As the 1998 model year ends, Ford Division, Lincoln and Mercury will abandon across-the-board carryover allowances in favor of more targeted spending on specific models to clear out leftover inventory.
Ford has offered a carryover allowance, historically 5 percent of the manufacturer's suggested retail price, since the late 1950s. These are payments to dealers for vehicles still on their lots when the new model year begins.
Ford Motor Co. will abandon that practice and adopt a more flexible approach used by its competitors, said Ford Division General Manager Ross Roberts in a letter sent to Ford dealers Friday, May 1. Old formulas no longer work, Roberts said; marketing dollars should be used on the models that need the spending.
The changes 'in no way reflect a reduction in our marketing budgets,' he said.
FORD COUNCIL OPPOSED
The Ford Division National Dealer Council objects to the change.
'The dealers want the 5 percent and don't want to see it go away,' said Douglas North, president of North Brothers Ford Inc. in Westland, Mich., and vice chairman of the national council. 'The dealers would like to see that carryover allowance and see it every year.'
Like its competitors, Ford will now spend more in the third quarter to move old stock rather than waiting until the new model year begins, Roberts said.
'Our competition has moved away from this traditional incentive toward a flexible, market-driven approach that provides additional support where required to reduce dealer inventories,' Roberts said in the letter. 'They also implement aggressive sell-down strategies in the third quarter, rather than post-introduction, in order to minimize carryover stocks.
'This allows dealers to focus on selling new models at the beginning of the year, providing numerous benefits, particularly for leasing,' he said.
Lincoln and Mercury dealers will be offered a choice in cleaning up stocks of 1998 Lincoln Town Cars and 1998 Mercury Villagers. The 1999 Villager will be revamped. On those two models, dealers may select a 5 percent allowance or incentives that will be announced nearer to the third quarter, said Lincoln Mercury spokeswoman Anne Doyle.
INCENTIVES NOT SET
Lincoln and Mercury have not finalized what type of incentives will be used on other 1998 models except to rule out 5 percent blanket payments, Doyle said.
It makes little sense to spend 5 percent of sticker to sell the Lincoln Navigator or Mercury Grand Marquis because the division cannot keep up with customer demand for those models, she said.
Last year, Ford Division and Mercury tinkered with the carryover allowance by varying the percentage offered on specific models.
In the 1997 model year, Ford Division and Mercury paid an allowance of 2.5 percent, 5 percent, or 7.5 percent, depending on the model. Lincoln dealers chose between a flat 5 percent or a combination of dealer and customer incentives.