Ford Large Utes Bright Spot in Otherwise Slow August

Low gas prices are boosting demand for fullsize SUVs as buyers seek passenger- and cargo-hauling capability, Ford officials say.

Ford Motor Co.’s fullsize SUVs posted a strong showing in August, outpacing smaller vehicles that suffered in year-over-year comparisons due to last summer’s “Cash for Clunkers” incentive program.

The Ford Expedition and Lincoln Navigator saw sales jump 64.0% and 35.0%, respectively, according to Ward’s data.

The mini sales boom is being driven in part by strong consumer demand for cargo- and passenger-hauling capability, a top marketing executive says.

“Our dealers have been telling us that, (due to) consumers with a number of children that want to tow a boat on vacation, there’s a demand for Expedition and Navigator,” Ken Czubay, Ford vice president-sales and marketing, says in a conference call with analysts and reporters. “And we’re seeing an uplift aided by gas prices now.”

The increase in demand for large utilities runs contrary to the product plans of most auto makers, including Ford, which has poured significant resources into developing more fuel-efficient vehicles.

But Ford still is betting gasoline prices will rise and boost demand for smaller models.

During the Clunkers program the Ford Focus C-car and Escape cross/utility vehicles sold like hotcakes, largely depleting inventory by the end of summer 2009.

Last year’s incentive-induced sales surge weighed heavily on Ford’s August sales, off 7.7% to 155,053 units on a daily basis, with 25 selling days this year and 26 in like-2009.

For the month, Focus sales plummeted 37.0% vs. year-ago to 15,466, while Escape demand was off 24.0% to 14,110.

“Although (Focus and Escape) continue to be strong in their segments, they didn’t measure up to last year’s record sales,” notes George Pipas, Ford’s top U.S. sales analyst.

The drop in Focus sales could have been worse, if not for an unforeseen boost in interest generated by the new Fiesta B-car.

“There’s a halo effect,” Czubay says. “People are coming in to look at a Fiesta and are saying, ‘Let’s take a look at Focus.’”

Ford delivered 3,315 Fiestas in August, a tally that likely would have been higher if not for launch problems that included an undisclosed quality glitch and severe weather that shut down rail lines transporting the cars from the Mexican plant to U.S. dealers.

“Fiesta has resumed shipping after addressing the (faulty) part,” Czubay says. “At Ford, we won’t ship anything until there’s 100% quality.”

Although volumes are limited, Czubay says Ford is pleased with initial response to the Fiesta, which has been drawing interest from consumers in markets where the auto maker has traditionally underperformed, such as Southern California and Florida.

Additionally, Fiesta is drawing customers away from other brands.

“Dealers are telling us they’re getting more and more people coming in with (Asian-brand) vehicles that they haven’t seen before,” he says.

Several other vehicles bucked the overall monthly downward sales trend, including the F-Series pickup, up 6.2%, the Econoline van (103.0%) and the Taurus fullsize sedan (57.0%).

“There was a strong sales increase and revenue growth with Taurus this month,” Czubay says. “It has turned out to be head-turner for Ford and our flagship.”

The wind-down of the Mercury brand, which is to be discontinued by year’s end, is going as planned, officials say.

Mercury sales in August were off 19.3% to 7,040 units.

All Mercury nameplates were down for the month, with the exception of the Mountaineer midsize SUV, which enjoyed a 3.5% gain.

Despite the slow pace of sales, all Mercury units should be sold by the end of December.

“We’re providing incentives to dealers to help with the sell-down,” Czubay says. “We’re confident everything will be gone by the end of the year.”

Mercury inventory levels currently stand at about 7,000 units, Pipas says, down from about 11,000 in June, when it was announced the brand would be discontinued.

Ford ended August with a 363,000-unit inventory, consisting of 135,000 cars and 228,000 trucks.

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