Ford to Cut Fourth-Quarter N. America Output by 21%

[DanielXR8]

Ford to Cut Fourth-Quarter N. America Output by 21% (Update11)

Aug. 18 (Bloomberg) -- Ford Motor Co., losing money in its largest market, will slash North American production by 21 percent in the fourth quarter, the biggest drop since the early 1980s. This quarter's output will be trimmed by 11 percent.

More than half of the reduction will be in F-Series pickups, among Ford's most profitable vehicles, company sales analyst George Pipas said today. The cuts come as Ford prepares to shed 6,000 salaried jobs in North America, a person with knowledge of the plan said, on top of 30,000 jobs already being eliminated in the region by 2012.

Chief Executive Officer William Clay Ford Jr., great- grandson of founder Henry Ford, is paring jobs and closing plants as he tries to revive the North American auto operations that have been unprofitable in seven of the past eight quarters.

``The sharp decline in production volumes will make it more difficult to see any signs of a turnaround at Ford,'' Craig Hutson, a Chicago-based senior analyst at Gimme Credit, wrote in a report.

Ford's North American finances will worsen because the company records revenue when it ships cars and trucks to dealers. The North American unit already was under strain as sales of pickups and sport-utility vehicles decline.

Fitch Ratings cut Ford's credit rating one level to ``B,'' five steps below investment grade, and Standard & Poor's said it's considering lowering its ``B+'' rating. Moody's Investors Service said it also may reduce its B2 rating for Ford and its Ba3 for Ford Motor Credit Co., the company's consumer-finance arm.

Shares Decline

Shares of Ford fell 17 cents to $8 at 4:03 p.m. in New York Stock Exchange composite trading.

A Ford spokesman, Oscar Suris, declined to comment about plans to cut the additional 6,000 salaried jobs, saying the company will disclose its strategy next month.

Ford announced its ``Way Forward'' restructuring plan in January, including the 30,000 job cuts to be completed by 2012. The company said in July it would accelerate restructuring after recording a $1.44 billion first-half loss, led by losses in North America.

Ford's sales of its U.S. Ford, Lincoln and Mercury brands fell 9.8 percent this year through July, and sales slid 9.7 percent overall. Ford hasn't gained U.S. market share since 1995.

GM's Wagoner Speaks

General Motors Corp. CEO Rick Wagoner, talking to reporters at an appearance today in Royal Oak, Michigan, declined to comment on his company's fourth-quarter production plans in North America. GM will discuss that subject when it announces August sales on Sept. 1, he said.

Third-quarter production in the region is ``locked in,'' Wagoner said. GM has forecast it will build 1.05 million cars and trucks in North America during the three months ending Sept. 30.

Ford's cuts announced today will shrink its North American output by 8.6 percent to 3.05 million cars and trucks this year. The automaker is ``getting product and inventory lined up with consumer demand,'' Pipas said.

Fourth-quarter production will be trimmed by 168,000 cars and trucks, to 625,000, Ford said. Production this quarter will be 650,000 vehicles, down from 728,000 a year ago and a previously announced plan of 670,000. More than half the production cuts involve the F-150 pickup.

Pickups, SUVs

Ford's SUV sales fell through 2005. F-Series sales, Ford's top-selling line of vehicles, began to drop during the second quarter and were down 12 percent for the first seven months of 2006.

The automaker now expects to miss its 2006 sales target of 900,000 F-Series trucks, Pipas said in the interview. Ford sold more than 900,000 of the pickups in the U.S. in 2004 and 2005.

Ford said in a statement that factories in Kansas City, Missouri; Norfolk, Virginia; Dearborn, Michigan; and Louisville, Kentucky, that produce F-Series trucks will have temporary shutdowns between now and the end of the year.

Other facilities scheduled for such shutdowns include a St. Thomas, Ontario, factory makes the Crown Victoria sedan; a Chicago plant that makes the Five Hundred and Montego sedans; a Wixom, Michigan, factory that assembles the Town Car sedan; a Wayne, Michigan, plant that produces the large Expedition SUV; and a St. Paul, Minnesota, plant that makes the small Ranger pickup.

The Wixom plant is set to close next year as part of the restructuring plan announced in January, while the Norfolk and St. Paul plants are scheduled to shut in 2008.

Ford's Suppliers

The production cut ``has the potential to send those suppliers heavily tied to Ford into bankruptcy,'' said Erich Merkle, an auto analyst at consulting firm IRN Inc. in Grand Rapids, Michigan.

Partsmakers that do significant business with Ford include Visteon Corp., Lear Corp., BorgWarner Inc. and Magna International Inc., Ron Tadross, a New York-based Bank of America analyst, wrote in a report today. Lear, which makes seats for the Expedition, gets about 25 percent of its revenue from Ford, according to U.S. regulatory filings.

``The F-150 for years has been every supplier's favorite contract,'' said Marc Santucci, an analyst at Lansing, Michigan- based ELM International. The F-150 accounts for about 60 percent of F-Series sales.

Shares of Visteon fell 19 cents to $9.06. Lear shares declined $1.47 to $21.01. Shares of BorgWarner dropped $2.07 to $58.65. U.S. shares of Magna lost $1.32 to $71.01.

Ford's 7.45 percent bond due July 2031 fell 1.25 cents on the dollar to 77.5 cents on the dollar. The yield rose to 9.9 percent from 9.73 percent.

The perceived risk of owning Ford's debt increased in the credit-default swap market. Contracts based on $10 million of Ford debt climbed to $650,250 from $636,000 yesterday, according to data compiled by Bloomberg.

Credit-default swaps are financial instruments based on corporate bonds and loans that are used to speculate on an increase or decrease in indebtedness.

To contact the reporter of this story: Bill Koenig in Southfield, Michigan, at wkoenig@bloomberg.net

[Fairlane]

Not cool

I dont reallt know what to say, its sounds like Ford is undergoing troubles like the ones Chrysler suffered a few years ago. All this will play into Toyota in a huge way, especially as they move further into the F-150/250 market.

The cutbacks and wage cuts will continue- The only way out i can see is new models, increased quality control and axe a few of the dead brands (yes i know ive said it before but Mercury must go).