Ford to Offer No-Interest Loans Plus Fuel Cards Worth $1,000

Ford Motor Co. said Wednesday that it would offer no-interest financing on almost all its vehicles and give buyers $1,000 toward gasoline purchases as part of its most aggressive sales incentive program of the year.

Ford said that under its “Drive on Us” discount program, which begins today and runs through July 31, customers would be given either a prepaid debit card for $1,000 of gasoline purchases or an equivalent discount on the vehicle purchase price.

The automaker’s offer to subsidize gasoline purchases for buyers upped the ante for larger rival General Motors Corp., which offered a similar program in California and Florida.

Both promotions take aim at rising customer concern over gasoline prices, a factor seen crimping sales of the large sport utility vehicles and pickup trucks that are the companies’ most profitable models .

“Sales have got to be very soft,” David Healy, a Burnham Securities analyst based in Sierra Vista, Ariz., told Bloomberg News. “Small cars are moving out. Everything else is dead, particularly the big SUVs.”

Jesse Toprak, an analyst with Edmunds.com in Santa Monica, described the Ford discount offer as “one of the most generous programs we’ve seen in a long time.”

“I said Ford was going to be the first to blink when it comes to incentives this summer,” he told Reuters, “and it looks like that was the case.”

Analysts closely track auto sales incentives as an indication of how urgently manufacturers need to move unsold inventory.

Ford’s position has been seen by many industry watchers as the weakest of the Detroit-area automakers because of the lack of new vehicles in its lineup to compete against GM’s revamped line of full-size SUVs known as the GMT-900 Series.

Ford sales through April fell almost 4% from a year earlier. Analysts expect that the automaker, No. 2 to GM in the U.S. market, will post a year-over-year sales decline of as much as 11% when it reports results for May today.

The company, based in Dearborn, Mich., said it was offering no-interest financing and $1,000 fuel credits on some of its most popular vehicles, including the Fusion sedan and the top-selling F-150 pickups, which also carry a $2,500 cash discount.

Chief Executive William Clay Ford Jr. has vowed to protect the company’s pickup truck franchise in the face of intensifying competition and steep discounting from rivals.

Toprak said Ford’s latest discounts would pressure GM and DaimlerChrysler’s Chrysler Group to offer deeper price and financing concessions on their competing truck lines. But he said he expected that GM would hold the line on pricing for its 2007 SUVs.

“I think they’re going to be selective, especially from GM’s perspective, since they have new products,” he said.

Chrysler has already spent heavily on sales incentives this year, including an offer of nointerest financing in May. GM’s offer of employee pricing for any buyer last year succeeded in boosting sales but touched off a price war that executives pledged to avoid this summer to protect margins.

Toprak, who tracks industry-wide sales incentives, said the average U.S. vehicle discount offered in May had slipped to slightly more than $2,400 from about $2,500, with Chrysler the most aggressive on pricing. The automakers do not report such figures.

Shares of Ford, which announced its program after the stock market closed, rose 18 cents to $7.16. The stock is down 7.3% this year.