Hit by deepening slump in US sales, Ford Motor Co yesterday announced that it would cut third quarter production of big trucks and gazz guzzling SUVs in response to consumer preference shifting to more fuel efficient cars and crossover vehicles as fuel prices come close to $4 per gallon.

It plans to cut production by 50,000 to 4,75,000 in the third quarter - a 25 per cent fall in production compared with last year - and a further by 14 per cent cut in the following quarter.

It will also delay launching a new version of its F-150 pickup truck, its best-selling vehicle and the most profitable, by two months due to the industry-wide slowdown in the US truck market and the need to sell down dealer inventory of the current model. 

"Our plan all along has been to introduce the new F-150 after our dealers had a chance to sell down inventory of the existing model, and - with the current slowdown in the marketplace - we decided it was prudent to adjust the start of public sale for the new truck by about two months," said Mark Fields, Ford's president of The Americas. 

Ford's announcement was madea a day after General Motors Corp. said it was stopping the development of its next-generation pickup trucks and sport utility vehicles due to soaring gasoline prices.

Ford also said that its financial performance for 2008 would be worse than 2007 when it reported a loss of $2.7 billion (down from $12.6 billion in 2006)  and said that it would struggle to break even on an operating basis in 2009. "It now is clear that 2008 pre-tax automotive results will be worse than 2007, cash outflows to fund operating losses and restructuring will be greater than previous guidance and, unless the economy improves, it will be difficult for Ford to break even companywide on a pre-tax basis in 2009, excluding special items," the compay said in a statement. 

Ford North America still expects to reduce annual operating costs by about $5 billion by the end of 2008, at constant volume, mix and exchange, and excluding special items, compared with 2005.

Ford Motor Credit Company now will incur a pre-tax loss this year - excluding any potential payment related to Ford's profit maintenance agreement - primarily due to further weakness in large truck and SUV auction values.  Ford Credit no longer is planning a distribution payment to Ford in 2008.

"As gasoline prices average more than $4 a gallon and consumers worry about the weak US economy, we see June industry-wide auto sales slowing further and demand for large trucks and SUVs at one of the lowest levels in decades," said Ford president and CEO Alan Mulally.  "Ford has taken decisive action to respond to this accelerating shift in customer demand away from large trucks and SUVs to smaller cars and crossovers, and we will continue to act swiftly moving forward."

Ford now expects US industry volume in 2008 - including medium and heavy vehicles - to be between 14.7 million and 15.2 million units, compared with the previous assumption of 15 million to 15.4 million units.  Accordingly, in the third quarter, Ford now plans to produce 475,000 vehicles, a reduction of 50,000 units from previously announced plans and a decline of 25 percent compared with the 2007 third quarter.  In the fourth quarter, Ford plans to produce 550,000 to 590,000 units, a reduction of 40,000 units from previously announced plans and a decline of 8 to 14 per cent compared with the 2007 fourth quarter. 

"We view the move to smaller, more fuel-efficient vehicles as permanent, and we are responding to customer demand," Mulally said.  "In the near term, we are adjusting production to the actual demand - increasing small cars and crossovers and reducing large trucks and SUVs.  For the long term, we are moving fast to introduce more small cars, crossovers and fuel-efficient powertrains - including more hybrids - and we will adjust our manufacturing facilities to match our updated product lineup."

Ford said it is uniquely positioned to build on its strength today as a crossover vehicle leader, while leveraging its small car expertise in Europe and bringing more of those vehicles to North America.

In addition to hatchback and sedan versions of the European-engineered Ford Fiesta small car that goes on sale in North America in early 2010, Ford is announcing today that four- and five-door versions of the next-generation European Ford Focus small car will be produced in North America beginning in late 2010.

The new Focus will be common with Europe, South America and Asia Pacific and represent the next generation of today's successful European Focus.  Excellent fuel economy will be achieved through new highly efficient direct-injection engine technology and a new advanced six-speed transmission.

The new Focus and Fiesta - as well as other small cars and crossovers from Europe - will be part of an unprecedented period of new Ford product introductions that has only just begun in North America.  The new Ford Flex crossover and Lincoln MKS sedan went on sale this month, and the new F-150 goes on sale in late fall.  New versions of the Ford Fusion, Mercury Milan and Lincoln MKZ mid-size cars debut late 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 the 2006 models.  By the end of 2010, 100 percent of the product lineup will be new, including in 2009 the next-generation Mustang, new fuel-saving EcoBoost engines and new European Transit Connect.

"We remain absolutely committed to accelerating the development of the new products that customers want and value," Mulally said.  "We sell some of the best smaller cars and utility vehicles in the world in our profitable European and South American operations, and our plan is to introduce these same vehicles in North America as quickly as possible.  This is an integral part of our plan to leverage our global assets and achieve our goal of profitable growth."
Ford said it will provide more details on changes to its overall plan when it announces second-quarter financial results in July. 

In the meantime, Ford is taking the following steps on production:
- Production of the 2009 F-150 now will begin in August at Kansas City Assembly Plant and in September at Dearborn Truck.  One shift will be eliminated at both Kansas City (from two to one) and Dearborn (from three to two).  Dearborn Truck will be idled most of the third quarter.
-  Michigan Truck Plant will be idled for nine consecutive weeks beginning the week of 23  June, in line with demand for the company's full-size SUVs.
-  One shift of production will be eliminated at Louisville Assembly Plant for mid-size SUVs in the third quarter.
-  The line speed will be reduced at Kentucky Truck Plant for large pickups in the third quarter.
-  The line speed will be reduced at Chicago Assembly in the third quarter for full-size sedans. 
-  Production will wind down at Cuautitlan Assembly Plant in Mexico by the end of 2008.  The plant, which now produces large pickups, will be retooled for production of the new Fiesta small car for North America beginning in early 2010.
Ford also is taking the following steps to increase capacity in the third quarter:
- Oakville Assembly will add a third shift for production of the Ford Edge, Lincoln MKX and all-new 2009 Ford Flex crossovers.
-  Kansas City Assembly Plant's line that produces the Ford Escape, Escape Hybrid and Mercury Mariner and Mariner Hybrid small utility vehicles will add a third shift.
-  Wayne Assembly Plant's body and paint shops will add a third shift, and the line-speed will be increased for final assembly production of the popular Ford Focus small car.

Production at Ford's stamping, engine and transmission plants is being adjusted in line with the changes in assembly capacity.

"We view the move to smaller, more fuel-efficient vehicles as permanent, and we are responding to customer demand," Mulally said.  "In the near term, we are adjusting production to the actual demand - increasing small cars and crossovers and reducing large trucks and SUVs.  For the long term, we are moving fast to introduce more small cars, crossovers and fuel-efficient powertrains - including more hybrids - and we will adjust our manufacturing facilities to match our updated product lineup."

Ford said it is uniquely positioned to build on its strength today as a crossover vehicle leader, while leveraging its small car expertise in Europe and bringing more of those vehicles to North America.

In addition to hatchback and sedan versions of the European-engineered Ford Fiesta small car that goes on sale in North America in early 2010, Ford is announcing today that four- and five-door versions of the next-generation European Ford Focus small car will be produced in North America beginning in late 2010.

The new Focus will be common with Europe, South America and Asia Pacific and represent the next generation of today's successful European Focus.  Excellent fuel economy will be achieved through new highly efficient direct-injection engine technology and a new advanced six-speed transmission.

The new Focus and Fiesta - as well as other small cars and crossovers from Europe - will be part of an unprecedented period of new Ford product introductions that has only just begun in North America.  The new Ford Flex crossover and Lincoln MKS sedan went on sale this month, and the new F-150 goes on sale in late fall.  New versions of the Ford Fusion, Mercury Milan and Lincoln MKZ mid-size cars debut late 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 the 2006 models.  By the end of 2010, 100 percent of the product lineup will be new, including in 2009 the next-generation Mustang, new fuel-saving EcoBoost engines and new European Transit Connect.

"We remain absolutely committed to accelerating the development of the new products that customers want and value," Mulally said.  "We sell some of the best smaller cars and utility vehicles in the world in our profitable European and South American operations, and our plan is to introduce these same vehicles in North America as quickly as possible.  This is an integral part of our plan to leverage our global assets and achieve our goal of profitable growth."