Ford to Halt Production at 10 Plants

The Associated Press
Saturday, August 19, 2006; 2:24 AM

DETROIT -- Ford Motor Co. said Friday it would temporarily halt production at 10 assembly plants between now and the end of the year, blaming high gas prices for pushing many consumers away from its pickups and SUVs and toward higher-mileage models.

Ford said the cuts will reduce the need for costly incentives to reduce bloated inventories. But they also illustrate just how out of step the lineup at the nation's second-largest automaker has become, as it loses market share to mostly Asian competitors under the watch of Chairman and Chief Executive Bill Ford.

General Motors Corp. and DaimlerChrysler AG's Chrysler Group also have been caught in the shift away from trucks and SUVs to smaller cars and crossovers as consumers seek better fuel economy. The Big Three's combined U.S. market share fell to 54.5 percent for the first seven months of 2006, down from 58.7 percent in the same period a year ago.

GM already has announced it will cut production 7 percent to 8 percent in the third-quarter.

Ford announced a turnaround plan in January that called for shedding 25,000 to 30,000 jobs and closing 14 plants by 2012. By year's end, the company was to have cut production capacity 15 percent.

Bill Ford said last month that the plan _ dubbed the "Way Forward" _ would be accelerated. He said Friday that the details would be revealed in September.

In response to the production cuts, Fitch Ratings downgraded Ford's debt further into junk status, while two other ratings agencies placed the company on review. Analysts said next month's announcements could include more plant closures and job cuts, as well as speeded-up introductions of new cars and crossovers.

The company said fourth-quarter production would be down 21 percent, or 168,000 units, from last year. Third-quarter production will be 20,000 units below what was previously announced and 78,000 units below last year.

For the full year, Ford plans to produce about 9 percent fewer vehicles than last year for a total of just above 3 million.

"We know this decision will have a dramatic impact on our employees, as well as our suppliers," Chairman and Chief Executive Bill Ford said in an e-mail to employees. "This is, however, the right call for our customers, our dealers and our long-term future."

He said it was the company's biggest North American production cut in more than 20 years.

Dearborn-based Ford, which lost $254 million in the second quarter, said last month that the speed of the market shift away from trucks had taken it by surprise. Like other U.S. automakers, Ford is heavily dependent on sport utility vehicles and other trucks, which have far higher profit margins than cars. Last year, 68 percent of the vehicles sold by the company in the U.S. were trucks, compared with 58 percent for the industry as a whole.

CONTINUED     1           >

© 2006 The Associated Press