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http://www.detroitnews.com/article/2...e-sales-prices

Quality, technology help Ford boost vehicle sales prices
Bryce G. Hoffman / The Detroit News

Dearborn --Two months ago, Ford marketing executives watched as a panel of California consumers checked out one of their new, European-designed small cars.

Surveyors asked the group how much they thought the car would cost. Most shouted out a price well above what the company plans to sell it for in the United States. Then they ripped the masking tape off the badge on the hood and revealed Ford's Blue Oval. For the first time anyone could remember, the price actually went up.

"We didn't hug each other, but we came close," confessed Jim Farley, Ford's global marketing czar.

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For decades, Ford has had to sell its cars for less than similar models offered by Japanese competitors because of its inferior quality and lackluster designs. Now, with Ford's quality rivaling the best in the world and a new generation of edgy cars and trucks hitting its showrooms, that is beginning to change. In the first six months of the year, Ford's net pricing increased by $1.9 billion. Most of those gains came in the U.S.

As the other Detroit automakers watched their market share erode and heaped big incentives on their products to stanch the hemorrhaging, Ford increased its share of the market -- and did it with lower incentives and higher sticker prices.

"That's huge," said analyst Eric Selle, who follows Ford for JPMorgan. "It's very encouraging for the future, when they are going to have to start making money on smaller cars."

In fact, Farley says the success of Ford's new product strategy, which aims at replacing its decades-long dependence on big trucks and sport utility vehicles with a more balanced product portfolio, is predicated on these pricing gains.

Making money off small cars has been an elusive goal for American automakers, but he said Ford's pricing gains -- coupled with cost savings from union concessions and a new global product development system -- will change the game.

Farley credits Ford's pricing gains to a number of factors: new models and improved quality, cutting-edge technology like Ford's voice-activated Sync system, and a host of tweaks to pricing and production that were the products of sophisticated mathematical modeling. Ford also has benefitted from positive consumer sentiment stemming from its decision to forgo a federal bailout.

Neither General Motors Co. nor Chrysler Group LLC would provide net pricing data. Analysts say the average price of their vehicles fell during the first six months of this year, in part due to their bankruptcies. Both are now trying to reverse that trend.

"Our main goal is to enhance our brands," said Chrysler spokeswoman Kathy Graham. "Part of that is being competitive in the marketplace on a transaction price basis."

GM spokesman John McDonald said the Detroit automaker's average transaction price increased from August to September, though largely because of increased demand for trucks.

Farley said Ford still has not achieved pricing parity with brands like Toyota and Honda, but he said the gap is closing.

"We still have a lot of work to do," he said. "But I'm confident we can continue to do this."