Ford Offers New Incentives as Price War Escalates

Ford Motor Co. (F), which has warned that its automotive operations may not be profitable this year, Friday said it was offering cash rebates for the first time on several new cars and sweetening incentives on its slow-selling Explorer SUV (search).

The move came after the second-largest U.S. automaker Wednesday reported its 12th straight month of declining U.S. sales and after rival General Motors Corp. (GM) ratcheted up Detroit's long-running incentives war with an aggressive new consumer rebate program.

GM, suffering from a sales slump as well, said Wednesday it was offering all customers the same steep vehicle discounts it gives employees.

Analysts have likened the GM deal to a clearance sale, aimed at slashing inventories of unsold cars and trucks by selling them off at wholesale, bargain-basement prices.

Ford -- which earlier this week raised cash incentives on a few other vehicles -- said it would now offer $1,000 cash back deals on its 2005 model Five Hundred and Montego sedans.

The deal also applies to the 2005 model Freestyle wagon, a Ford spokesman said.

The three vehicles were launched last fall and had sold without any customer cash incentives until now.

The automaker also raised the cash rebate on its four-door Explorer sport utility vehicle by $1,500 to a total of $5,000.

U.S. sales of the Explorer fell 35 percent in May from May of last year and are down about 25 percent so far this year. High U.S. gasoline prices have hurt sales of many mid- and full-size SUVs, but especially the older, fuel-thirsty models offered by Detroit's traditional Big Three automakers.

Despite its sales slump, the Explorer remained the top selling SUV in the United States last month.

Ford, which saw its U.S. sales slip 3 percent in May from May 2004, is preparing to launch a redesigned Explorer this fall.