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June 11, 2003

USA: Ford launches new truck production as analysts fret over its profits

Ford launched production on Tuesday of its all-new F-150 pickup truck, a product vital to the vehicle maker’s bottom line as it celebrates its centennial this week and struggles to recover from a profit slump, Reuters reported, noting that the truck has been the best-selling vehicle in the United States for more than two decades, and Wall Street analysts say it drives more than half of Ford's profits.

By bcusack

Ford launched production on Tuesday of its all-new F-150 pickup truck, a product vital to the vehicle maker’s bottom line as it celebrates its centennial this week and struggles to recover from a profit slump, Reuters reported, noting that the truck has been the best-selling vehicle in the United States for more than two decades, and Wall Street analysts say it drives more than half of Ford’s profits.

“This is a make-or-break for Ford. This is without a doubt the most crucial product that they’ve got coming in the last five years and going forward for the next five years,” said automotive consultant MaryAnn Keller told Reuters , adding: “This has to succeed, they have to make it work.”

Reuters said that, while the new version has been heralded as bigger and better than its predecessor, analysts say it is also at least $US1,000 more expensive to build, a cardinal sin in today’s motor industry, where design and engineering processes are aimed at taking costs out, not adding them in.

To compensate for the cost, Reuters said, Ford, which is trying to recover from a profit slump, may boost the sticker price of the F-150 but that could make it difficult to keep selling more than 800,000 of the trucks a year, especially in a market where Detroit’s Big Three makers have been unable to sell anything lately without huge consumer incentives.

Ford has been pulling out all the stops to make the new F-150 another American classic, Reuters said, with plans to add new F-150 production in two more plants, in Kansas City and Dearborn, Michigan. But the marketplace has changed dramatically since Ford launched the outgoing version of the F-150 seven years ago, the news agency noted.

“It’s a different competitive landscape,” Michael Robinet, an analyst with CSM Worldwide , a Michigan-based automotive research and consulting firm, told Reuters .

Unlike in the mid-1990s, the F-150 faces tough competitors from General Motors and Chrysler , along with new offerings due soon from Toyota and Nissan, Reuters said.

To differentiate its new truck, a struggle for any manufacturer, Ford is offering the industry’s widest variety of body and trim configurations, with five different F-150 packages featuring three different box lengths and two distinct box styles. All will come with four doors, of one size or another, the news agency said.

Even the base model regular cab version of the truck, which goes on sale this autumn, features 13 inches of storage space behind the front seat and that alone could give it an edge over the standard pickup offerings from GM, Ford’s leading rival, Reuters said.

But, given the cut-throat nature of the industry, and Detroit’s intensifying price war, analysts have told Reuters that Ford may put profit-gouging incentives on its new pickup, to help spur sales soon after its launch and that could mean it will no longer be the cash cow it once was for the company.

“The bottom line is that even if they sell 800,000 (per year) they’re going to make less per unit on them than they did on the current version,” Keller told Reuters .

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