Ford poised to ramp up Fusion output to challenge Camry

Ford Motor Co. has bigger aspirations than challenging Toyota Motor Corp.'s Camry. Its Fusion is about to take on the law of supply and demand.

An assembly plant about 20 miles south of Ford headquarters in suburban Detroit is preparing to roll Fusion family cars off the line for the first time. The additional supply will test the staying power of a more than $2,300 per-sale premium that Fusion has commanded this year over America’s longtime best-selling car, the Camry.

“Ford has managed to be a volume player competitive with the Toyota Camry and the Honda Accord while still maintaining a far more competitive price point,” Alec Gutierrez, an analyst with Kelley Blue Book, said by telephone. “You might see prices come down a few hundred dollars, but I don’t think they face any significant risk of serious price degradation. They’re going to hold their premium spot in the segment.”

The Fusion is Ford’s best shot at eventually reclaiming the car-sales crown it last held in the 1990s heyday of the Taurus, a model CEO Alan Mulally studied at Boeing Co. The Fusion’s sale surge -- 13 percent so far this year -- has cut a quarter of Camry’s sales lead, demonstrated how much consumers care about attractive design and illustrates how U.S. carmakers can now compete in all segments.

It has also overwhelmed capacity at the only plant where it has been made, in Hermosillo, Mexico, which couldn’t make more than about 350,000 Fusions and Lincoln MKZ sedans. The Mustang assembly plant in Flat Rock, Mich., hired 1,400 employees to produce as many as 100,000 more Fusions.

Climbing capacity

The added output draws Ford closer to production levels that Toyota and Honda Motor Co. reach with their Camry and Accord. It also positions the No. 2 U.S. automaker to continue growing in coastal states that were long a source of weakness.

The average price that the Fusion has sold for this year through July climbed 5.8 percent to $26,343, behind only Volkswagen AG’s Passat in the mid-size car segment, according to Kelley Blue Book.

Fusions are selling at a premium of $1,176 above the segment average and $2,378 over the Toyota Camry, which ranked No. 11 in segment pricing this year, behind entries such as Chrysler Group LLC’s 200 sedan, said the researcher, which includes some incentives in its analysis.

Camry’s average prices have fallen 2 percent to $23,965, and the car has slipped from ranking eighth in the segment at this point last year.

Fuel economy

“The Fusion is probably the most interesting mid-size car because it’s being sold on a variety of fronts,” Alan Baum, an independent auto analyst in suburban Detroit, said by telephone. “No. 1, it’s gorgeous, and the fact that design matters in the mid-size segment has not always been a given.”

Another selling point has been Fusion’s fuel economy, said Baum, whose research on electric and plug-in vehicles was used by the Obama administration to set U.S. green car sales goals.

Ford is offering Fusions powered by a standard gasoline engine, three turbocharged EcoBoosts, hybrid and plug-in hybrid powertrains -- everything but all-electric, Baum said.

The range of options has enabled Ford to generate interest by marketing the 47 miles per gallon highway fuel economy rating for Fusion hybrid, even though the bulk of sales are the traditional gasoline-engine model rated 34 mpg highway.

California gains

Improved fuel economy for the redesigned Fusion sedan and Escape SUV as well as efficient new models such as the C-Max hybrid are fueling Ford’s growth in California, a state that has given American carmakers fits for years.

The Ford brand’s 18 percent jump in California light-vehicle sales during the year’s first half put the marque within 0.1 percentage point of the Honda brand’s market share, according to the California New Car Dealers Association.

“It was not because of pickup trucks that Ford became more competitive in California,” Baum said. “C-Max is essentially all additive, and the Fusion hybrid has done quite well.”

Ford is training new workers at its assembly plant in Flat Rock to help boost inventory in markets such as Los Angeles, San Francisco and Miami. While Ford had about 40 days supply of Fusion across the country at the beginning of this month, the carmaker carried enough stock to last 30 days in those markets, said Erich Merkle, its U.S. sales analyst.

Detroit’s cars

“Ford spent a lot of money on the vehicle, it’s gotten really good reviews, it looks really nice, and you want to be able to make as many as you can now,” said Adam Jonas, an auto analyst for Morgan Stanley.

Even with its looks, prices will probably come down some as Ford accelerates Fusion production, because the earliest models were loaded with content and the extra output may be of lower-priced versions, Jonas said in a telephone interview.

The automaker has said it’s on track to increase Fusion production this quarter.

“We have an automobile market unlike any other in the last 40 years, where everybody is equal in that they all have terrific cars,” said Maryann Keller, principal at auto-industry consulting firm Maryann Keller & Associates in Stamford, Conn. “Now, everybody is fighting for every sale.”

Camry challenge

The Fusion has prompted Toyota to acknowledge the challenge it faces to maintain leadership for its Camry sedan, which has reigned as the top-selling U.S. passenger car for 11 years and 15 of the last 16.

“It is true that rival carmakers have come out with very competitive models in the segment, and that competition in the U.S. mid-size sedan segment is becoming fiercer,” Nobuyori Kodaira, a Toyota executive vice president, said last week in Tokyo. “What we need to do is to come out with even more competitive models.”

The additional production from Flat Rock could allow Ford to stretch for as much as 450,000 units of combined annual Fusion output from the Michigan factory and its Hermosillo plant in Mexico, said Jeff Schuster, an analyst for LMC Automotive.

The researcher estimates that Toyota has capacity in North America to build about 475,000 Camrys per year, while Honda can assemble about 450,000 Accords.

LMC forecasts Ford making about 350,000 to 360,000 Fusions this year, Schuster said.

“Ford is not saying this extra production is what we’re going to do to enable us to be the most popular car in America,” said Baum, the independent analyst. “That would be foolish. This car is profitable and can remain profitable even with more volume. The design of it has a longer shelf than most mid-size vehicles.”