Ford's New Fusion Drives Big Gains

Ford Fusion Hybrid. Photo Source: Ford Motor Company

There's no question that it's a striking car, with its sleek flanks and Aston Martin-inspired nose. And its interior is a pleasant surprise, well-trimmed and loaded with luxury-car touches.

But for Ford , and for more and more new Ford customers, the beauty of the company's new Fusion sedan is much more than skin-deep.

The new Fusion is another big hit for Ford
The old Fusion was a very good car, and a strong seller for Ford. But the new car, introduced late last year, has taken things to a different level. So far in 2013, Ford's new midsized sedan is one of the top five models in U.S. sales - a trend that looks set to continue when Ford reports its March sales numbers on Tuesday, say analysts.

The Fusion still has a long way to go to displace Toyota's Camry from the top of the U.S. sales chart. In the first two months of 2013, the Camry outsold the Fusion by almost 13,000 cars in the U.S. Ford isn't likely to catch up soon: Its factories are already running at full capacity, and then some.

Adding more production capacity will require a big investment from Ford. But meanwhile, the company has to be pretty happy with the model's success so far. The Fusion's "turn rate", or the amount of time individual cars spend on dealer lots before they're sold, is shorter - meaning, it's selling faster - than both the Camry and Honda's Accord, the Fusion's other big rival. And the handsome Ford is commanding higher prices than either of its major Japanese rivals, according to a Bloomberg report.

Incentives are still higher than rivals'
That's not to say that there are no concerns. Ford's "incentives", those cash-back or cheap-financing deals that automakers often tout in TV commercials, are still higher than the company (and its investors) would like. Ford's offers on the Fusion are higher than Toyota's on the Camry; Toyota's incentives are regularly among the lowest in the industry. That's an artifact of lingering customer (and dealer) expectations from Ford's bad old days, when discounts were needed to keep so-so products moving.

Ford's products are much improved now, but those discounts are still part of the business. The company would surely like to get its per-vehicle incentives down closer to Toyota's levels to improve its already-strong U.S. profit margins, but that will take time.

Ford has made progress in lowering its incentives relative to competitors over the last couple of years. Its overall per-vehicle spending on incentives has been considerably lower than both General Motors and Chrysler over the last several quarters.

Lowering incentives further will require time, discipline, and continued close attention to product quality. But as the success of the Fusion is already showing, Ford seems to be on the right track.

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Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool recommends Ford and General Motors and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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