credit due to the financial crisis on Wall Street is cutting into sales as banks and finance companies refuse to give loans to people with poor credit or those who owe too much on existing vehicles, Jim Farley, vice president of marketing, said.
"They just can't make a deal. I hear that more and more from dealers," Farley said.
Auto makers are now moving away from leases and low-interest financing to give people cash to help if they owe more on their current vehicle than it is worth, Farley said.
"They're going to: 'Here's cash. Use it for your down payment, or your trade to get out of your old product.' I think the industry will see more and more cash," he said. Farley would not predict how long the cash incentive trend would last, but said Ford is seeing longer terms on vehicle loans than in the past, with most customers borrowing for 60 or 72 months.
Even though gasoline prices have dropped recently from around US$4 a gallon, the economy is making people cautious, leading to lower industrywide sales, Farley said.
Yet the keys to Ford once again making money are in savings from developing models produced and sold globally, said Derrick Kuzak, group vice president of global product development. When models are engineered once and have common parts, they are far less costly to produce, he said.
On the product side, Ford said it will leverage its expertise making top-selling small cars in Europe so it has top products in the US and worldwide. US market research, Kuzak said, shows that people will pay higher prices for Ford's small cars because they are perceived to have greater features, looks and quality.
The European-designed Fiesta subcompact and Focus compact will surpass competitors in acceptance of design as well as features and fuel economy, he said.
Ford has lost US$23.9 billion in the past two and a half years and has had to mortgage its assets to stay in business as the US auto market has shifted away from profitable trucks and SUVs to more fuel-efficient models.