Ford announced its largest production cuts in more than 20 years on Friday, blaming high gas prices for pushing many customers away from its pickups and SUVs and toward higher-mileage models.
Ford Motor Co. said it would temporarily halt production at 10 assembly plants between now and the end of the year to reduce the need for costly incentives to trim bloated inventories.

The decision illustrates 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.

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 quicker 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.

"An unprecedented spike in gasoline prices during the second quarter impacted our product lineup more than that of our competitors because of the long-standing success of our trucks and SUVs," Bill Ford said in his note Friday.

The nation's second-largest automaker said that by better matching inventories to demand, it can avoid costly incentives and reduce inventory carrying costs for dealers.

Reducing incentives will help improve resale values of vehicles, and more rational inventories will help "stabilize operating patterns for our plants and our suppliers," Mark Fields, Ford's president of the Americas, said in a statement.

The Wall Street Journal, citing unidentified sources, reported Friday that Ford is considering shutting down more factories and cutting salaried jobs and benefits by 10 percent to 30 percent.

Ford spokesman Oscar Suris declined to comment on the report.

The new production schedule will result in temporary shutdown this year at assembly plants in St. Thomas, Ontario; Chicago; Wixom, Mich.; Louisville, Ky.; Wayne, Mich.; St. Paul, Minn.; Kansas City, Mo.; Norfolk, Va.; and Dearborn, Mich.; Ford said.

Company officials would not say what specific impact the production cuts would have on workers. In general, hourly workers placed on temporary layoff receive 95 percent of their wages through state unemployment benefits and a supplement by Ford.

The United Auto Workers had no immediate comment on the announcement.

In Louisville, which has two affected plants, Mayor Jerry Abramson said he was told by Ford executives that the Louisville Assembly Plant, which makes the Ford Explorer and Mercury Mountaineer, will be shuttered for six weeks. The Kentucky Truck Plant, one of four plants producing the best-selling F-Series pickups, will close for five weeks in the fourth quarter, he said.

Abramson said state and local officials have asked to meet with Ford officials.

The production cuts are the second time this week that slower sales have forced Ford to announce changes. On Tuesday, it said it would trim the number of dealerships it has in 18 metropolitan areas. Dealer profits declined an average of 10 percent in the first half of 2006, the company has said.

In response to the production cuts, Fitch downgraded Ford and its finance arm Ford Motor Credit Co. to "B" from "B+" and lowered its senior unsecured debt to "B+" from "BB-."

"Implicit in the production cutbacks are expectations of continued weak pickup sales that have resulted in extended inventories," the agency said. It added that shrinking sales of Ford pickups and more declines in mid-size and large SUVs would speed up a drop in revenues.

Standard & Poor's Ratings Services and Moody's Investors Service both put Ford's credit ratings on review for possible downgrades further into junk territory.

Ford shares fell 17 cents, or 2.1 percent, to $8 in afternoon trading on the New York Stock Exchange.

Craig Hutson, an auto analyst at the corporate bond research firm Gimme Credit, said that while the cuts are aimed at matching supply and demand in the long term, "the short-term ramifications will be ugly."

"Trucks are Ford's most profitable vehicles, and the sharp decline in production volumes will make it more difficult to see any signs of a turnaround at Ford," he said in a research note.

The production cuts are likely to affect the revenues of many of Ford suppliers.

"When our customers adjust production up or down, we obviously adjust accordingly," said Jim Fisher, a spokesman for Visteon Corp., Ford's largest supplier.

Fisher said the company was assessing the impact of Ford's cuts.

 

Ford needs to get things under control now. They can't wait any longer. Gas supply isn't going to get better for another 2 years when more oil than is being pulled out of the ground and refining capacilty gets better.. exploration is taking off but won't come in time.. They need to cut now.

 

Ford is making the right move. I work in the construction industry and started seeing a decress in new projects due to lack of investor interest because of rising interest rates. Like Ford I have a couple of options. One I can cut my prices to attract the new work at the risk of making little, none, or loosing money. Two cut manpower, equipment, and whatever else I can and wait out the down turn in the economy. Number two is what Ford is doing. Number one is what Chevy has been doing. Trading off making a profit to increase sells. This may look great on paper when you see the monthly sells report, but when the quarterly statement comes out showing loss off profits heads will roll. Ford is making the right move. They need to follow it up by intrenching themselves deeper into their nich markets "trucks and SUVs". They can do this by introducing ones that get better mpgs with little up keep. Diesels and hybrids would fill this requirement very well for the light truck and SUV market.

 

Well I have one issue with this, the workers get 95% of thier pay between unemployment and a suplement from ford and they don't know how it's going to impact workers? well first they are cost shifting the cost of wages onto us the tax payers and secondly, how is it going to impact the workers gee I don't know does paid vacation ring a bell. Pay me 95% of my wage and tell me to stay home, that would sure be tough to do.

 

Well remember that the company and employees pay for unemployment insurance.

 

I agree with Batgeek...

 

Actually Terry the company pays for the UI it's not deducted from the check, but note they are getting 95% unemployment only pays probably about 20% of thier pay (there is a max limit, and UAW workers are wwwaaay above that limit) that means ford is suplementing thier unemployment to get it up to that level. And my point was there was discussion going on about how this was so hard on the workers, Really? getting a paycheck thats reduced by 5% to take a vacation, man that must be tough. Note this is a temporary layoff. Yes when they lay off permanent it's a different story.

 

Get us Focus and Fiesta from Europe and Ranger from Asia.

That should return things back to "normal"

 

You are correct that it will not be a hardship on the workers and I would be the first to lineup for such a deal. That is why 2007 is going to be such a neat year. I don't expect we will see contracts like we have in the past.

 

I am a Ford Employee and you guys are all sadly mistaken. It is definately a hardship on the employees. Between Unemployment and Supplemental Unemployment Benifits you end up with about 95% of your net(not Gross) 40 hour check, then they tax that! The typical Ford employee will see about $450 less than when he/she was at work working 40 hours and it takes about 3-4 weeks to even get your first check! Now how many of you reading this can afford to go 3-4 weeks without a paycheck? We may make more but the old motto holds strong "The more you make the more you spend" Everyone adjusts their life to their income and over 1/3 less on a paycheck will affect people alot.

 

Please cry me a river. Most of us in a similiar situation would get much less as we only get unemployment insurance. I would only get about 33% of my pay and about 3-4 weeks before that first check also. And that is before taxes.


And the motto is true but you should aslo be saving more for a rainy day.

 

That is the problem, people in general don't save for the unexpected and sometimes even if they make pretty good money still end up living paycheck to paycheck.

It is true the more you make, the more you spend.

 

I am in the firm belief to put some money aside for a rainy day. Ive heard the people in this country dont have any savings at all. 95% off your pay thats pretty good. Thanks to to the UAW. You should consider your self lucky. Sorry Im not feeling sorry foryou. Lots off people are in much worse shape.