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Mulally: Full speed toward smaller
Amy Wilson
Automotive News
May 29, 2008 - 12:01 am ET
DETROIT — Ford Motor Co. is getting religion about American consumers' lack of appetite for trucks.
Ford CEO Alan Mulally now believes U.S. truck sales are in rapid and permanent decline. That means small and mid-sized vehicles — both cars and crossovers — ultimately will dominate the U.S. industry and Ford's lineup. Last week's sweeping production cuts torpedoed the automaker's long-promised plan to return to profitability in 2009.
"It appears to us that fuel prices are not going to come down," Mulally said last Thursday. "You just cannot make cars that people don't want."
The pullback came just four weeks after Ford announced a surprise $100 million first-quarter profit amid glowing media reports about the automaker's turnaround. But Ford soon found that consumers wanted dramatically fewer pickup trucks and SUVs as gasoline prices topped $3.50 a gallon.
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With customers turning away from the gas guzzlers, Ford is slashing production by 15 percent in the second quarter. Third-quarter production will plunge as much as 20 percent compared with 2007. Fourth-quarter production will drop as much as 8 percent. Pickup and SUV plants are taking the brunt of the cuts.
Indeed, the percentage of pickups and SUVs in Ford's 2008 production plan will be the lowest the company has seen since at least the 1980s when the original Taurus was hot, Ford sales analyst George Pipas told Automotive News.
Give Mulally credit for being the first from the Detroit 3 to step up and say loudly that the typical Detroit pattern is a path to oblivion. Ford also stepped away from the pack with a new sales forecast of U.S. light-vehicle sales of 14.7 million to 15.1 million units in 2008. That is one of the lowest projections in the industry.
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But don't drown Ford with applause. The situation remains dire:
-- Ford can't predict when it might make money, Mulally said. He promised more guidance in late July after further number crunching.
-- More job cuts are planned by Aug. 1. Reductions will affect both hourly and salaried workers, and executives don't rule out firings and additional plant closings. J.P. Morgan analyst Himanshu Patel estimates Ford could lay off as many as 9,000 additional employees.
-- The small and mid-sized vehicles Mulally is counting on to rebalance Ford's product lineup aren't scheduled to arrive in the U.S. market until 2010 and later.
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