Ford to Sharply Cut '06 Production
From Associated Press
9:43 AM PDT, August 18, 2006
Ford Motor Co. today announced sharp cuts in its 2006 North American production that will force it to temporarily shut down plants in the U.S. and Canada as it struggles to boost profits against intense foreign competition.
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.
ADVERTISEMENT
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 a note 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.
In response to the announcement, Fitch Ratings downgraded Ford's debt further into junk status, while Standard & Poor's Ratings Services placed the company on review.
Dearborn-based Ford, which lost $254 million in the second quarter, vowed last month to speed up its North American restructuring.
Bill Ford told employees the cuts are part of that acceleration and said full details of more actions will be announced in September.
The nation's second-largest automaker said the cuts are an effort to match inventories to demand and avoid costly incentives. The plan also reflects reduced expectations for big trucks and sport utility vehicles considering high gas prices, the company said.
The new plan will result in temporary halts in production 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.
Mark Fields, Ford's president of the Americas, said the plan reflects the need "to match production and inventories with consumer demand."
"In doing so, we'll reduce incentive spending and inventory carrying costs for our dealers -- with the intent to improve residual values for our customers and stabilize operating patterns for our plants and our suppliers," he 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.
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.
Meanwhile, 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. "Volume declines in Ford's pickup segment, along with continued declines in mid-size and large SUVs, are likely to accelerate revenue declines and negative cash flows in 2006."
Standard & Poor's said it had put Ford's current "B+" long-term and "B-2" short-term ratings on review.
The agency said the cuts "reveal the magnitude of turnaround efforts needed to deal with Ford's deteriorating product mix, lower market share, and excess production capacity in North America."
Bank of America analyst Ron Tadross said the cuts are a sign that "Ford is getting more realistic about its share trajectory." He said he would not rule out similar cuts at rival General Motors Corp., which is in the midst of its own restructuring.
Ford shares fell 19 cents, or 2.3 percent, to $7.98, in early afternoon trading on the New York Stock Exchange.
Reply With Quote
Originally Posted by roushzx2
