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Ford plans more production cuts in Q4

DETROIT -- Ford Motor Co. is poised to cut North American production of cars and crossovers during the fourth quarter, sales analyst George Pipas said Monday.

More details on the production cut are expected Friday when Ford details its third-quarter earnings results. It would mark the fourth time this year that Ford has announced cuts to its North American production plan.

The latest cut comes in the wake of a 32 percent skid in Ford’s U.S. sales during October compared with the same month last year. Industry sales for the month translated to an annual rate of around 10.9 million, the lowest since March 1983.

“You could probably be looking for Ford to get car and crossover inventories more in line with the demand for those products in this kind of 11 to 12 million industry environment,” Pipas said.

Ford finished October with inventory of 492,000, including vehicles in transit to dealerships. That's down from 564,000 at the same time a year ago.

Car inventory accounts for 187,000 of those vehicles, up 12,000 units year-over-year. Truck inventory is at 305,000 units, down by 84,000 units.

Much of the reduction in truck inventory stems from cuts in F-150 production taken this summer. Ford reduced F-150 production from five shifts to three and scheduled several weeks of downtime at both of its F-150 assembly plants.

“We have taken our medicine. The second and third quarter production cuts were very severe,” said Ford marketing chief Jim Farley. “If anything, we overreacted.”

Ford is adding back one of those F-150 work crews in January at its plant in Dearborn, Mich. Some of the added volume is likely to go to Mexico. At the end of this year, Ford plans to shut down a plant in Cuautitlan, Mexico, that is making F-150s for the Mexican market. It will retool that plant to assemble the Fiesta subcompact expected to go on sale in early 2010.

Ford officials didn’t indicate how much fourth-quarter production could be reduced.

But in light of the dramatic slowdown in industry sales, Ford will continue to lower overall inventory levels. Ford's planned year-end inventory level will be “notably lower” than the current level of 492,000, Pipas said.

The company’s most recent forecast calls for fourth-quarter North American production of 470,000 units. That compares with 628,790 vehicles produced during the fourth quarter of 2007, according to the Automotive News Data Center.

Ford has produced 1.8 million vehicles through the first nine months of 2008, down 18.3 percent from the same period in 2007.

You can reach Amy Wilson at awilson@crain.com

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