Ford raises incentives on Fusion to cut inventories

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DETROIT -- Ford Motor Co. has been raising incentives on the Fusion sedan to help clear out growing inventories, just months after it started building the car in a second North American plant to keep up with demand.

In many parts of the country, the Fusion is now offered with zero-percent financing for 60 months plus $1,000 cash back. Ford also is offering leases with no money due at signing and no first payment, or discounts of as much as $3,000 for buyers who decline the financing and make a trade-in.

Dealers and analysts said they are the most generous deals on the Fusion since the current generation was introduced in 2012.

"The car is selling, but not as fast as they're building them," said Larry Taylor, the owner of Beau Townsend Ford in Vandalia, Ohio, and a former member of the Ford dealer council. "They've buried us."

Taylor said he has sold 17 so far this month and has 90 more on his lot, plus 100 more on the way.

Ford had a 97-day supply of the Fusion as of Feb. 1, up from 84 days a month earlier, according to the Automotive News Data Center. Fusion sales declined 8 percent year-over-year in January, though it outsold the Honda Accord by 113 units.

Sales of the Fusion -- and mid-sized cars in general -- have weakened in the past six months, coinciding with when Ford began building it at a plant in Michigan to ease inventory shortages. The segment topped 200,000 units a month from February through August 2013 but has fallen short of that mark in each month since then.

In addition, snowstorms and cold weather slowed sales of many new vehicles in January, allowing inventories to grow.

Ford's chief sales analyst, Erich Merkle, said he is confident Fusion supplies will thin out as the weather warms up. He said Ford plans to be disciplined with incentives, yet "maintain a competitive position." After accounting for incentives, the Fusion commands the segment's highest transaction prices, he said.

"The midsize sedan segment is the most competitive segment in the industry right now," Merkle said. "The good thing is average transaction prices are still very healthy."

Ford has been spending about $2,900 in incentives on each Fusion since December, up from an average of roughly $2,200 for all of 2013, according to Alec Gutierrez, senior market analyst with Kelley Blue Book. Both the Toyota Camry and Nissan Altima still have higher incentives, he said.

Even though Ford now has enough Fusion production capacity to keep up with the segment's leaders this year, Gutierrez said the company would be ill-advised to get into a discounting war to try to knock off the Camry.

"When you know that Toyota has already committed to doing whatever it takes to keep the Camry No. 1," he said, "I think it would be a risky proposition for Ford to try and make a statement in this segment right now."

Mitchell Dale, the owner of McRee Ford in Dickinson, Texas, said he doesn't see the Fusion incentives as a worrisome sign. Dale said he actually could use more Fusions than what he has on hand now.

"They're being proactive to increase the sales pace of the car," he said. "I don't think it's a panic. I think they're trying to get the dealers moving them at a faster pace. That car is a tremendous value and stacks up well against the competition. I think they're trying to jump start it."

You can reach Nick Bunkley at nbunkley@crain.com. -- Follow Nick on Twitter


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