Ford’s Production Cut

Detroit- Due to the increase in the gas prices Ford Motor company has reduced its production of Pickups and SUVs, the consumers are now looking for small and more fuel efficient cars. The company is not expecting to return to the profitability by the end of 2009 even though they have not mentioned any layoffs and plant closures.

The Dearborn based Ford has also declared to cut its production of U.S light vehicle sales in 2008 in between 14.7 million to 15.1 million vehicles. In 2005, the number was 17 million vehicles.

Ford President Alan Mulally has said in the conference call on Thursday that “We all would like the basic business environment to not have deterioted, but clearly the most important thing we can do for the long-term success of the Ford Motor Company is deal with this reality”. “Due to the disturbances caused to the US economy several weeks ago Ford Company will be recovering very slowly and it will take long time,” said Mulally.

Company has started selling its latest buyouts and the early retirement offers to their workers. And last month 4,200 hourly workers have already accepted the offer. Ford has also announced on Thursday that they will be continuing selling out these offers to the manufacturing workers by plant-to-plant basis. Ford will possibly announce the details of their salaried layoffs and plant closures later in July.

Ford’s shares have also been dropped by 9 percent to $7.10 in the midday trading. Ford is planning to meet its sales demands of cars and crossovers through additional shifts and overtime. Although the company will cut the production of pickups and SUVs by 15 percent in the second quarter, 15 to 20 percent in the third quarter and 2 to 8 per cent in the fourth quarter due to the increased gas prices and decrease in the new home construction.

George Pipas, the top Ford’s US sales Analyst stated that in 2004, 70 percent of Ford’s sales volume was done by trucks and SUVs only but this year the case is entirely different. One of the best selling trucks of Ford is the F-series trucks but the sale of this truck was also decreased by 16 percent during this period.

Company is working to make its trucks and SUVs more fuel efficient and offering more options to it.“ There is always a market for the truck-based platforms for their capability to tow and haul,” Mulally said

They have restructured their production base to make small cars and side by side they are also planning to introduce some more small cars from Europe and South America. In March, Ford said that they are planning to cut the production of the second quarter by 10 percent. They confirmed the cuts in the factory of Michigan in this week. But the full extent of the cuts will come to the picture only on Thursday.

The decrease in the production of vechiles directly affects the automobile company’s revenue since the vehicles coming out of the production are considered as new sales.

With the increase in gas prices for last few months the consumers are now buying the small and fuel efficient cars. This resulted in 33 percent increase in the sales volume of small segment cars in April whereas the SUVs sales decreased by 29 percent. A sale is decreased by 8 percent as a whole in the United States as per the Autodata Inc.

“We are also trying to understand what the real demand is going to be from this point forward,” Mullaly said. Ford is expecting the gas prices in the range of $3.75-$4.25 throughout this year. While in the beginning of the year Ford has planned to reduce its North American automotive operating cost by $5 billion. But now they are finding it difficult to meet the expected gains due to the rise in the prices of steel and other commodities from their new contract with the United Auto Workers.

Articles published in here are unique and property of the site only. Copying Content or Publishing Article from AllinfoDir Autos is strictly not allowed and against Site’s policy.