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High gas prices hurting Ford's SUV sales

High U.S. gasoline prices are hurting the sales of one of Ford Motor Co.’s highly profitable sport utility vehicles, the automaker said Wednesday.
/ Source: Reuters

High U.S. gasoline prices are hurting the sales of one of Ford Motor Co.’s highly profitable sport utility vehicles, the automaker said Wednesday.

Sales of the Ford Expedition, a full-sized SUV that gets about 16 miles per gallon, fell 23 percent in August and are down nearly 13 percent year-to-date despite heavy consumer incentives. Ford offers $4,000 cash back on the SUV, which received a major make-over two years ago.

“Expedition, of course, is down,” said Ford Division President Steve Lyons. “By and large I think that is a by-product of fuel prices.”

While Lyons only referred to the Expedition, sales of other big SUVS have also been disappointing this year.

Sales of the gas-thirsty Ford Excursion -- a lightning rod for criticism from environmental groups -- fell 44 percent last month and are down 20 percent year-to-date.

Sales of General Motors Corp’s bulky, gas-guzzling Hummer H2, which gets about 13 miles to the gallon, fell 11 percent in August, meanwhile, and are down 21 percent year-to-date.

The aging Chevrolet Suburban SUV, also from GM, saw its sales fall nearly 33 percent in August.

“Overall there has been a little pressure on the industry,” Lyons said, referring to the high gasoline prices.

Detroit’s Big Three automakers all make a major share of their automotive profits from sales of truck-based sport utilities and pickup trucks. And all have sought to play down the impact of higher fuel prices so far this year.

Ford, unions deal to save Land Rover
Ford and labor unions struck a deal Wednesday to save Land Rover, the British maker of off-road vehicles, hit hard by inefficiency, poor exchange rates and quality problems.

Up against a deadline imposed by the number-two U.S. auto maker to boost competitiveness at Land Rover's tradition-drenched Solihull plant in the West Midlands, employees made concessions on working conditions to save some 8,000 jobs.

"The trade unions have recognized the need for ongoing efficiency and productivity improvements which require the adoption of working practices already in existence in other Ford-owned plants," said Dave Osborne, the Transport and General Workers Union's national secretary for the car industry.

He said in a statement that unions now expected the company to keep investing in the business that Ford bought in 2000, but has struggled to make a consistent money earner.

"On the basis of today's agreement, we would expect that Solihull, which has been the home of Land Rover for over 50 years, to remain so for the next 50 years," Osborne said.

Mark Fields, head of Ford's Premier Automotive Group of luxury brands that includes Land Rover, said the detailed deal focused on operating improvements, work practices and the "culture, behaviors and beliefs within the plant."

"The longest journey starts with a single step. We have taken a very positive step, but we still have a lot of pavement in front of us," he told Reuters. "The real hard work of implementation starts now."

In May, Ford told Land Rover to put forward a detailed plan to improve quality and achieve world-class competitiveness in five years. It did not threaten to shut the plant, but had made clear it would slowly starve it of fresh investment.

"As long as we can implement that plan and as long as we can make the progress on quality, cost and productivity that has been included in that plan, then this plant will have a bright future," Fields said. "But at the end of the day, it is going to be customers who decide whether the plant stays open."

Land Rover languished at 28th place in the J.D. Power and Associates 2004 initial quality study, well below the industry average and badly trailing its sister company Jaguar, the British luxury car group, which was number 3 in the poll.

Fields said Land Rover had a long way to go to catch up to Jaguar, but even Jaguar has struggled. It said last month it would cut output by some 15,000 vehicles over the rest of 2004 due to a weak dollar and slack demand that swelled inventories, but no jobs were lost.

Fields repeated Ford's position that Jaguar was a concern.

"It is a business that is not as healthy as we'd like it to be and we are in the process of taking action that we need to take to make it healthy. As we said, were not ruling anything in or anything out," he said.

Ford's luxury car business is key to its goal of booking $7 billion in annual pre-tax profits by 2006.

The Premier Automotive Group -- which also includes the Aston Martin and Volvo brands -- and Ford's Lincoln brand are supposed to account for a third of that profit.

But PAG sank to a pretax loss of $362 million in the second quarter from a profit of $166 million a year earlier, hit by the strong euro, model changeovers and higher operating costs.