Ford to idle F-150 factories for 13 weeks to prep for aluminum version

DETROIT -- Ford Motor Co. today said it plans 13 weeks of downtime for retooling this year at plants building the F-150 as it prepares to introduce the next generation of its top-selling pickup.

Ford said production would be halted for 11 weeks at the Dearborn Truck Plant in Michigan and for two weeks at its plant near Kansas City, Mo. The figures include the traditional summer shutdown for both plants.

How Ford manages the launch of the 2015 F-150 and how customers react to the truck's lighter, more expensive aluminum body will have a significant effect on the company's profits this year. The F series accounted for 31 percent of Ford's U.S. light-vehicle sales in 2013, and Morgan Stanley estimates that it generates about 90 percent of Ford's global profits.

"We see '14 profit pressure from extended truck production downtime for the transition to the new aluminum F-150 pickup truck and increased sales of smaller vehicles that have narrower margins," Efraim Levy, an analyst with S&P Capital IQ, wrote this afternoon.

Ford officials said they expect the company to be less profitable in North America this year than in 2013, when it earned a record $8.8 billion. Operating margins will be between 8 percent and 9 percent, they said, compared with 9.9 percent in 2013 and 10.4 percent in 2012.

The expected declines are "largely attributable to F series," Ford CFO Bob Shanks said on a conference call with analysts and reporters.

Shanks and Ford COO Mark Fields said they are confident inventories will remain sufficient to meet demand throughout the year. But they provided few specifics about their plans to bridge the gap between the outgoing and incoming trucks, nor would they discuss the financial effect of the changeover in any more detail.

"We have a lot of experience with this," Fields said.

Buckingham Research Group analyst Joseph Amaturo said the increased downtime for the F-150 launch could reduce Ford's North American pretax profit by $800 million this year.

Brian Johnson, an analyst with Barclays Capital, said the downtime Ford announced for 2014 implies that the Kansas City plant also will be shut for about nine weeks in early 2015.

The revolutionary nature of an aluminum body truck creates more than the typical amount of uncertainty that accompanies a launch, Johnson said.

"There has already been a delay in the production schedule, likely due to challenges in stamping, riveting, and welding of the aluminum," he wrote in a report Monday. "Moreover, Ford also faces risks with regard to potentially higher warranty expense and customer acceptance (large pickup buyers may be resistant to change, and may be skeptical of the new truck's durability)."

Ford has to tread a fine line with F-150 production this year to maximize its profits from the truck. If it doesn't build up a large enough inventory, impatient customers could elect to buy a competitor's vehicle instead.

If it stockpiles too many, it will have to discount them heavily to get rid of them.

A year ago, General Motors was grappling with similar issues as it prepared to introduce redesigned versions of the Chevrolet Silverado and GMC Sierra. After GM overshot its inventory target and wound up with a 139-day supply in November 2012, dealers advertised discounts of up to $11,000 to help thin out their lots. But shortly after the new trucks went on sale last summer, GM said it had gotten ahead of schedule on selling down the outgoing models and raised prices.

Reuters contributed to this report.

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