Ford Motor Co. is cutting the price to dealers of some of its cars by as much as $1,000 to meet the competition presented by Chrysler Corp.'s customer rebates.
Ford announced its dealer incentive program yesterday. The No. 2 automaker rejected the direct rebate approach because "we don't believe that factory paid retail rebates are productive," according to Walter Walla, Ford division general manager.
The financially ailing Chrysler Corp. began offering $400 customer rebates last week on its U.S.-built full and mid-sized cars and trucks. The rebates were on top of a dealer discount program. Sales and showroom traffic immediately improved.
Ford's program will run through Oct. 11. The company expects dealers will pass on the full amount of the incentives to customers, permitting them to sell Ford models "at prices every bit as competitive as consumer-rebated units in the marketplace," said Walla.
Incentives will range between $200 and $400 on Ford's LTD and Thunder-bird between $300 and $400 on light trucks, vans and club wagons; $500 on Rancheros, and $1,000 on the special Mustang designed to resemble the pace car at this year's Indianapolis 500 auto race.
Opinion in the auto industry over the comparative effectiveness of dealer incentives and cash rebates is mixed. The last time rebates were tried was in 1975. Also initiated then by Chrysler, both Ford and General Motors quickly following and the result was a vigorous price war.
The rebates did much to spur sales -- and were credited with helping draw the United States out of a recession then. But selling activity eventually grew weak again, leading some in the industry to think the rebates merely drew future sales forward rather than actually expand the market.
This time around, GM, like Ford, is resisting a rebate war with Chrysler, though GM has also announced an extension of its dealer incentive plan into early September.