Posted on 08/20/2006 7:49:13 AM PDT by Flavius
DETROIT (AP) -- Ford Motor Co. said Friday it would temporarily halt production at 10 assembly plants between now and the end of the year, blaming high gas prices for pushing many consumers away from its pickups and SUVs and toward higher-mileage models.
ADVERTISEMENT Ford said the cuts will reduce the need for costly incentives to reduce bloated inventories. But they also illustrate just how out of step the lineup at the nation's second-largest automaker has become, as it loses market share to mostly Asian competitors under the watch of Chairman and Chief Executive Bill Ford.
General Motors Corp. and DaimlerChrysler AG's Chrysler Group also have been caught in the shift away from trucks and SUVs to smaller cars and crossovers as consumers seek better fuel economy. The Big Three's combined U.S. market share fell to 54.5 percent for the first seven months of 2006, down from 58.7 percent in the same period a year ago.
GM already has announced it will cut production 7 percent to 8 percent in the third-quarter.
Ford announced a turnaround plan in January that called for shedding 25,000 to 30,000 jobs and closing 14 plants by 2012. By year's end, the company was to have cut production capacity 15 percent.
Bill Ford said last month that the plan -- dubbed the "Way Forward" -- would be accelerated. He said Friday that the details would be revealed in September.
In response to the production cuts, Fitch Ratings downgraded Ford's debt further into junk status, while two other ratings agencies placed the company on review. Analysts said next month's announcements could include more plant closures and job cuts, as well as speeded-up introductions of new cars and crossovers.
The company said fourth-quarter production would be down 21 percent, or 168,000 units, from last year. Third-quarter production will be 20,000 units below what was previously announced and 78,000 units below last year.
For the full year, Ford plans to produce about 9 percent fewer vehicles than last year for a total of just above 3 million.
"We know this decision will have a dramatic impact on our employees, as well as our suppliers," Chairman and Chief Executive Bill Ford said in an e-mail to employees. "This is, however, the right call for our customers, our dealers and our long-term future."
He said it was the company's biggest North American production cut in more than 20 years.
Dearborn-based Ford, which lost $254 million in the second quarter, said last month that the speed of the market shift away from trucks had taken it by surprise. Like other U.S. automakers, Ford is heavily dependent on sport utility vehicles and other trucks, which have far higher profit margins than cars. Last year, 68 percent of the vehicles sold by the company in the U.S. were trucks, compared with 58 percent for the industry as a whole.
"An unprecedented spike in gasoline prices during the second quarter impacted our product lineup more than that of our competitors because of the long-standing success of our trucks and SUVs," Bill Ford said in his note Friday.
The nation's second-largest automaker said that by better matching inventories to demand, it can avoid costly incentives and reduce inventory carrying costs for dealers.
Reducing incentives will help improve resale values of vehicles, and more rational inventories will help "stabilize operating patterns for our plants and our suppliers," Mark Fields, Ford's president of the Americas, said in a statement.
The Wall Street Journal, citing unidentified sources, reported Friday that Ford is considering shutting down more factories and cutting salaried jobs and benefits by 10 percent to 30 percent.
Ford spokesman Oscar Suris declined to comment on the report.
The new production schedule will result in temporary shutdown this year at assembly plants in St. Thomas, Ontario; Chicago; Wixom, Mich.; Louisville, Ky.; Wayne, Mich.; St. Paul, Minn.; Kansas City, Mo.; Norfolk, Va.; and Dearborn, Mich.; Ford said.
Company officials would not say what specific impact the production cuts would have on workers. In general, hourly workers placed on temporary layoff receive 95 percent of their wages through state unemployment benefits and a supplement by Ford.
The United Auto Workers had no immediate comment on the announcement.
In Louisville, which has two affected plants, Mayor Jerry Abramson said he was told by Ford executives that the Louisville Assembly Plant, which makes the Ford Explorer and Mercury Mountaineer, will be shuttered for six weeks. The Kentucky Truck Plant, one of four plants producing the best-selling F-Series pickups, will close for five weeks in the fourth quarter, he said.
Abramson said state and local officials have asked to meet with Ford officials.
The production cuts are the second time this week that slower sales have forced Ford to announce changes. On Tuesday, it said it would trim the number of dealerships it has in 18 metropolitan areas. Dealer profits declined an average of 10 percent in the first half of 2006, the company has said.
In response to the production cuts, Fitch downgraded Ford and its finance arm Ford Motor Credit Co. to "B" from "B+" and lowered its senior unsecured debt to "B+" from "BB-."
"Implicit in the production cutbacks are expectations of continued weak pickup sales that have resulted in extended inventories," the agency said. "Volume declines in Ford's pickup segment, along with continued declines in mid-size and large SUVs, are likely to accelerate revenue declines and negative cash flows in 2006."
Standard & Poor's Ratings Services and Moody's Investors Service both put Ford's credit ratings on review for possible downgrades further into junk territory.
Ford shares fell 17 cents, or 2.1 percent, to close at $8 on the New York Stock Exchange.
Bank of America analyst Ron Tadross said the cuts are a sign that "Ford is getting more realistic about its share trajectory."
Craig Hutson, an auto analyst at the corporate bond research firm Gimme Credit, said that while the cuts are aimed at matching supply and demand in the long term, "the short-term ramifications will be ugly."
"Trucks are Ford's most profitable vehicles, and the sharp decline in production volumes will make it more difficult to see any signs of a turnaround at Ford," he said in a research note.
The production cuts are likely to affect the revenues of many of Ford suppliers.
"When our customers adjust production up or down, we obviously adjust accordingly," said Jim Fisher, a spokesman for Visteon Corp., Ford's largest supplier.
Fisher said the company was assessing the impact of Ford's cuts.
Associated Press Writer Bruce Schreiner in Louisville, Ky., contributed to this report.
Ford Motor Co.: http://www.ford.com/
In the past, Consumers Reports have rated all domestic cars as terrible. They use one vehicle to test drive and the rest is rated by consumers. Who only report the bad things. Consumers Reports and J. P. Powers are worthless in picking the best or worst products.
No it does not (necessarily) mean that at all, since foreign car makers manufacture in the U.S., and continue to expand their operations here.
I drove Fords for YEARS. They pinned their profits on Explorers because it was low hanging fruit. Now they may go out because of it. My last "big three" went 165k miles before the tranny blew. My last "rice mobile" went 280k before I sold it for a grand to some kid who is still driving it.
I am not anti-Ford, I just know that the last Ford I owned got shitty gas mileage and needed to be at the dealer every 15k miles or so for some issue. After it started costing 500+ bills per trip, I rid myself of it.
I just rented a ford focus z24. Excellent engine, handling and visibilty. Terrible ergonomics and the sheet metal was tin cannish. An excellent car to rent, I would never own one.
And we manufacture our cars in other countries. Unless you have the stats to know who's up and who's down, we can assume it's about a wash, with 20,000 to 30,000 layoffs coming our way.
Every Ford I have ever owned sucked, they engineer failure into their parts so they can keep ther dealerships in business.
Couldn't happen to a more deserving bunch.
Me neither. A new Focus may be fun to drive, but who knows when it could be Found On Road Dead ..
"but for those of us who live in the SnowyBoondocks... we have no choice."
Yeah. Same here. Got a 4WD Toyota truck (93).
It's the only way I can get out of my 1000 ft driveway at certain times of year.
You should see all the 4X4's on the used car lots in town!
Especially the cute way they slow waaaayyyyy down to go over a RR crossing...
Yep, the Ranger was a great truck back in the day! I stil have a 1994 4wd with 5 sp transmission that has 164,000 miles on it, burns virtually no oil between changes, has only had one thing go wrong with it and that was the clutch at 140,000 miles. It still gets 26 MPG on the freeway. It is sad they have let the Ranger go to hell along with their other products.
null and void said: Especially the cute way they slow waaaayyyyy down to go over a RR crossing.
The reason a lot of soccer moms drive SUVs is because of the death of the station wagon. It is difficult to fit two kids into the back seat of a small car when you have to strap them into a car seat, then when you add two or three more if you car pool and a small car doesn't cut it. SUVs, some of them, offer the room to haul lots of children comfortably, this goes for mini vans too but they died out also, at least to a large extent.
They probably don't need the 4 wd but some companies don't offer a 2 wd SUV, some do, some don't.
Making fun of someone's vehicle choice is disrespectful and also goes against freedom of choice, which isn't enumerated in the constitution but is still a freedom we enjoy. Don't want to buy an SUV? Don't. Are SUVs a bad choice for many? Maybe, but if so the many will find out about it eventually and stop buying them.
Your opinion on what vehicle to buy is just that, an opinion for YOU, and not applicable to everyone. I am sure there are many soccer moms who read and post on FR. If they want the advice of automobile experts such as yourself I am sure they will ask because surely everyone in the US has heard of you two major gearheads, correct?
Every Ford I've ever had has been a great car. I'm in the market again in a year or two. Hope that they either put out a super efficient diesel or a hybrid with a long lasting battery, because those are what I'm going to be looking for. The escape hybrid is something I'm interested in, but I don't want a $4,000 battery replace after four years.
I still think the biggest problem US automakers face begins with a "U".
Isuzu doesn't make any vehicles for this market....FYI
They stopped making the Assender?
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