Ford price moves significant

Press, 15 January 1988, Page 12

Ford price moves significant

BEHIND the WHEEL with

Peter Greenstade

New Zealand’s car market is too small not to be affected by the ripples when a major local assembler, such as Ford New Zealand, Ltd, throws a pebble in the water. That is why Ford’s New Year’s Eve price reduction announcement was of rather more significance than most chief executives an marketing managers of other car assemblers and importers seem to have attached to it.

The reality is that if the assembler and importer of the country’s leading brand decides to reduce' r prices, just about everyone else with cars to sell must respond in some way, simply to survive. Bear in mind that Ford can pare away at its margins simply because it has the greatest number of cars to sell.

The little people in the business are in a quandary. As they don’t have sales volume they need bigger margins to sustain themselves and their dealers. If they reduce their margins they turn off their dealers and, in any event, a sales loss assumes greater significance when all the calculations for the financial year have been completed and the company has arrived at a bottom line. Bob Field, managing director of Toyota New Zealand, Ltd, has shown himself to be a realist.

On hearing Ford’s news, he let it be known that Toyota was considering price reductions. Within days Toyota announced price reductions averaging 5 per cent and, in some instances, 10 per cent. That was on January

7 and the reductions were retrospective to January 1. But Toyota did not show its full hand. This will occur about the end of this month when the company launches a new' model range. Generally, the reaction of other key people in the motor industry is that Ford has overreacted to a fall-off in sales. Whether that is so is difficult to determine. Certainly the clue that could possibly point towards Ford’s current thinking is unlikely to appear before the 1987 new-car registrations by brand become known, and that will be some time yet. To be cynical, memories are short and it could well be that some of the motor industry’s spokesmen had that in mind when they were questioned by the media about their reactions to Ford’s move. Toyota is in the throes of planning the launch of the 1988 Corolla range in

New Zealand. The Corona, recognised, as a general rule, as the world’s best-selling car, and certainly a New Zealand market leader, should reach dealers’ showrooms before the end of this month. ’ Heavier than the average volume-produced Japanese car and having chassis dynamics very much akin to European poise, the Corolla looks set to become the bestselling car in the local market this year. When Bob Field was asked for an indication of the price range in which the dozen or so Corolla models would fall, he quite bluntly refused. That was at the Corolla media launch at Waitangi just before Christmas. He said that the media would have to wait until just a few days before the public launch of the Corolla and admitted that

his Johnsonville-based company was still working on the prices.

They would be competitive, he assured us, hinting that Toyota was playing the cat-and-mouse game and waiting to see if any of its competitors would do anything in the meantime.

Field’s conservative approach at Waitangi has obviously paid a dividend already.

If you have not fixed and published a price it is easy to say with a certain amount of equanimity that you are going to follow Ford and reduce prices, while at the same time giving thanks that your questioner has been a rather naive reporter! Actually, the rather detached reaction of some of the other industry leaders was based upon the unique circumstances in which their companies are at present.

A typical example was that of Denford McDonald, chief executive of Mitsubishi Motors. He finds himself in a position not dissimilar from Toyota. Mitsubishi, once very active in the local market, has been dragging its feet over the last couple of years, but will begin an ambitious launch programme this year about the beginning of March with a new Sigma range, reputedly. This car, judging from overseas reports, should be very interesting from a technological viewpoint and, what is more, is likely to be followed by similarly interesting cars in the Mitsubishi range later in the year. The point is, having got the message from Ford, Mitsubishi Motors has a certain amount of time to work out its own marketing strategy, whereas Toy-

ota has been compelled to indulge in a pressurecooker exercise.

Under the circumstances, I believe that anyone who forecasts that the new Corolla will match the Ford laser dollar for dollar, model for model, will not be wide of the mark.

Although the Trenthambased managing director of General Motors, Ray Halliday, said on reception of the Ford news that his company was not about to panic, GM can probably afford to adopt a nonchalant attitude, in the meantime at least. The General is as high as a kite at the moment, because of the strong demand for the newish Nis-san-engined Holden Commodores and the weak Australian dollar. If anyone has been giving Ford a shake-up this

year, it is GM, but unfortunately, unlike Ford, the General has no effective small arms in its arsenal. The Camira and the Barina cannot be doing a great deal for the bottom line.

Ford, of course, always the aggressive and blatantly successful marketer, made much of the largest of its price reduction — the $3115 cut in the price of the Ford Laser TX3 Turbo.

Unless all the lawn bowlers and politicians in the country decide to forsake their virginal white and squeaky clean images for the grime, smell and noise of motor racing, that $3115 price cut will not make Bill Hartigan, Ford’s straighttalking, Australian managing director, even twitch a bushy eyebrow when he surveys the New Zealand company’s bottom line at the end of the financial year.

By the same token, it is interesting to note that a Toyota dealer said he hoped the parent company would find its way to bring the price of the new Corolla GT below that of the Ford Laser TX3 Turbo. Footnote for those sufficiently interested. Russell Scoular, Ford’s external affairs manager, says that, compared with others in the motorassembly business, Ford is not overstocked. Although such a reply was entirely predictable, Scoular, after all, did have the class to treat the comments from the spokesmen for other companies with ignore, at least publicly!