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Ford makes big production cuts

Citing gas prices, the automaker decides to build 168,000 fewer vehicles in the fourth quarter.

By ASSOCIATED PRESS
Published August 19, 2006

DETROIT - Ford Motor Co. announced its largest production cuts in more than 20 years Friday, blaming high gas prices for pushing many customers away from its pickups and SUVs and toward higher-mileage models.

Ford said it would temporarily halt production at 10 assembly plants between now and the end of the year to reduce the need for costly incentives to trim bloated inventories.

The decision illustrates 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.

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. The details will be revealed in September, he said Friday.

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 quicker 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 more than 3-million.

"We know this decision will have a dramatic impact on our employees, as well as our suppliers," 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."

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, of Dearborn, Mich., 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 United States 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.

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.

Ford said the new production schedule will result in temporary shutdowns 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.

BOEING TO CUT PRODUCTION

Boeing Co. said Friday that it would start shutting down production of its cavernous C-17 military cargo plane in Long Beach, Calif., marking the possible end of aircraft manufacturing in a region that once dominated the industry. Unless Congress authorizes new orders, the decision could trigger a ripple of job cuts nationwide, including more than 7,000 Boeing employees and an additional 25,000 workers in 42 states that provide parts for planes still moving everything from tanks to troops around Iraq and Afghanistan.

[Last modified August 18, 2006, 21:01:54]