Ford Fusion challenges sedan stalwarts Camry, Accord

The 2013 Ford Fusion at the Long Island The 2013 Ford Fusion at the Long Island Car Show at Nassau Veterans Memorial Coliseum. (Oct. 12, 2012) Photo Credit: Steve Pfost

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A commercial showing the new Ford Fusion being driven off a cliff led David Bowhall to visit a dealer last month for a test drive. The owner of four Mercedes- Benzes in the last five years said it wasnt much of a leap.

Boy, that kind of looks like an Aston Martin, Bowhall, who designs and installs audio-visual equipment, said of his first impression of the car. The hybrid version that Bowhall, 41, plans to buy has many of the same features as the Mercedes C350hes replacing, plus it will almost double the fuel economy of his German luxury car and cost about $17,000 less.

The Fusion, redesigned by Ford Motor Co. late last year, has vaulted into the top five models by U.S. sales early in 2013 and is leading a charge by U.S. automakers that are offering the best small and mid-size cars to take on Japans in decades.American sedans are providing stiffer competition to stalwarts like Toyota Motor Corp.s Camry and steering U.S. auto sales to a fourth-straight annual gain, the longest streak since 2000.

Fusion also has been selling from dealer lots faster and at higher prices than Camry and Honda Motor Co.s Accord, suggesting that the model is more than just a two-month wonder, said Kevin Tynan, an analyst for Bloomberg Industries. While Fusionoffers higher incentives than Camry, its discounts are slimmer than last years.

Fords turning them faster, theyre doing it at higher transaction prices and lower incentives, and the volumes there, Tynan said by telephone. If volume was there but you see a decreasing trend in pricing or increasing trend in incentives, thatwould suggest maybe this isnt sustainable.

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Loyalty Challenge

Camry, the top-selling car in the U.S. for 11 years, remains a potent force, outselling Fusion by almost 13,000 cars in the first two months despite a decline in February.

And Fusion faces challenges in keeping up its torrid pace: Mid-size sedan owners dont tend to jump from model to model, said Jessica Caldwell, an analyst with market researcher Edmunds.com. With millions of loyal owners on the road, Toyota and Hondaare unlikely to lose their grip on the segment lead any time soon, she said.

Two months does not make a pattern, said Caldwell, who is based in Santa Monica, California. The car is competing with the decades of dominance by Camry and Accord. Even though Fusion has sold well, the numbers dont stack up.

Still, with the new Fusion, Ford has its best shot to have a sedan lead in sales since the 1990s heyday of the Taurus, the last American sedan to top the Camry and Accord.

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Everybody Competing

That comes amid a backdrop in which Ford, General Motors Co. and Chrysler Group LLCs combined share of the U.S. small and mid-size car market will grow to 33 percent next year, from 26 percent in 2009, according to researcher LMC Automotive.

U.S. light-vehicle sales probably climbed 4.2 percent in March to 1.46 million, the average estimate of 10 analysts surveyed by Bloomberg. The annualized industry sales rate, which is adjusted for seasonal trends, may have risen to 15.4 million, theaverage of 15 estimates, from 14.1 million a year earlier. If that pace keeps up, it will be the highest total since 2007.

No one is abdicating any segment to anyone else, said John Mendel, the head of U.S. sales for Honda, who left Ford after more than 25 years in 2002. Fords previous approach was screw cars because their profit margins were narrower than trucks,he said. Today, everybody is competing everywhere.

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Ford probably continued to outpace the industrys sales gain in March by delivering 4.4 percent more cars and light trucks than a year earlier, the average estimate of 11 analysts surveyed by Bloomberg. The Dearborn, Michigan-based companys salesincrease topped the market in both January and February.

Facing Altima

Through February, Fusion was the fifth best-selling model in the U.S., behind Fords F-Series pickup line, GMs Chevrolet Silverado pickup, Camry and Accord.

Fusion deliveries may have surged 24 percent in March after rising 28 percent in February and 65 percent in January, Kelley Blue Book estimates. Fusion probably trailed Nissan Motor Co.s Altima in March for the first month this year, the Irvine,California-based market researcher said.

Even if Altima sales topped Fusion last month, the effect that more competition is having on established leaders in the mid-size car segment is clear. Altima deliveries may drop 10 percent from a year earlier, and Camry sales probably will slip for asecond-straight month, by 4.2 percent in March after Februarys 9.5 percent decline, Kelley Blue Book said.

Competition coming from the U.S. carmakers is at a much higher level, Carlos Ghosn, Nissans chief executive officer, said last week at the New York auto show. Thats good for the consumer, because they have a choice between much better productscoming from everywhere. And its good even for the competitors, because whenever you have tough competition, it forces you to be a much better company.

Truck Company

GM, which is introducing 13 new Chevrolets this year and showed a redesigned Cadillac CTS during last weeks New York show, probably led the industry in posting a 12 percent increase in sales for March, the average of 11 estimates. The Detroit- basedautomaker is shedding its reputation as just a big Midwest truck company, Mark Reuss, president of GMs North American operations, told reporters last week in New York.

All the effort, resources and marketing for the U.S. automakers used to be spent in getting people to continue to buy trucks, said Tynan, who is based in Skillman, New Jersey. You created a loyal customer base for your competition for ageneration.

GM, Ford and Chrysler are stemming that tide and luring younger buyers again. The three increased their combined share of retail registrations to 18- to 24-year-olds by 1.9 percentage points and to 25- to 34-year-olds by 1.5 points since 2008,according to R.L. Polk & Co. and Edmunds.com.

Honda may trail GM with an 8.5 percent increase in March, the average of eight estimates. Mendel, the head of U.S. sales for the Tokyo-based carmaker, in an interview forecast 138,000 deliveries for the month, which would be an 8.7 percent gain.

Smarter Detroit

Youre seeing Ford-GM-Chrysler now getting serious about selling cars, getting a lot smarter and a lot more competitive on the car side of the business, Mendel said last week in an interview. Nobody can give up any segment to anybody.

Hondas Accord outsold Fords Fusion by just 124 cars in February, the narrowest margin in 11 months. Ford is adding a second shift of 1,200 workers to its Mustang assembly plant in Flat Rock, Michigan, to start building Fusions there this year.

One of our problems is that we dont have enough production, said Amy Marentic, a marketing manager for Fords global cars. This summer, our inventories are going to be tight. Our dealers are asking for more.

Fords additional Fusion production could spell trouble for Toyotas Camry. The Fusion took 35 days on average to sell in February compared to 38 for Hondas Accord and 62 for Toyotas Camry, Bloomberg Industries said in a report last month, citingEdmunds data. Fusions average transaction price was $26,586 in February, $2,772 more than Camry.

Rallying Cry

Im not sure if threat is the right word; I think theyre going to be a strong competitor to Camry, Jim Lentz, who becomes CEO of Toyotas North American operations today, said of Fusion. When you have the No. 1-selling car for 11 years, its anice rallying cry with your retail organization to keep that car No. 1, Lentz said in an interview.

Toyotas U.S. sales may rise 1.6 percent in March, the average estimate of eight analysts. Camry remained the best- selling car this year through February, with 11,244 more deliveries than Accord and 12,893 more than Fusion.

Toyota, Honda and Nissan may make it tougher for U.S. automakers to gain ground on them this month because of a push to boost sales at the end of Japanese companies fiscal year.

Fiscal Push

The three automakers collectively have posted bigger sequential increases in U.S. unit sales in March than the total industry each of the last three years, followed by larger drops in April deliveries, according to researcher Autodata Corp.

March ends up being a higher-than-normal seasonal increase or push by Japanese brands, Larry Dominique, president of TrueCar Inc.s ALG and a former product planner for Nissan, said by telephone. I always saw a push, some years stronger than otheryears.

Nissans gain in March 2012 from the month earlier was 28 percent, the largest among Japans three biggest carmakers last year, and setting a record for the Yokohama-based company. Sales dropped sequentially in April by 48 percent, the biggestdecline of the three companies.

Nissans deliveries this March may have dropped 2.1 percent from a year earlier, the average of eight estimates. Hyundai Motor Co. and Kia Motors Corp., the Seoul-based affiliates, may have combined to sell 6.8 percent fewer vehicles in Marchcompared with a year earlier, the average of seven estimates.

Chrysler 200

The strength of Chrysler cars such as the 200, which was revamped since Fiat SpA took control of the company in 2009, may have helped the company sustain a 35-month streak of U.S. sales gains even as it feels a pinch from Jeep factories retooling fornew models. Chrysler Groups deliveries probably increased 3 percent in March, the average of 10 estimates.

We were always kind of hit for the interior quality and fit and finish of our vehicles, Saad Chehab, head of the Auburn Hills, Michigan-based companys Chrysler brand, said in a Bloomberg Television interview. The 200 now has incredible interiors,a much tighter suspension, it has the engine of the year inside of it. Were really proud of this car.

Volkswagen AG may post an 11 percent gain in combined sales for its Volkswagen and Audi brands in March, the average of four estimates.

Bowhall, the Mercedes owner, isnt the first to see similarities between the new Fusion and Aston Martin, the maker of six-figure luxury cars that Ford divested in 2007. Columnist Jason H. Harper made the comparison in a November review for BloombergNews, which also praised its fuel economy.

The car has to look good to catch my eye, Bowhall said. He expects to pay about $35,000 for the Fusion hybrid, compared with the $52,000 spent on his C350. The Fusion doesnt drive like a hybrid, it doesnt feel like a hybrid, and if Im savingmoney at the same time that Im saving on my monthly payment, then, by golly, even better.

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