Is Ford’s Alleged 2010 Fusion Shortage Guerilla Marketing or Legitimate?

By Chris Haak

06.08.2009

2010 Ford FusionOver the weekend, we received word from a few sources that Ford is simply running out of 2010 Fusions, and simply cannot make enough of them to satisfy demand.  A typical story:

Thanks to all the great reviews for the 2010MY Ford Fusion and all the positive media attention given the Fusion and Ford, it looks like the Fusion is finally starting to gain some traction. Unfortunately, for some of us Ford Dealerships, Fusion inventory is hitting a critical stage. My Connecticut store had been advertising 2009 Fusions from November 2008 through late April 2009, almost exclusively on TV at a total cost of over $100,000. Last month the store sold 16 Fusions, mostly 2010’s, and we have only 6 left in stock and only 3 more that are due to arrive this week. After that, we’ll have allocation for only 2 more 2010 Fusions based on the most recently completed “wholesale” done last week. Ford offered us 2 Fusions for the next production cycle and we asked for an additional 8 but were informed by our Ford Zone Manager that we would only get the 2 Fusions offered as the plant is already working overtime and no additional units are available.

As such, it seems that Ford should consider retooling a 2nd plant for Fusion production if it’s not already in the works. Perhaps it’ll be a PR announcement soon amongst those that Ford is orchestrating so well.

You know what?  The shortage is non-news, and part of the normal launch of a new model. Ford can’t snap their fingers and expect 50 Fusions to show up in dealer lots overnight. Eventually, as with 99.99% of all cars, the supply will catch up with demand in a couple of months (if not less) and you’ll be able to buy as many Fusions as your heart desires at your local dealer.

Ford’s marketing Chief Jim Farley is a brilliant creative mind, and I wouldn’t be surprised if these stories were his brainchild.  We’re not talking about limited-production cars, here – we’re talking about $20-25k, garden-variety midsize sedans.  Most Fusions will probably come with four cylinders, automatic transmissions, and cloth seats.  Not the type of car to wait in line for overnight at a dealership, or to put a $5,000 deposit on.

The idea that Ford might want to retool another factory to increase production of the Fusion would be just about the most stupid thing the company could possibly do right now.  This is not a reflection of Fusion demand suddenly exploding, but simply an example of the well-received 2010 Fusion’s production and launch not leaving enough vehicles in the pipeline to meet initial demand.  In fact, high inventories of the 2009 Fusion, Milan, and Zephyr late in 2008 caused Ford to decide to shut down the trio’s Hermosillo, Mexico plant for all of January 2009, in spite of the need to produce the new-for-2010 models of all three cars.  Volume production didn’t really begin in earnest until February for the three cars.

Sales figures for the Fusion were up a healthy 9.3% in May 2009 vs. May 2008, but year to date, Fusion sales are down 13.1% (not as bad as the overall market by any stretch, but still not evidence of the need for more Fusion production).  Milan and MKZ sales were both significantly lower both year to date through May 31, and during May 2009.  Overall, Ford has sold 86,778 Fusions, Milans, and MKZs through May 31, 2009, while it sold 106,675 of the same cars through May 31, 2008, which is an 18.7% decrease.

On the production side, Hermosillo has produced 58,384 Fusions through the first week of June, 2009, while in that same period, it produced 90,398 of them.  The plant also produced 8,314 Milans during the same period in 2009, against 15,653 in 2008, and 7,309 MKZs in 2009 and 16,217 in 2008.  Basically, the shortage is coming from production falling significantly.  Year to date 2009 production of the three cars at Hermosillo was 74,007 units, while it was 122,268 units in the same period in 2008.  That’s 48,261 fewer units produced in 2009, or a 39.5% production decline.

It’s not that Ford needs more capacity for the Fusion – if it produced the car at even last year’s pace (or a little behind it), there would be no issues with demand exceeding supply and dealers not being able to find cars for buyers.

This is not a new phenomenon that is unique to the 2010 Fusion.  When the Pontiac Solstice and Saturn Sky were launched, it was impossible to find the cars and dealers were tacking $5,000-plus markups on them.  Those cars are now in abundant supply and their assembly plant in Delaware is being closed under GM’s bankruptcy.  The 2006 Chevrolet Corvette Z06 was easily fetching six figures at many dealers at its launch, and now can be yours for just $64,495 (includes GM loyalty rebate).  The Fusion example is another reason why I don’t let dealer markups bother me.  By nature, I’m not a patient person, but knowing I could save thousands – if not tens of thousands – of dollars on a new car by waiting three months, I become far more patient than normal.  Dealer markups offend me, but they also don’t affect me.  The prices will come down after the gotta-have-it effect wears off, or those marking-up dealers won’t be selling that car.

So if you want a new Fusion, just wait a few months.  And if you’re Ford, please don’t spend $600 million to retool another factory to build Fusions just for a short term supply problem.

COPYRIGHT Autosavant – All Rights Reserved

Author: Chris Haak

Chris is Autosavant's Managing Editor. He has a lifelong love of everything automotive, having grown up as the son of a car dealer. A married father of two sons, Chris is also in the process of indoctrinating them into the world of cars and trucks.

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6 Comments

  1. While the Fusion is undoubtedly a good car, they are not that hard to come by. The local Ford Dealer is advertizing Fusions starting at $15,900.

    It would not surprise me at all if there is a shortage of the Hybrid version, Ford has always underestimated demand for their Hybrids

  2. The $15,900.00 is on a 2009 Fusion, undoubtedly there are still a few left. The sale rate on the Fusion in May was right at plant capacity. This took place while the overall market was down over 30%. The question isn’t if Ford will ramp up an additional production line to get more volume it is a question of when. With the Mazda6 underperforming at Flat Rock and the days of the Mustang filling out two shifts probably over, it seems likely that Ford may try to squeeze another 50K or more out of Flat Rock. Of course, that may not be enough. Louisville seems a prime location to get a whole shift producing an additional 100K + since it has been going through a conversion into a flexible manufacturing plant for the past year with no product officially assigned to it. Everyone calls the Fiesta a game changer but in fact Ford already has a game changer in the Fusion with potential for the Taurus to be very well received as well. The impressive market share gains in the past six months will pale in comparison to what is about to happen once they get Chicago up to two shifts and Hermisolla running full out. Then early next year the Fiesta appears to have the goods to totally embarrass all current entries in the B-segment. Will Ford break 20% of the U.S. market by the middle of next year? The GM and Chrysler fire sales, with help from the Koreans and Nissan, are the only thing keeping Ford under 18% now.

  3. The problem isn’t production matching demand. It is that there are too many dealers. Since Ford IS matching production to demand, each dealer is getting fewer vehicles to stock on the lot. It works in a macro sense, but in a micro sense leaves every dealer short on variety. It means customers will have to hunt around for the exact car they want, or dealers will have to do alot more swaps, which wastes time and money.

  4. Lance48, I think you’re being overly optimistic about Ford’s potential. In spite of being in a better competitive position than GM or Chrysler with its [relative, yet still poor] financial health and large debt burden and bloated dealership count, there are more than just three players in this market nowadays. EVERY point of market share is a huge fight.

    Doesn’t Hermosillo have capacity for something like 400,000 cars? I couldn’t find the number in a quick search, but if the real number is anywhere near that, they do NOT need the effort or expense of building Fusions elsewhere. This is *NOT* a long-term problem, and it’s one that can’t be solved outside of Hermosillo in less than 12 months, by which point supply will have met demand. Had 2009 CY production been equal to 2008 CY production, we would not even be talking about this.

    I’m not as optimistic as you are on the Fiesta and Taurus, either. The Taurus is basically a rebodied Five Hundred (far nicer looking with a great interior, but are the car’s buyer demographics really going to change?) and the Fiesta doesn’t seem to offer anything that the competition (specifically the Fit and Yaris) do not aside from arguably better styling. Some members of Ford management have gone on record saying that they’re trying to remove some of the cost from the Euro Fiesta to meet US price point expectations, and that unfortunately means a cheaper interior. That being said, it will no doubt be a decent seller for Ford and is clearly the best subcompact from GM, Ford, or Chrysler.

    Mulally is too smart to open another production line for the Fusion. Mark my words that this will not happen. This is a totally normal phenomenon when a new car is launched. In the Fusion’s case, it’s a greatly improved new car that I happen to like, but realistically, it’s nothing more than a mid-cycle enhancement of a car that dates to 2006. At least Ford was smart to focus its money on powertrains in the name of fuel economy and performance for this go-round.

  5. “Ford has always underestimated demand for their Hybrids”

    I’ve heard that Ford limits production of their hybrids because they lose money on every unit. Their hybrids are strictly a long-term investment on their part to develop the technology and get a foothold in what they hope continues to be a growing market (which they’ve seemed to do, so far).

    As far as shortages on new cars…I’ve never understood the need to rush out and buy any new or newly redesigned car, as typically you have to pay sticker price or more. New car depreciation is steep enough as it is, let alone paying an extra few grand for a few months of exclusivity!

  6. @Chris

    Hermosillo is your standard 300K plant on three shifts. They could probably squeeze out more like 350K with overtime on each shift. However, 15 – 20K of that goes to South America and now that I have slept on it I realize that my enthusiasm for the potential of this car may have gotten the better of me. Ford has been running right around 10 – 12% rental fleet on the Fusion in recent years so I think their first move would be to cease that part of the business and move a higher percentage through retail channels. Just like Honda used to do. If you take a trip to any rental lot it is alot easier to find a Honda than it used to be. While Fords are becoming more and more scarce. And after having numerous experiences renting Accords in recent months it has only reinforced my confidence in the Fusion’s potential.

    The Fiesta’s point of difference has been the fact that it is a low end car with near-luxury interior so I would hope the information you have received is incorrect regarding the decontenting of the Fiesta. Depending on gas prices, I imagine it will average 5K a month. Keep in mind neither the Fit or the Yaris have what one could call nice interiors. Both appear to be Honda and Toyota’s attempt at mimicing Chrysler’s approach to interior quality.

    On the Taurus front I think you are grossly underestimating the potential of this car. While I don’t anticipate it selling the 20K+ a month that the Fusion is capable of in a more normalized market, I do see it hitting 10K a month on occassion and averaging about 8,500 units a month with more of them going to retail than in years past. At those volumes Chicago will be running one shift with consistent overtime to produce the Taurus and 25 – 30K a year of the MKS. Then when the Explorer starts production at Chicago the plant will be running on two full shifts.

    All the rhetoric regarding Ford not taking a bailout has done for Ford what their marketing dept. never could. And that is to drive showroom traffic. The fact that Ford is on the cusp of having numerous vehicles that are best in class at this time bodes very well for them. Hence my confidence for Ford’s future marketshare levels.

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