* Ford sees consumer shift to smaller cars as oil rises
* Ford prepared for higher demand for fuel-efficient cars
* "Fragile" economic recovery continues despite higher gas
SANTA BARBARA, Calif., March 3 (Reuters) - Ford Motor Co (F.N) 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 (GM.N) 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 placed 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 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."
(Reporting by Nichola Groom; Editing by Gary Hill)
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