Ford to cut production, will take longer to be profitable
DETROIT - Fast-rising gasoline prices claimed their latest victim yesterday: Ford Motor Co., which dropped its goal of becoming profitable by 2009 and said it would cut production of trucks and sport-utility vehicles through the rest of the year. It was a warning to the rest of the U.S. auto industry, which is facing its worst sales in more than a decade.
DETROIT - Fast-rising gasoline prices claimed their latest victim yesterday: Ford Motor Co., which dropped its goal of becoming profitable by 2009 and said it would cut production of trucks and sport-utility vehicles through the rest of the year. It was a warning to the rest of the U.S. auto industry, which is facing its worst sales in more than a decade.
Ford, which is based in Dearborn, did not rule out layoffs or plant closures, saying it would release more details about its cost-cutting efforts in July. Ford cut its forecast for U.S. light-vehicle sales this year to between 14.7 million and 15.1 million, down from 17 million as recently as 2005. If sales drop as low as 14.7 million, it would be the slowest year for U.S. vehicle sales since 1993, according to Ward's AutoInfoBank.
Ford said it would cut North American production 15 percent in the second quarter, 15 percent to 20 percent in the third quarter, and 2 percent to 8 percent in the fourth quarter. The cuts will primarily affect pickups and SUVs, whose sales have plummeted in recent months because of rising gasoline prices, the weak economy, and the slowdown in new-home construction.
Production cuts hurt automakers' revenues because the companies book vehicles as sold when they leave the factory.
"We all would like the basic business environment to not have deteriorated, but clearly the most important thing we can do for the long-term success of the Ford Motor Co. is deal with this reality," Ford president and chief executive officer Alan Mulally said in a conference call yesterday.
Mulally said the company expected a longer, slower recovery than it did several weeks ago and would not immediately set a new profitability target. Ford predicts gasoline prices will be in the $3.75 to $4.25 range for the remainder of the year.
It was a stunning turnaround from last month, when Ford posted a first-quarter profit of $100 million and billionaire investor Kirk Kerkorian announced plans to buy up to 20 million shares of Ford stock because of his confidence in the company's direction. Ford said yesterday that its board voted to remain neutral on Kerkorian's offer.
Ford shares dropped 64 cents, or 8.21 percent, to close at $7.16.