In Aggressive Move, Ford to Drop Average Vehicle Price by 0.3%

DETROIT —  For the first time in at least a generation, Ford Motor Co. will lower the average vehicle price on new models from the previous year, the nation’s No. 2 auto maker said Monday.

The move is the most aggressive yet in a price war that has prompted major auto makers to hold car and truck prices steady for the last two years or to undercut listed retail prices with rebates.

Ford said it will lower average 1999 vehicle prices by 0.3% even while making some optional features standard and adding new emissions and safety equipment to some cars and trucks.

Not all Ford vehicles are going down in price. The company said car prices will drop on average 1.7%, and prices of light trucks--accounting for nearly 60% of its sales--will go up half a percent.

Other auto makers also are keeping vehicle prices in check. Chrysler Corp. recently said 1999 model prices will rise just 0.1%, mostly because of added emissions equipment. For 1998, Chrysler initially dropped average prices 0.6%, though later adjustments increased them by 1.6%.

General Motors Corp. has indicated repeatedly that it will hold its 1999 prices steady. Last week, Toyota Motor Corp. announced a modest 0.2% price increase on new models, and Mitsubishi and Subaru said they plan to hold prices at last year’s levels.

“We are looking at price deflation,” said Jim Hall, analyst for AutoPacific Group, an auto marketing consultant.

Monday’s action marks the second straight year that Ford has not raised car prices. In 1998, the auto maker kept prices of comparably equipped vehicles at the year-earlier levels. (“Comparably equipped” means the price could increase if an option in the previous year becomes standard in the current one.)

Ford said it has not lowered overall prices for at least 30 years, and perhaps not since before World War II, when the company was ruled by Henry Ford, the company’s founder.

The lower prices come as auto makers are aggressively cutting operating costs. Ford, for instance, said it has reduced such costs by $4.3 billion in the last 18 months.

In the past, auto makers routinely increased retail prices 2%, 3% and sometimes more on new vehicles each year. Price hikes were justified as covering inflation and higher labor and operating costs.

But the sales environment has been altered by the nation’s growing low-inflation economy as well as intense competition for customers. With excess manufacturing capacity in North America, auto makers are producing more vehicles than consumers want.

“There is too much capacity, too much competition and too much weakness in the economies of auto-producing nations,” said William Wilson, economist with Comerica Bank in Detroit. “There is also less brand loyalty among buyers.”

The pressures are most apparent with passenger cars. With more and more consumers shunning cars for light trucks--minivans, sport-utility vehicles and pickups--auto makers have been forced to entice buyers with costly rebates.

Ford is now offering incentives worth $750 on its popular Taurus mid-size sedan. As part of its price moves Monday, the company said it will lower the price of a base model Taurus by $1,000 to about $18,000.

The Dearborn, Mich.-based auto maker is hoping its pricing will give it a leg up in the showrooms.

“We are trying to differentiate ourselves from a pricing standpoint,” said Lloyd Hansen, controller of Ford’s marketing and sales operations, who said the company’s incentives will probably drop a bit but not disappear.

Ford began to adjust its pricing structure last year. It simplified option packages and adjusted standard equipment levels. The moves helped it increase retail car sales 5%, even as it dropped some poor-performing models.

As part of its 1999 pricing changes, Ford said it will no longer charge customers in California, New York and Massachusetts $170 extra for emissions equipment required by those states.

Ford shares declined 13 cents to close at $52 on the New York Stock Exchange.