July 26 (Bloomberg) -- When Ford Motor Co. starts selling its re-engineered Explorer sport-utility vehicle, it will ask U.S. buyers to do something unusual: Pay more for less.
Bucking an automotive tradition of charging extra for more horsepower, Ford will ask buyers of its redesigned 2011 Explorer to pay a premium for a small, 4-cylinder engine when the vehicle goes on sale in December. The Explorer’s standard engine will be a 3.5-liter V-6 with 290 horsepower, 53 more ponies than the optional 4-cylinder.
Ford began trying to convince consumers they should spend to save when it unveiled the Explorer at events in New York, Chicago and other locations today. The smaller engine has technology Ford said will give the seven-passenger SUV the same fuel economy as Toyota Motor Corp.’s Camry sedan that gets 19 mpg in city driving and 26 mpg on the highway. That’s more than 30 percent better than the 2010 Explorer.
“We really want to make a statement that the old baggage on fuel economy with the Explorer is gone,” Jim Holland, the Explorer’s chief engineer, said in an interview. “To get great fuel economy it takes technology, and it’s our view that people will pay for that.”
The second-largest U.S. automaker will be challenged to command a premium for the more efficient engine because U.S. gasoline prices have fallen 34 percent from their peak of $4.11 per gallon two years ago, said Jim Hall, principal of automotive consulting firm 2953 Analytics in Birmingham, Michigan.
“Why would you want to pay more for fuel economy when gas prices are going down?” Hall said. “People have very short memories.”
Ford told dealers today that the new Explorer with a V6 engine will start at $28,995, $1,000 less than the base price of the current model, said Jay Ward, a company spokesman. The XLT version with a V6 starts at $31,995, while the Limited trim level with a V6 has a base price of $37,995, Ward said.
Ford hasn’t yet said how much extra it will charge for the 4-cylinder, the smallest engine ever to power an Explorer.
“It’s going to be a challenge” explaining to Explorer shoppers why they should pay more for the smaller engine, said Larry Taylor, the dealer principal at Beau Townsend Ford in Vandalia, Ohio. “We’re going to have to have a lot of product knowledge and training so we can make people understand.”
Ford charges a $3,000 to $6,000 premium on its Flex model for V6 engines using the same direct-fuel-injection and turbo-charging technology as the 2.0-liter, 4-cylinder going into the Explorer, Hall said. The Explorer engine is likely to be less because it won’t be packaged with all-wheel-drive like on the Flex, he said.
“The market will determine which really is the base engine,” Hall said. “If the market says, ‘Forget it,’ they may have to lower the cost of this engine.”
The Explorer’s 4-cylinder engine won’t tow as much as the V6, Ford said. The front-wheel-drive, 4-cylinder version that is most fuel-efficient will have the least off-road capabilities, traditionally a key characteristic of the model.
Buyers of the Explorer will be willing to make those trade-offs for better fuel economy, Holland said. Ford said poor gas mileage is the No. 1 reason shoppers reject the Explorer, which saw sales fall 88 percent during the past decade, from 445,157 in 2000 to 52,190 last year.
“The impact of rising gas prices has really stuck with people,” Holland said. “People now buy more expensive light bulbs to be more efficient. We’re moving to a point where people make the choice to be more responsible.”
Ford rose 22 cents, or 1.7 percent, to $12.94 at 4:01 p.m. in New York Stock Exchange composite trading. The automaker, which posted profit of $4.7 billion for the first half, has risen 29 percent this year.
The Explorer’s improved fuel economy will be central to a marketing campaign that will reach more than 50 million people through social media such as Facebook, said Jim Farley, Ford’s global sales and marketing chief.
“Fuel economy is the core truth we have to get at,” Farley said at a media briefing on the Explorer July 20. Many of the 140,000 Explorer owners who trade in their SUV annually are “disappointed and want more on fuel economy.”
To improve the Explorer’s mileage, Ford cut its weight by about 100 pounds (45 kilograms) by switching the SUV from a heavy pickup-truck frame to the same chassis as the Taurus sedan. Designers also sculpted the shape in a wind tunnel to lower wind resistance.
The Explorer with the 4-cylinder engine will be the most fuel-efficient mid-sized SUV on the market, according to Derrick Kuzak, Ford’s product-development chief.
In the 1990s, the Explorer was the top-selling utility vehicle in the U.S. and earned as much as $10,000 per vehicle for the Dearborn, Michigan-based automaker.
“As goes the Explorer, to some extent, so goes Ford,” Farley said. “It’s the backbone of the brand.”
Ford expects to sell more of the new model, especially with optional equipment such as the 4-cylinder engine, Farley said, while declining to reveal a sales goal. Analysts estimate annual sales for the new Explorer may top 100,000 units.
“What’s more important than the number we sell is that people see the value and that they’re willing to buy the better, more highly equipped versions,” Farley said. “That’s the key for us.”
To contact the reporter on this story: Keith Naughton in Southfield, Michigan, at Knaughton3@bloomberg.net
To contact the editor responsible for this story: Jamie Butters at firstname.lastname@example.org