Ford says new F-150 to reap higher profits

Ford Motor Co. says the new 2004 version of its F-150 pickups will be more profitable than the older model, despite its higher assembly costs, according to a Reuters story. Steve Lyons, head of the Ford division, said a combination of lower incentives and a larger mix of high-end versions will raise the average profit per F-150 sold. While the retail prices of the vehicle will rise about 1.8 percent, Lyons said optional equipment that had been made standard more than accounted for the increase. The new models go on sale in a few weeks. "I can assure you that the 2004 new F-150 will deliver a higher contribution margin per vehicle to the company than the outgoing model," Lyons said in a conference call announcing prices for the F-150. Ford executives have faced a delicate balance in pricing the F-150, which is Ford's best-selling vehicle and the key to its turnaround plan. The new F-150 is more powerful and more sophisticated than its predecessor; some interiors on high-end versions would not look out of place in a Lincoln. But that sophistication comes with an extra $1,000 to $2,000 per vehicle in parts and assembly costs. Even at lower estimates, analysts forecast the new F-150 would increase the company's cost by $390 million this year. And any cost increases spell trouble for Detroit automakers, who have little power to raise prices. Stronger competition from foreign and domestic automakers and a sluggish economy has already pushed Ford's incentives to nearly $4,000 per truck. Lyons said the new truck would go on sale with some incentives he declined to specify, but said they would be far smaller than the $3,500 cash rebate offered today. To fight Detroit's price wars, Ford will continue to sell the old F-150 for the next year as a price leader. That will allow Ford to sell more high-end versions of the new F-150, whose sticker prices can reach $35,570 before options. "We continue to believe that the new truck, because of its richer features, will drive a richer mix," Lyons said. Art Spinella, an industry sales analyst with CNW Marketing/Research, said Ford should be able to stave off the kind of heavy discounting that General Motors and the Chrysler group use to sell their models. "With the F series, they have a good window to do that," Spinella said. The early F-150 buyers, such as ranchers, "don't need a big giant incentive to be convinced to buy either something new or a Ford. These are very loyal customers." Ford has said it would start advertising the new F-150s in early September, when they had reached dealers in sufficient numbers.

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