DETROIT – In a bold bow to changing consumer tastes, Ford Motor Co. announced a gutsy 21 percent production cut – mostly of its lagging F-Series pickup and SUV lineup – for the last three months of the year that will result in downtime at three local factories and seven others nationwide.

During the last three months of the year, Ford said it would build 168,000 fewer vehicles than a year ago.

The move will allow the financially struggling automaker to build more of the fuel-efficient cars and crossovers that consumers want these days and fewer of the gas-guzzling trucks they don’t. But it’s a risky gambit: the vehicles customers want are far less profitable than the big trucks they have been shunning.

And while the move may help Ford better stock its showrooms for future customers, the cutback is yet another blow for Michigan and its battle-worn automotive industry.

Dearborn, Mich.-based Ford’s latest move is expected to have a ripple effect on the local auto parts industry, especially Lear Corp. and Visteon Corp., where more production cuts and financial losses could follow as Ford needs fewer seats and electronics.

“No one can be pleased by the severity of this cut, which is the most aggressive reduction of a North American production plan in more than 20 years,” Bill Ford, the company’s chairman and CEO, said in an e-mail to employees.

“I am satisfied, however, that we are laying a sturdier foundation upon which to build our business structure going forward. … This is … the right call for our customers, our dealers and our long-term future.”

Ultimately, the aggressive production cut could be a lifesaver for the ailing 103-year-old automaker, which lost $1.4 billion during the first half of the year.

By building more of the vehicles customers want and fewer of those they don’t, Ford won’t be saddled with parking lots full of hulking vehicles that the automaker will only have to discount, and possibly sell at a loss, later.

What’s more, dealers won’t be forced to push big vehicles on customers who don’t really want or need them.

Six months from now, Ford’s shrewd business move could leave showroom floors full of desirable new 2007 cars and crossovers and far fewer trucks that have been trailing in popularity.

Cleaning out the showroom inventory in this manner might be a critical opening play for Ford’s updated Way Forward turnaround plan, which is slated to be unveiled after a Sept. 14 board meeting, a person familiar with the company’s plans said.

The updated plan might move up pull forward plant closures; close more plants, especially more of those that build the F-Series; and call for the elimination of even more jobs. Bloomberg reported Friday that Ford is preparing to shed 6,000 salaried jobs in North America, citing a person with knowledge of the plan.


Mich. Gov. Jennifer Granholm, who last week boasted about a new agreement with Ford that aims to save 13,000 jobs at nine facilities, called Ford’s announcement “terrible news” in a Friday afternoon interview on CNBC.

Then, she noted how the federal government has failed to help local automakers address rising health care costs or rising oil prices, emphasizing how the leaders of Ford, General Motors Corp. and the Chrysler Group have been waiting “for months now” to meet with President George Bush.

“We want to keep every single automotive job we have,” she said.

Locally, Ford said it would cut schedules at plants in Dearborn, where the F-Series is built; in Wayne, where the new Expedition and Navigator SUV are assembled; and in Wixom. That factory, which builds the Lincoln Town Car and Ford GT, is already slated to be idled in 2007.


Ford officials refused to say how many workers might be furloughed at specific facilities.

Overall, however, Ford said it would cut production of cars, specifically models like the Town Car, Mercury Grand Marquis and Ford Five Hundred, by 5 percent, to 235,000 vehicles.

Pickups and SUVs, meanwhile, will take the biggest hit – 28 percent – and only 390,000 of those vehicles will be built in the October-December period.

Bill Ford explained in his e-mail that the decision is part of broader efforts to accelerate the company’s North American turnaround and modernize the company’s lineup in a marketplace that has grown ever more sensitive to spikes in gas prices. Conflict in the Middle East, which is a major source of U.S. oil, has also played a role in stoking customers’ concerns about fuel.

“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,” he wrote.

“People aren’t buying trucks and SUVs because of the cost of gas,” said Henry Fischer, 44, a skilled trades worker at the Wixom plant. “This whole industry has changed.”

For the full year, Ford now plans to produce 3 million vehicles at its North American assembly plants – 1.1 million cars and 1.9 million trucks – a 9 percent reduction from 2005.

Ford officials said the aggressive reduction is part of the company’s broader effort to accelerate its Way Forward turnaround plan, which was announced in January. That plan called for cutting 34,000 jobs and idling 14 plants.

The company acknowledged last month that it would have to cut even deeper to get back on track after the consumer shift away from trucks and into car-based models intensified. Through July, sales of Ford’s light trucks, a category that includes SUVs, pickups and vans, were down 16.4 percent. Car sales, meanwhile, were up 3.5 percent.

Reaction to the announcement was mixed. Ford shares closed at $8.00 Friday on the New York Stock Exchange, down 2 percent, or 17 cents.


But Mike Jackson, the CEO of Autonation Inc., the nation’s largest seller of new vehicles, with 50 Ford dealerships nationwide, gave Ford a thumbs-up for the tough move.

“Ford is clearly focused on the turnaround efforts and this is another step forward,” Jackson said in an e-mail message to the Detroit Free Press.

But while Ronald Tadross, an automotive analyst for Banc of America Securities, called Ford’s move a sign the company “is getting more realistic,” he also said it still “doesn’t solve the problem.”

“We believe they are not fixing some of their core problems,” he wrote in a note to investors.


While SUV sales have been falling out of favor for some time, causing undeniable pain to Ford, the fall of the full-sized pickup truck is a relatively new and potentially catastrophic phenomenon for the automaker.

The F-Series is the franchise: Ford Motor has six brands that sold 3.2 million vehicles last year, but F-Series sales made up nearly one-third of that.

Sales in the segment are off 15.3 percent through July, compared with the same period a year ago. Ford is performing better than that, with F-Series sales down a lesser 12.3 percent this year. But for a Ford so dependent on pickups, it’s still a painful change.

“While our products continue to perform relatively well within the larger vehicle segments,” Bill Ford’s memo said, “the size of the segments has diminished significantly, and we must adjust accordingly.”


August sales results won’t be released until Sept. 1. But Ford’s top sales analyst, George Pipas, said in an interview Friday that sales of the F-Series have continued sliding through the first half of August.

Consequently, he said, “The Ford F-series plants represent a majority of the production cuts.”

In making Friday’s announcement, Pipas and other Ford representatives confirmed, the automaker is backing away from its longstanding goal – trumpeted by Mark Fields, Ford’s president of the Americas, just last April- of selling 900,000 F-Series trucks this year. If Ford had met the objective, 2006 would have been the third consecutive year F-series sales have topped 900,000.

Not everyone who has examined Ford’s F-Series woes blames the situation entirely on gas prices, however.

John Murphy, an automotive analyst for Merrill Lynch, in a note to investors Friday, also cited “increased competition from GM’s new trucks and the all new Toyota Tundra launching late this year.”

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(Detroit Free Press correspondent Katie Merx contributed to this report.)

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(c) 2006, Detroit Free Press.

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GRAPHIC (from MCT Graphics, 202-383-6064): 20060818 FORD slowdown

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