Ford delays new pickup 2 months
DETROIT (AP) - June 20, 2008 Shortly after Ford's announcement, Standard & Poor's Ratings
Services said it is reviewing ratings on Ford, Chrysler LLC and
General Motors Corp. with the possibility of lowering them due to
the deteriorating U.S. auto market. Also, Moody's Investors Service
changed its ratings assessment for Ford and Chrysler from stable to
negative.
Lower credit ratings can boost the a company's borrowing costs.
Dearborn-based Ford also said Friday that its loss on automotive
operations will worsen in 2008 and that it will be difficult for
the company to break even in 2009 as it had predicted just one
month ago.
Ford's moves are the latest in a series from U.S.-based
automakers as they struggle against an economic downturn and $4 per
gallon gasoline that has sent buyers fleeing from pickups and sport
utility vehicles, their traditional moneymakers.
"It's a critically tough environment," said Efraim Levy, a
senior industry analyst with Standard & Poor's. "It's almost like
anything that can go wrong is going wrong."
Ford conceded in a statement that the U.S. market is declining
this year, reducing its industrywide light vehicle sales forecast.
The company now predicts sales will not rise above 14.9 million and
could go as low as 14.4 million, which would be the lowest level in
13 years according to Ward's AutoInfoBank.
Just a month ago, Ford dropped its forecast to a range of 14.7
million to 15.1 million. The company's sales fell 16 percent in
May.
Because of the crumbling sales, Ford said Friday it will cut
third-quarter production by another 50,000 vehicles. It now plans
to produce 475,000 vehicles, 25 percent fewer than the third
quarter of last year.
The company also says fourth-quarter production will drop by
another 40,000 vehicles to a range of 550,000 to 590,000. That's on
top of a previously announced 8- to 14-percent cut from the fourth
quarter of last year.
Most of the production cuts will come from extending the normal
two-week summer shutdown at pickup and SUV plants, as well as shift
and assembly line speed reductions, the company said in a
statement.
Ford said it will now introduce the new F-150 model two months
later than normal, in late fall instead of its earlier target of
late summer. F-series trucks accounted for 27 percent of Ford's
U.S. sales last year, generating much of the company's revenue. But
sales are off 19 percent for the first five months of the year and
plummeted 31 percent in May.
The Dearborn-based automaker also said it will increase
production of its Focus small car, as well as the Mercury Mariner
and Ford Escape small SUVs.
It also said it will bring production of the next generation
European Focus and Fiesta small cars to North America starting in
2010 "as Ford confirms it is revising its product plan to add more
small cars, crossovers and fuel-efficient powertrains."
Ford expects to detail further changes to its restructuring plan
when it announces earnings in July. It would not rule out plant
closures and further layoffs. Already the company is looking to cut
about 12 percent of its salaried work force.
On Friday, Ford announced cuts at seven truck and SUV factories
during the remainder of the year, including the idling of the truck
factory in Dearborn for most of the third quarter and the temporary
closure of a Wayne truck factory for nine weeks during the summer.
It also announced production increases at three factories that
make small SUVs and cars.
"We view the move to smaller, more fuel-efficient vehicles as
permanent, and we are responding to customer demand," Ford CEO
Alan Mulally said in the statement. "For the long term, we are
moving fast to introduce more small cars, crossovers and
fuel-efficient powertrains - including more hybrids - and we will
adjust our manufacturing facilities to match our updated product
lineup."
Ford shares fell 54 cents, or 8.5 percent, to $5.78 in late
afternoon trading.
The company also said its 2008 automotive financial results will
be worse than in 2007, when the company posted an overall net loss
of $2.7 billion. As late as May 22 the company predicted it would
break even in 2009, but Ford now warns that will be difficult on a
pretax basis.
Levy said it's not just the decline that's troubling, it's the
rapid shift away from trucks, the traditional money makers for the
Detroit Three.
"If people aren't buying pickup trucks, that's where Ford's
bread and butter is, so where are they going to make their money?"
Levy asked. "The shift in cars is so rapid that the domestic
brands in particular aren't going to be able to produce enough to
match demand."
Ford, which has mortgaged its factories and blue oval logo to
stay in operation, should have enough cash to stay afloat into 2010
when the economy is expected to recover and the Detroit Three begin
to see savings from shifting hourly retiree health care costs to
the United Auto Workers, Levy said.
"I think they had some cushion for the cash needs when they
mortgaged the Ford brand, but the environment that's appeared since
then has changed," Levy said. "It's going to make it ever more
difficult for them to make the turnaround. That's not saying they
can't."
Earlier this month, GM announced it would close four truck and
SUV factories. On Thursday the company said it would delay work on
the next-generation of full-size pickups and SUVs to focus
resources on more fuel-efficient vehicles.
Chrysler made cuts earlier in the year and has confirmed the
idling of its Warren, Mich., truck plant for five weeks this summer
before it begins production of the redesigned Dodge Ram.
Spokesman Ed Saenz said the company has no immediate plans for
further cuts in its truck production and the Ram would be launched
on schedule this summer.