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Ford issued a press release this morning detailing its plans for the remainder of 2008, and considering the current price of gasoline, weak U.S. economy and rising cost of raw materials, the changes are exactly what you'd expect. Ford will now be producing 690,000 vehicles during the remainder of this year's second quarter, down 20,000 units from its previous estimate and 15% below its total for Q2 2007. Production levels in Q3 will fall to between 510-540,000 units in Q3 2008 (down 15-20% from Q3 2007) and between 590-630,000 units in Q4 2008 (down 2-8% from Q4 2007).

Though it will be producing fewer units overall, Ford will increase production of hot-selling cars and CUVs like the Focus, Edge and Escape, Mercury Milan and Mariner, and Lincoln MKZ and MKX. Production of trucks and SUVs, however, will drop sharply because potential customers are walking away from these relative gas-guzzlers in droves. Since those models typically earned big profits for Ford, the Blue Oval revised the timeline for its turnaround plan and now expects to break even overall in 2009, though it will probably take longer than that now for its North American operations to contribute any black ink to the ledger.

[Source: Ford]

PRESS RELEASE

FORD ADJUSTS PRODUCTION TO LOWER INDUSTRY VOLUME AND SHIFT IN CUSTOMER PREFERENCES; PROFIT OUTLOOK REVISED
  • North American car production increased and truck production reduced for remainder of 2008 to reflect the continuation of rapid changes in customer buying preferences
  • Lower industry volume, reduced overall production, dramatic model mix shifts away from large trucks and SUVs, and higher commodity costs force a change in Ford's near-term profit outlook
  • Ford now expects to be about break-even companywide in 2009 on a pre-tax basis, excluding special items, as North America Automotive profitability is delayed
  • North America Automotive operations remain on plan to reduce annual operating costs by $5 billion by the end of 2008
  • Investment in smaller, fuel-efficient vehicles accelerates; further manufacturing capacity realignments planned in line with the introduction of more small cars and crossovers
DEARBORN, Mich., May 22, 2008 – Ford Motor Company [NYSE: F] today said it is making adjustments to its production plan and revising downward its near-term North American Automotive profit outlook, while planning further manufacturing capacity realignments, additional cost reductions and changes to its product mix to respond to the rapidly changing business environment in the U.S.

The company said it is increasing 2008 North American production of the hot-selling Ford Focus, Fusion, Edge and Escape, Mercury Milan and Mariner, as well as the Lincoln MKZ and Lincoln MKX. At the same time, Ford is reducing 2008 production of large trucks and SUVs, as gas prices soar and customers move more quickly to smaller and more fuel-efficient cars and crossovers.

"We are continuing to make great progress on our plan," said Ford President and CEO Alan Mulally. "We are profitable and growing outside of North America, and our transformation plan in North America is working. The challenge affecting the entire industry is the accelerating shift in consumer demand away from large trucks and SUVs to smaller cars and crossovers – combined with a steep rise in commodity prices and the weak U.S. economy."

Ford said it now plans to produce 690,000 vehicles in North America during the second quarter, a further reduction of 20,000 units from previously announced planned production levels and a decline of 15 percent from the second quarter of 2007. The company plans to produce between 510,000 and 540,000 units in the third quarter, down 15 to 20 percent from the same period last year. Fourth-quarter production is expected to be between 590,000 and 630,000 units, down 2 to 8 percent from year-ago levels.

The second-half production plan includes higher car and crossover production compared with a year ago and will be achieved through overtime and added shifts at Ford's smaller car and crossover assembly plants. Large truck and SUV production in the second half will be lower than a year ago, with reductions achieved through a combination of additional downtime, shift reductions and line-speed actions.

The lower overall production, dramatic model mix shifts and substantially higher commodity costs are forcing a change in Ford's near-term financial outlook, the company said.

"Rapidly rising commodity prices – particularly steel prices – and higher gasoline prices that are accelerating consumers' shift away from large trucks and SUVs together are having a tremendous impact on our sales, our manufacturing operations and our profitability as we look to 2009," said Mark Fields, Ford's President of The Americas.

"Unless there is a fairly rapid turnaround in U.S. business conditions, which we are not anticipating, it now looks like it will take longer than expected to achieve our North American Automotive profitability goal," Mulally said. "Overall, we expect to be about break-even companywide in 2009 – with continued strong results in Europe and South America."

Given the external challenges, Ford said it is more critical than ever to continue executing its transformation plan, which includes:

Aggressively restructuring to operate profitably at the current demand and changing model mix
Accelerating the development of new products that customers want and value
Financing the plan and improving the balance sheet
Working together effectively as one team, leveraging Ford's global assets
"The most important thing we can do right now is to continue to take decisive action implementing our plan to respond to the rapidly changing business environment," Mulally said.

Ford remains on track to reduce by $5 billion its annual North American Automotive operating costs by the end of 2008 – at constant volume, mix, and exchange and excluding special items – compared with 2005. However, further cost reductions and recognition of anticipated retiree health care savings from Ford's recent UAW labor agreement will be needed to offset higher commodity costs. Ford previously had anticipated that ongoing retiree health care savings in 2008 would allow it to exceed the $5 billion target.

In addition, the company said it is planning further manufacturing capacity realignments, as it accelerates the introduction of more fuel-efficient small cars and crossovers.

Cash outflows associated with operating losses and employee separations now are projected to be between $14 billion and $16 billion for 2007 to 2009. This is a deterioration compared with previous guidance but remains better than the original $17 billion outflow projection. Ford's Automotive net liquidity remains substantial. Total liquidity – including available credit lines, the majority of which are in place through Dec. 15, 2011 – was $40.6 billion as of March 31. Ford said it will continue to evaluate overall liquidity and alternatives to further improve its balance sheet.

Ford now expects 2008 U.S. industry volume, including medium and heavy trucks, to be between 15 million and 15.4 million units. Ford, Lincoln and Mercury U.S. market share is expected to be approximately 14 percent this year – supported by the introduction of several new products.

"We are making great progress on the acceleration of new products, and our initial quality is among the best in the business," Fields said. "The new Focus, Edge and Escape have had significant sales growth this year, and the pace of our product introductions accelerates even further this summer."

Production of the Ford Flex crossover and Lincoln MKS sedan is under way and soon will begin for the new generation of the F-150. Ford also just introduced the 2009 Ford Escape and Mercury Mariner small utility vehicles. They have new 4- and 6-cylinder engines with 11 and 20 percent more horsepower, respectively, and 5 percent better fuel economy, thanks to new engine technology, aerodynamic improvements and new six-speed transmissions. In fact, Ford now offers more vehicles with fuel-saving six-speeds than any other automaker.

New versions of the Ford Fusion, Mercury Milan and Lincoln MKZ mid-size cars also debut later this year, as do all-new hybrid versions of the Fusion and Milan.

By the end of this year, 70 percent of all Ford, Lincoln and Mercury products by volume in North America will be new or significantly upgraded compared with 2006 models. By the end of 2010, 100 percent of the product lineup will be new, including the next-generation Mustang in 2009, new fuel-saving EcoBoost engines in 2009, a new European-engineered Transit Connect in 2009 and all-new Ford Fiesta small car in 2010 – as well as several other vehicles not yet announced.

As an example of working together and leveraging its global assets, Ford said that it is accelerating even further the North American introduction of many of the small cars and crossovers that the company profitably sells today in Europe and South America.

"We remain absolutely committed to creating an exciting, viable Ford going forward – and to transforming Ford into a lean global enterprise delivering profitable growth over the long term," Mulally said. "We continue to make progress on every element of our plan, and we are taking steps in the near term to ensure our long-term success."


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  • 17 Comments
      • 6 Years Ago
      Pretty common for all manufacturers. Heres whats interesting to watch though.... There is some speculation in the industry that gas should eventually level back down to about $90 a barrel putting gas at the pump at about $3 - $3.25 a gallon. So, do all these people (I think SUV sales were 46% at one point) now start ditching their fuel efficent cars and go back to SUV's? Do they keep their fuel efficient cars and add an SUV? Or do they just keep their fuel efficient car?

      Of course this requires that gas goes back to that rate but if it does, I bet a majority buy a new SUV and the big winner will be auto manufacturers. After all, SUV prices will be higher due to less production and one would assume that the auto manufacturers would be hesitant to ramp production or expand any large vehicle production for years to come.

      Should be interesting to watch.
        • 6 Years Ago
        Maybe they learned their lesson, finally. While fuel prices may settle a little, eventually, there's only one direction they will trend in and that's up.
        • 6 Years Ago
        Disgruntled Goat said "A. $3 per gallon gas is still REALLY expensive."

        Uh...no. Actually it dirt cheap by any rational standard. It just seems expensive compared to what we are used to.

        Say you are 25 miles from home. If you walk, it will take you 5 hours to get there. If you bike, it will take you two hours. But for $3 you can get there in half an hour.

        So you save 4 1/2 hours or your time vs. walking for only $3. If you make a piddly $12 and hour, that $3 only took you 15 minutes to earn and you just saved yourself 4 1/2 by spending it, or 1 1/2 hours compared to riding a bike. Or, at $4 a gallon it only took you 20 minutes to earn that much.

        Gas is still a great bargain, it's just not as great of a bargain as we are accustomed to.
        • 6 Years Ago
        Well... hopefully they'll just be less emotional. I mean, I've seen people trading in their two year old 4-runners and Explorers for Corollas and Focii. So, they took a HUGE depreciation hit - sometimes $10-12k!! - to save $1500-$2000/year at the pump (@$4/gal). $30-40/week? $4-6/day? Come now. Are we really that dumb?
      • 6 Years Ago
      Well the new Fiesta coming should help put Ford's car business back into the buying publics eye. It really is a great looking car, something Ford doesn't really have.

      While looking at convertibles recently I checked out the 6cylinder Mustang only to be shocked by its pitiful gas mileage
      • 6 Years Ago
      Yippie!!! I have been waiting for the stick to go down again?
      • 6 Years Ago
      What annoys me is how the manufacturers are only pulling back truck production only because sales are down. Not because they are gas-guzzling, road hogging monsters.
        • 6 Years Ago
        A company is ment to produce profits, and that's all. If you have a product that sells well and doesn't brake any law, there's no reason to stop selling it.

        Do you expect any company to say they will stop sales of it top profitable/sales product because it's bad to the environment??? Come on...
        • 6 Years Ago
        Their real mistake was mostly not having a well-developed and fuel-efficient vehicle line for when gas prices go up...they really need to have better contingency plans for different economic situations.

        Unfortunately it seems like the Big 3 just didn't want to really spend the money to realistically develop solutions (remember that aluminum bodied Taurus that was supposed to get like 80mpg), and basically squandered what could have been real development.

        But that really applies to a lot of companies...I hate it when companies run their operations as if the only thing that matters is each quarter's profit. Sometimes you gotta learn to live with a lower profit so you can invest in the next decade's profits, or the one after that. So you gotta respect companies that basically ignore the idiotic quarterly profit BS that wall street likes to go by, Amazon.com for example managed to lose plenty of money for years and years and plow tons of money into R&D. But in the long run it's paying off very nicely for them compared to the other dot.com boom retailers.
      • 6 Years Ago
      "Ford to make less vehicles in 2008"

      FEWER vehicles!
        • 6 Years Ago
        +1 to the grammar cop
        • 6 Years Ago
        +2 to the grammar cop -beat me to the punch
        • 6 Years Ago
        less might be true anyways, so don't get all worked up about it
      • 6 Years Ago
      And it begins...
      • 6 Years Ago
      I wonder if the domestic oil companies are charging us $130.00 per barrel for domestic oil that belongs to the people in the first place? If domestic oil was held at $50.00 per barrel, price of gas would come down. And stop selling oil to Jap Land at below market prices and use that oil here, let them buy at market prices. Not even the Arabs gouge their own folks!
      • 6 Years Ago
      It's not just the Fiesta. The new Fusion launching at the end of this year is expected to get better mileage than the current. The hybrid Fusion is coming this winter. The new Flex has the same or better gas mileage than most minivans out there. The new Escape coming in a couple months will have better mileage than the current Escape. Then Ecoboost starts launching. Then Ford's V6 hybrid line is supposed to show up for the Edge, Flex and Taurus. Then diesels. The bigger problem is that Ford got serious about this in 2006 - and that's not enough time to build a fleet of very fuel-efficient vehicles.
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