Ford Puts Mustang Production on Hold – But Move Could Hurt Continental Launch

New luxury sedan also faces first recall.

by on Oct.11, 2016

Mustangs won't roll down the Flat Rock, Michigan, plant line for a while as Ford looks to reduce bloated inventory levels.

Two years after launching an all-new, 50th anniversary Mustang, Ford Motor Co. is putting production of the pony car on temporary hold as sales slide and inventories mount.

Mustang sales have fallen sharply this year, and tumbled 32% in September compared to year-ago levels. Competition has been one of the key factors, demand for the Ford muscle car hurt by the launch of an even newer Chevrolet Camaro. But both models – as well as the rival Dodge Challenger – have been feeling the impact of shifting market trends from passenger cars to SUVs and other light trucks.

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While the week-long closure of the Flat Rock, Michigan, plant will help bring bloated Mustang inventories in line, analyst David Sullivan said the move will have an “unfortunate” side effect, halting the slow ramp-up of production of the new Lincoln Continental, the new flagship of Ford’s luxury brand.

“It’s unfortunate because the Continental rolls down the same assembly line as Mustang, and it is in short supply,” said Sullivan, senior auto analyst with AutoPacific Inc. “It’s happening at a critical time when Ford is trying to get that model into showrooms.”

Further complicating matters, the new Lincoln sedan has been targeted by recall, a headlight issue prompting the maker to fix 1,900 of the luxury cars.

The decision to put Mustang production on temporary hold was driven by the need to reduce inventories that now stand at an 89-day supply, or nearly 50% higher than what most analysts consider a healthy norm on dealer lots.

The new Lincoln Continental is already subject to a recall for a headlight problem affecting 1,900 cars.

Overall demand for performance vehicles has been strong this year, benefiting from low fuel prices as well as increased options. Manufacturers have been muscling up across their product line-ups, everything from the new 2017 Hyundai Elantra Sport to two new high-performance versions of the Mercedes-AMG GT unveiled at the Paris Motor Show late last month.

Mercedes has also been beefing up its light trucks, with AMG versions of the various GL sport-utility models. And that trend can be seen across the industry.

It doesn’t help that coupe sales, in general, have been on the decline for a number of years. But sporty coupes are particularly vulnerable, explained Sullivan, noting that, “They’re hot when they come out, but that usually lasts just 12 to 18 months.”

Ford reported a 32% decline in Mustang last month, at 6,429 units sold. For the first nine months of 2016, demand is off 9.3%, at 87,258 cars sold.

(Click Here for more about Hertz offering up Ford’s classic “rent-a-racer.”)

That’s despite some hefty incentives. According to J.D. Power tracking data reported by the Detroit News, the average Mustang carried a $2,700 giveback in September, which was actually down from $3,000 the month before.

The new Camaro has caused some sales headaches for the Mustang, but Chevy's looking for ways to trim it inventory levels as well.

Camaro has proven a tough competitor since its return to the Chevrolet line-up in 2009, after a lengthy sabbatical. Sales surged 25.4% last month – in part due to a tripling of incentives, to $3,300, according to that J.D. Power data. The Chevy sports coupe narrowly beat Mustang in September, with sales at 6,577.

But Camaro inventory is even higher than Mustang, at 120 days supply in September. Chevy is apparently hoping big incentives will narrow that number, and inventory did drop from the 139-day level in August.

But analyst Sullivan said, “I wouldn’t rule out” the possibility that General Motors will also move to cut production of the Camaro, if necessary. That pony car is assembled at GM’s Lansing Grand River Assembly Plant which also builds the Cadillac ATS and CTS models. Those luxury cars have also suffered sluggish sales in recent months, so a brief plant furlough might not pose major headaches for GM.

(Click Here to see the new Annie Leibovitz ad campaign for the Lincoln Continental.)

But for Ford, putting things on hold at the Flat Rock plant – which was originally built as a joint venture with Mazda – is causing some serious issues. While it will help bring Mustang inventories in line it will stretch out the debut of the new Lincoln Continental.

First shown in concept form at the New York Auto Show in April 2015, and then, a year later in production form, the Continental replaces the old Lincoln MKS. It brings back one of the brand’s most beloved nameplates and is meant to not only move the marque up-market but help challenge luxury brands as diverse as Cadillac, Lexus and Mercedes-Benz.

Production of the Continental has been running at an extremely slow pace, in part to ensure top quality for a closely watched new product. So, only a relatively small number of the luxury sedans will be lost due to the plant furlough.

Nonetheless, said Sullivan, even the most modest delay in the launch of such an important product is “unprecedented.”

(To see more about the Mustang being the top-selling sports car in Germany, Click Here.)

There’s one positive side to the slow ramp-up of Continental production. Lincoln is recalling 1,900 of the sedans because their headlights might not meet federal visibility standards. It appears a number of those models might not yet have reached the hands of customers. The maker says that for those buyers who have taken delivery, it will make repairs at no charge.

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