Rising commodity prices and a soft market for full-size trucks are prompting the Ford Motor Company to make drastic changes in its North American operations. The company announced today that it’s cutting production in the region by a whopping 15 percent for the second quarter of 2008.
That 15 percent works out to being approximately 20,000 units, putting production figures for the quarter at 690,000 units. Don’t expect this cut to be short-term; Ford plans to reduce production by 15 to 20 percent in the third quarter, while fourth quarter production is estimated to be around 590,000 to 630,000 units – a drop of eight percent from 2007.
Increasing fuel costs have hampered the market for full-size trucks, and most of the production cuts accordingly fall within that segment. Expect to see products like the F-150, Expedition, and Lincoln Mark LT and Navigator severely slashed in the coming weeks. Conversely, Ford will bolster production of its smaller vehicles, including the Focus, Edge, Fusion, Mercury Milan, and , hoping they’ll appeal to consumers wanting smaller, fuel-efficient vehicles. Exact figures for these cuts and increases have not yet been released.
Although these changes are aimed to help stabilize the company, the “Way Forward Plan” – or a drive to profitability – has been delayed.
“Unless there is a fairly rapid turnaround in U.S. business conditions, which we are not anticipating,” Ford CEO Alan Mullaly said in a prepared statement, “it now looks like it will take longer than expected to achieve our North American Automotive profitability goal.” The company now hopes to be “about” break-even in 2009, provided its European and South American wings remain profitable.
Ford still says it will reduce its operating costs in North America by $5 billion by the end of this year, but that figure falls short of its original hopes – the company had expected to cut costs by at least $5 billion. Specifics haven’t been released, but the company is looking to further cost reductions in the near future to offset its rising business costs.