Exit Plan? What Exit Plan?

LAKE PLACID, NY — Ford Motor Co.'s foray into the employee-discount wars looks to be lacking a clear exit strategy and, based on initial sales results, it may not need one for a while.

When asked when the auto maker will bring an end to its “Family Plan,” which offers employee pricing to everyone on most Ford, Mercury and Lincoln vehicles, Ford Div. President Darryl Hazel gives little guidance.

“That's a good question. I don't know,” he tells Ward's during a program here. “What I do know is what people like about it is the no-hassle aspect.”

The auto maker initially was reluctant to follow General Motors Corp.'s lead in employee pricing, letting its chief competitor ride the incentive through the month of June on its own. GM turned in a 41% U.S. sales increase vs. like-2004 as a result and achieved a 32.9% market share.

Buyers flocking to GM's struggling vehicle stable has been reminiscent of the 2001 “Keep America Rolling” 0% financing campaign launched as a way to generate demand following the Sept. 11 terrorist attacks. While the plan was effective, it sparked a profit-draining incentive race that has plagued Detroit's Big Three since.

Ford's U.S. Sales Analysis Manager George Pipas told media during a June sales call the auto maker considered matching the plan early on. It was reluctant, in part, because it was hard to define the sort of exit strategy that would be necessary to avoid a similar fate that followed Keep America Rolling.

Ford changed its tune last month, launching the Family Plan just as Chrysler Group rolled out its own employee-pricing scheme.

Hazel says the auto maker did this because “I didn't want the dealers, and I didn't want us to be selling '05s when everybody else was selling '06s. It was fairly clear to me that this was a very good way to get rid of the old inventory.”

J.D. Power and Associates says Ford is reaping the benefits so far. The auto maker's market share rebounded to 19.6% during the first 15 days of July, compared with a measly 15.1% last month and 18.1% in July 2004.

The surge comes as Ford scrambles to empty dealer lots of '05 vehicles in anticipation of some important '06 models, including a revamped Ford Explorer/Mercury Mountaineer SUV combo; the all-new Fusion, Mercury Milan and Lincoln Zephyr sedan trio; and the introduction of optional navigation systems to several vehicles.

In addition to a market-share bump, Hazel says Ford is enjoying a better pricing environment thanks to the clarity of the employee-pricing method.

“The truth is the prices are higher now than they were in May or June, but since there's no negotiation (and) no hassle, I think there are a lot of people who say, ‘sign me up.’”

For those who aren't waiting, many are content to buy more features on vehicles now that pricing is more transparent, Pipas says in an interview with Ward's.

Ford is realizing success with its Family Plan, and all of its product segments are seeing gains, especially the new cars such as the Five Hundred sedan and Freestyle cross/utility vehicle.

Despite this, Ford continues to seek the elusive exit strategy, Pipas admits. “I guess the question would still be, ‘What is our exit strategy?’ I would have to say I don't know.”

Hazel says Ford's analysis of GM's success in June shows a dispiriting trend of pulling loyal buyers ahead that could come back to bite those playing the employee pricing game.

“When I look at the numbers in the month of May, GM conquests were at about a 37% rate,” Hazel says. “In the month of June, when they had this big promotion, with this big uptick in sales, their conquest rate was 36%. It actually went down a percentage point.”

If the pull-ahead trend proves true at Ford, as well, it could cripple the auto maker's big plans for '06.

That's because buyers who otherwise were waiting until the fall introduction season to buy, potentially have been enticed to purchase sooner.

“I'm cognizant that (pull ahead) might be the case, but I don't know that I'm afraid of it,” Hazel says.