Ford to Halt Production at 10 Plants

ap ^ | 8/19/06 | AP

[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/

[MSM Hater]

Check out this site that talks about the Ford boycott. It has examples of Ford homosexual ads and the magazines in which it places them.

[MSM Hater]

Check out this site that talks about the Ford boycott. It has examples of Ford homosexual ads and the magazines in which it places them. Here's the link: http://www.boycottford.com/

[HarmlessLovableFuzzball]

I once rented a Ford Focus SE and drove all the way from Portland to N. California and back. For a small car it was top notch, the best small car I have ever driven. Crisp handling, strong engine and well equipped. Even though I drive Japanese myself, I was really impressed with this Ford.

[alice_in_bubbaland]

LOL! My 1975 Ford Pinto was an exploding time bomb on wheels! Sure as heck wasn't a car!:(

[Malsua]

However, it is not that hard to be prepared and the car companies should have had competent small cars ready to roll out and they do not.

ANY car company that did not have plans on the board for an efficient car simply did not learn the lesson of 1979-80. If I had been the CEO of FORD, I would have had a plan to ramp up production of something small to mid that gets decent mileage. I'd have had it in the wings since the mid 80s. Every year, they update it somewhat and have the ability to push out a bazillion of them at the drop of a hat.

There is no suprise in oil prices. It will again recede some in the next couple years and gas hogs will surge in popularity...not having an alternative is a showstopper.

[EEDUDE]

"soccer mom's driving tanks on flat Phoenix roads always crack me up"

I'd be willing to bet that 75% of these 4WD SUV's will never even see a dirt road.

But STATUS is important!

Witness the latest Hummer commercials where the Mom and kid get pushed out of the line for the slide at the playground...

Solution? Go buy a Hummer! Then you'll BE SOMEBODY.

Madison Avenue is having to scrape the bottom of the barrel to come up with reasons for the average person to own something like a Hummer.

[Ghost of Philip Marlowe]

That's a lot of new white-collar jobs that are going to be created suddenly for or by these laid-off workers. Think of all the new business they'll open and the new jobs those businesses will create. This is great news economically.

At least, that's what we're constantly told will be the result of letting other countries take our jobs.

[apackof2]

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[xarmydog]

I once restored a 1955 Ford F-350 for an old farmer who bought it brand new.At the time,I had recently purchased a brand new 1995 F-350.It came with four wheel drive,long bed,460 fuel injection,five speed.When I asked the old farmer how he got the large dents in the roof,he said that when he would pick up sawdust,his hands would climb on the roof to mash it down to carry more.The sawdust was sold by weight,and when it was loaded,it would hold five tons of sawdust.I was stunned.I had no reason to doubt the farmer,as he chuckled about avoiding the weigh stations,as a very large ticket would ensue.Then I looked at my new truck and thought,it would never hold that much weight.I came to the conclusion that his old pickup would carry two of mine!Mine would maybe carry one of his!Being in a country environment,many pickups would be used to haul hay.Usually as many bales as possible,at a time.Many times I would have farmers come to my shop complaining about their beds being out of square,and what could be done to fix them.The first question I would ask was,you hauled hay in it?The answer was yes, which explained why their beds would be crooked.A truck bed loaded,driving on a slant,would put them out of shape on the first load.I never repaired them,as I knew they would be back.Again and again.It did take a little luster off my new truck purchase though.

[1rudeboy]

I'm sure that somewhere in the constellation of Ford "worldwide" there exists a better-than-decent design. The problem is that (most of? all of?) Ford's North American plants are not tooled to produce the model.

[1rudeboy]

Somehow "letting other countries take our jobs" does not appear to be the problem in this case.

[WhyisaTexasgirlinPA]

My husband bought a Ford 18 months ago and it has been a lemon! It was his first Ford to purchase in over 20 years and will be the last. I'm working on him to trade it in now....

[Doohickey]

F-Series aren't made in Mexico.

[BW2221]

"You'd think that maybe they'd have an updated Ford Ranger ready to go, but it's not due until 2010! Some real product planning going on there! (sarc)"

Good point. Ford used to be the leader in the small pickup market with Ranger. Now it ranks well behind Toyota, Nissan and Chevrolet.

Ford F-Series sales are likely to further decline as GM introduces all-new Silverado and Sierra models, which have won rave reviews, and a new Toyota Tundra in January.

Ford definitely is in the biggest trouble of the three Detroit automakers. GM is probably in the best shape.

[Malsua]

The problem is that (most of? all of?) Ford's North American plants are not tooled to produce the model.

One would ponder that it's better to invest in re-tooling NOW(well, 20 years ago) than to be left holding the bag when gas prices rise. I mean, who didn't predict gas prices would rise? I understand that it's expensive. Sacrifice some profit during the 90s and be done with it. Now they may go out. Well, tough nuggies. Toyota, Honda, Isuzu et. al. make better cars that get better mileage. Is this any mystery? Reminds me of the girl on Mad TV that holds her hands up to her ears and say "la la la la la" when anyone tries to talk to her.

[glorgau]

Ford and GM are the reason that the recent pension reform bill passed so quickly. Both are getting ready to "restructure" because their business models no longer work.

[Chode]

anybody who sells their SUV cause of the price of gas(unless they buy one with better mpg) proves they didn't need it in the first place...

but for those of us who live in the SnowyBoondocks... we have no choice. luv my 6L-HO Jeep!!!

[uncitizen]

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.

We know unemployment doesn't give much, so in order to meet 95% of their earnings Ford must be kicking in around 80-90%%. Is this a stipulation in the union contract or is Ford just being outrageously generous?????

[KYGrandma]

You haven't really driven a Ford lately. My 2007 Escape just drove from Detroit to Toronto last week. Traveling at 67 miles an hour (speed limit is 62), I averages 29.8 miles to the gallon. My son's 2006 Fusion regularly gets 30 mph. There are a lot of uneducated bashing of Ford here.

[lOKKI]

Actually, lots of educated Ford-bashing going on here. Take a look at Consumer Reports regarding Ford's quality. They're Hell to live with.

The Fusion is a nice car - except for the fact that it's underpowered (the consensus of the magazines) but why didn't Ford get the engine power right from the beginning in an all new model.