Ford's Premier Automotive Group is spending more on incentives because larger competitors such as BMW and Mercedes Benz are dictating the market, said Mark Fields, Premier's Chairman and CEO.
"Our incentive levels are being driven by our larger competitors," Fields told reporters at the Automotive News Europe Congress. "We're not driving the market."
Competition in the luxury sector has become brutal, just as earlier in the mass-market sector, and incentives are greater this year than last year, said Fields.
US incentive activity remains higher than in Europe and is more predominant at the smaller end of the market where cars like the Volvo S60 compete, he said.
But Fields said Premier would maintain a cautious approach and not spend as much as its larger competitors.
"You can get yourself into serious trouble by trying to juice the market in terms of residuals," he said. "Residual values [the market value of a vehicle at the end of a consumer lease] are the ultimate arbiter of the health of every brand."
Despite increasing discounting in the luxury sector, Fields remains confident Premier and its four brands -- Aston Martin, Jaguar, Land Rover and Volvo -- will deliver a third of Ford Motor Co. profits by the middle of this decade. Fields said PAG could be profitable this year despite an $88 million loss in the first quarter. Fields is hoping on an array products -- 35 new or facelifted products in five years -- to lift Premier's profits.
Fields said Premier has no plans currently to build any cars in the USA despite currency exchange rates that have turned unfavorable for European luxury carmakers.
But he said: "I don't rule anything out, particularly in an area of increasing volatility."
Volvo and Land Rover are working at acceptable level of capacity utilization but Jaguar is not, he said. But he said there are no plans to shut any of Jaguar's three factories in the UK.
Premier is looking to increase common usage of parts among its brands in areas customers do not see, but Premier will do this according to what Fields called "intelligent commonality."
And PAG will allow its brands to sensibly expand their reach -- as Volvo did with XC90, for example. That includes even when such products may overlap slightly with Premier's own brands, in this case Land Rover.
Fields believes trends are still flowing in the right direction for Premier. A demographic group he called "Generation Luxury" has more disposable income and will spend that income on products they feel emotionally connected to, he said. Because Premier has four brands, it is uniquely positioned to take advantage of this opportunity, he said.
"These four brands are coordinated not to cannibalize each other's sales," he said. "Or to put it another way, they hunt in a pack and don't eat each other's lunch."