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Ford Motor Company (F)
Ford Taking Lessons from Hyundai
In an effort to combat declining auto sales, Ford Motor Company rolled out a new incentive program that would cover a year's worth of car payments for customers who lose their jobs. The South Korean automaker, Hyundai, has offered similar protections for purchasers who lose their jobs. The incentive was successful in boosting sales for Hyundai, so should Ford expect similar results?
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Hyundai Motor Co has outperformed almost all major U.S. automakers so far this year. Some of this success can be attributed to the Hyundai Assurance program launched in January that allows customers to return vehicles if they lose their jobs within the first year of the purchase. In the first two months of 2009, Ford's U.S. sales plunged 44 percent compared to a market that declined 39 percent overall and a 5 percent increase in Hyundai's sales. Hyundai saw its sales down less than 1 percent while the rest of the market was down 41.3 in February.
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The "Ford Advantage Plan" will cover up to a year's worth of payments of up to $700/month for customers who lose their jobs. Ford also said it will offer zero percent financing on select vehicles. "Consumers remain anxious about the economy and their own outlook for the future," said Ken Czubay, vice president of sales and marketing. "We at Ford want to do our part to rebuild faith in the marketplace by offering payment protection on every new Ford, Lincoln or Mercury vehicle for up to a year if our customers lose their jobs."
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Ford's announcement comes one day after President Obama told General Motors (GM: Charts, News, Offers) and Chrysler that they would need to declare bankruptcy if they didn't properly restructure their businesses. This is despite loans already totaling $13.4 billion for GM and $4 billion for Chrysler. Last week, market-research firm J.D. Power & Associates said retail new-vehicle sales continued to tumble in the first part of March and said it cannot make forecasts for the rest of the year. We can expect Auto makers to release their March sales figures later this week.
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It is way too early to tell whether Ford's plan will match the success of Hyundai Assurance. Consumer confidence remains near all time lows and consumers have been cutting back their spending, particularly big-ticket items such as cars and trucks. The plan is likely to give some incentive to potential car buyers and boost confidence. However, other automakers such as GM and Chrysler may announce similar plans undercutting the "Ford Advantage Plan." As of 11:58 PM, Ford is down approximately 2 percent.
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