Struggling Ford cuts production in US as high fuel costs hit sales

Slump in demand for gas guzzlers
· Factories in Canada will also be affected

Andrew Clark in New York
Saturday August 19, 2006
The Guardian

The struggling American motor company Ford is cutting its car and truck production by more than a fifth as high fuel prices have led to a slump in demand for trucks and sports utility vehicles.

Ford said yesterday it would make partial shutdowns at more than nine factories in the US and Canada. In the fourth quarter of the year, it will cut output by 21% to 625,000 vehicles with sports utility vehicles and light trucks bearing the brunt. Ford's move is the latest sign that persistently high fuel prices have slowed consumer demand for gas-guzzling vehicles.

Struggling Ford cuts production in US as high fuel costs hit sales · Slump in demand for gas guzzlers · Factories in Canada will also be affected Andrew Clark in New York Saturday August 19, 2006 The Guardian The struggling American motor company Ford is cutting its car and truck production by more than a fifth as high fuel prices have led to a slump in demand for trucks and sports utility vehicles. Ford said yesterday it would make partial shutdowns at more than nine factories in the US and Canada. In the fourth quarter of the year, it will cut output by 21% to 625,000 vehicles with sports utility vehicles and light trucks bearing the brunt. Ford's move is the latest sign that persistently high fuel prices have slowed consumer demand for gas-guzzling vehicles. Article continues UK figures earlier this week showed that sales of 4x4s had dipped in 2006 for the first time in years. Ford's output for the whole of the year will be down by 286,000 vehicles to 3.04m, a drop of 9%. Ford's chairman, Bill Ford, said: "We know this decision will have a dramatic impact on our employees as well as our suppliers. This is, however, the right call for our customers, our dealers and our long-term future." Ford is the world's fourth-largest motor manufacturer in sales terms and has more than 300,000 employees. But in common with its larger rival General Motors, it has been losing market share to Japanese competitors. The Michigan-based company's historic strength in pick-up trucks and sports utility vehicles such as the Ford Explorer has left it particularly vulnerable to a shift towards smaller cars by American consumers concerned about paying more than $3 a gallon for petrol. In January, the company announced 14 plant closures and more than 12,000 job cuts. But critics have suggested that this may not be enough to turn the business around. Mr Ford admitted in June that the Way Forward plan was based on "some fairly conservative assumptions" and a revised version is widely expected next month. Some reports have suggested that Ford could aim for a reduction in its salary and benefit costs by between 10% and 30%, including an emphasis on cuts to white-collar pensions to show unions that all levels of the company are taking the pain. Ford's vice-president for the Americas, Mark Field, yesterday described the fresh factory stoppages as "tough but important". Car output in the fourth quarter will drop by 13,000 to 235,000 while the number of trucks coming off the production line will fall by 155,000 to 390,000. Mr Field said: "We are basing our business plans on the customer, and we are determined to match production and inventories with consumer demand." Among the operations vulnerable in Ford's shake-up is Jaguar, the brand bought by the American company in 1989 which has suffered virtually non-stop losses ever since. Jaguar is among the businesses being reviewed by Ken Leet, a former Goldman Sachs banker brought in by Ford to develop a strategy for the company's weak spots - a move widely interpreted as a step towards putting Ford's underperforming arms up for sale. Rivals are also taking radical action: at the behest of shareholders, General Motors recently entered talks with Carlos Ghosn, the boss of Renault and Nissan, to investigate a technology-sharing alliance or an even deeper collaboration. The credit agency Fitch yesterday cut its rating for Ford deeper into "junk" territory, reducing it from "B plus" to "B" with a negative outlook, indicating that further cuts are likely. Fitch's report said: "Volume declines in Ford's pick-up segment, along with continued declines in mid-sized and large SUVs, are likely to accelerate revenue declines and negative cash flows in 2006." Ford's North American auto operations lost $1.6bn (£842m) in 2005 and a further $797m in the second quarter of this year. The company's shares fell 3.5% to $7.88 during early trading on Wall Street yesterday, compared with $9.50 a year ago.