DETROIT — Starting Jan. 1, Ford Motor Co. will tell dealers its incentive plans annually rather than quarterly.
The change is designed to help dealers better plan their marketing and inventory strategies. The approach gets Ford in line with the way most other automakers communicate incentives, Ford CFO Don Leclair said.
"It is just a simpler and better way to communicate to the dealers, so that they know that the incentives will be there for the entire model year," Leclair said.
As part of the new strategy, Ford will take a noncash charge of about $1.4 billion in the fourth quarter of 2007 to adjust the reserves it uses for incentives. The change covers all Ford's global markets, but most of the charge is in the United States.
Leclair says the new incentives plan still will let Ford tweak by nameplate or for model year changeover or react to market feedback.
"That's not to say we can't change the incentives during the year," he said. "For example, if something ends up as a hot seller or a slow seller, we'd have to adjust production and adjust the incentives. But the basic level of incentives will be communicated annually."
As part of its turnaround plan, Ford has tried to be more disciplined about incentives. Lower retail incentives were responsible for nearly $500 million in net pricing gains Ford made in North America during the third quarter, Leclair said.
Ford's average incentive in the United States dropped from $4,705 per vehicle during the third quarter of 2006 to $3,801 per vehicle during the third quarter of 2007, according to J.D. Power and Associates' Power Information Network data provided by Ford. The automaker did not repeat a 0-percent-for-72-months financing blowout during this year's third quarter.