Ford Boosts Prices $117 Per Vehicle as Materials Costs Rise

Ford Motor Co. (F), the second-largest U.S. automaker, raised prices by $117, or 0.4 percent, per vehicle because of higher costs for raw materials such as steel.

The increase isn’t related to supply disruptions from the March 11 Japanese earthquake and tsunami, said Todd Nissen, a company spokesman.

"This was in the works for months," Nissen said in an interview. "We’re responding to higher commodity prices, and this is in keeping with what we’re seeing from our competitors."

Toyota Motor Corp. (7203), the world’s largest automaker, said last week it was raising prices on most models by an average of 1.7 percent. Higher commodities prices may add more than $1 billion to Ford’s costs this year, the company has said.

Ford, based in Dearborn, Michigan, is shutting factories in Kentucky and Belgium this week because of parts shortages related to the crisis in Japan. Production disruptions in Japan may lead to a tight supply of vehicles from automakers such as Toyota and Honda Motor Co., Brian Johnson, a Chicago-based analyst with Barclays Capital, wrote today.

“In the face of potential supply disruptions, we expect price discipline to improve further through the spring time, when typically incentives increase seasonally,” Johnson wrote in a research note.

Auto-incentive spending throughout the U.S. industry in March fell 3.6 percent from February and 11 percent from a year earlier to $2,484 per vehicle, according to Autodata Corp. in Woodcliff Lake, New Jersey.

Higher prices and automakers limiting sales to fleet customers may reduce U.S. sales in April and May, Johnson wrote.

Ford Sales

Ford last raised prices by $130 per model, or 0.5 percent, in January, Nissen said. Ford, which posted a 16 percent increase in U.S. sales last month, can command higher prices even in a fragile economic recovery, he said.

“There are signs of economic recovery such as job growth,” Nissen said. “There are price increases in other sectors, such as gasoline.”

U.S. unleaded gasoline prices averaged $3.66 a gallon yesterday, up from $2.83 a year ago, according to AAA. The average price in the U.S. peaked at $4.11 in July 2008.

Ford rose 39 cents, or 2.6 percent, to $15.55 at 4:01 p.m. in New York Stock Exchange composite trading, its highest closing price since Feb. 18. The shares have fallen 7.4 percent this year after rising 68 percent last year.

Chrysler Group LLC, the U.S. automaker operated by Fiat SpA, said its minivan assembly plant in Windsor, Ontario, will be closed this week because of a parts shortage.

The supply shortages aren’t the related to the disaster in Japan, Katie Hepler, a Chrysler spokeswoman, said in a statement.

To contact the reporters on this story: Keith Naughton in Detroit at knaughton3@bloomberg.net; Craig Trudell in Detroit at ctrudell1@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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