Finance and Insurance in USA

SANTA BARBARA, Calif. (Reuters) - Ford Motor Co. plans to hold the line against price discounts in the U.S. market despite pressure from competitors who have spent more heavily on incentives to boost sales in the first months of the year, Executive Chairman Bill Ford said on Thursday.

"One of the things that comes with having a better portfolio is the ability to hold back on discounts," Ford said in an interview at the Wall Street Journal ECO:nomics conference in Santa Barbara.

"We've planned our production very conservatively so we're not caught in the game of cranking out too many vehicles and then figuring out how we have to push them out the door."

Ford's rival General Motors Co. logged an industry leading 46 percent sales gain in February, stoked by incentives that also led the industry. Ford's sales were up 14 percent for the month.

"You can't be completely immune to what your competitors are doing, but we've shown a lot of restraint in the marketplace, and I think that's appropriate," Ford said.

With gas prices surging, Ford said he expected to see consumers shift to buying smaller, more fuel-efficient cars -- a market Ford is better able to serve than it was the last time oil prices spiked in 2008.

U.S. oil prices were near $102 a barrel on Thursday, the highest level in nearly 2-1/2 years.

"You will see a shift, I believe, to smaller cars, smaller SUVs," Ford said. "We are very prepared. I love our portfolio because it plays right into our strategy, which is to be the fuel economy leader."

Ford is making small, more fuel-efficient cars more attractive to consumers by incorporating premium-priced features, including electronics and navigation systems, that also help boost the margins on those sales, Ford said.

"If you look back at what used to be considered Green vehicles, it really meant very small vehicles that were no fun to drive and that were stripped of all content ... you were lucky if you got an FM radio," Ford said.

"What's different today, though, is that our smallest cars in many cases have more technology than some of the bigger cars. We choose to introduce technology first into that segment. As content goes into the vehicles we can price for it."

Ford rolled out the early version of its Sync audio and phone system developed with Microsoft Corp. on its Focus small car for the 2008 model year.

Ford executives have said repeatedly that the automaker's intent is to compete by offering vehicles that hold their value without big, up-front incentives -- a strategy that Honda Motor Co. and others have long followed in the U.S. market.

Ford's average incentive spending per vehicle in the U.S. market in 2011 has been just under $2,800, less than the amount spent by GM, Chrysler and Nissan Motor Co., according to market research firm Autodata Corp.

Ford's 2012 Focus, set to be launched shortly, is the first real test of Ford's strategy of using fewer platforms and fewer suppliers to reduce costs.

In addition, Ford is marketing the Focus with a first-of-its kind global ad campaign that will highlight technology available for the small car, including a rear view camera and rain-sensor wipers.

Bill Ford said it was a sign of the company's progress that it was manufacturing the fuel-efficient Focus at its Michigan Assembly plant outside Detroit and making money on it.

"That's not something that would have been possible years ago," he said.

Ford also said that the economic recovery, albeit "fragile," appeared to be continuing despite higher fuel prices.

"Any time you see inflation, whether it's in basic commodities or oil or food, they all cumulatively become an issue," Ford said. "So far it looks as if the fragile recovery that we've been in is still continuing. So I think that's a good sign. But who knows? Who knows what next political event may trigger another dislocation in price."