Ford Cuts Production, Expects to 'Break Even' in 2009

Company revises forecast as consumer demand shifts away from larger gas-guzzling vehicles.

Ford Motor Co. does not expect to meet its goal of returning to profitability in 2009 and will make additional production cuts in 2008 as consumers respond to rising gas prices by buying fewer large trucks and SUVs, the company said May 22.

Ford now plans to reduce vehicle production in the second quarter by 20,000 units, a 15% decline from the year-earlier period. The company plans to reduce production by 15% to 20% in the third quarter and 2% to 8% in the fourth quarter.

At the same time, Ford will increase production of the more fuel-efficient Focus, Edge, Escape, Mercury Milan and Mariner and the Lincoln MKZ and MKX.

The company cited rising steel and gas prices as reasons for the move.

"The challenge affecting the entire industry is the accelerating shift in consumer demand away from large trucks and SUVs to smaller cars and crossovers - combined with a steep rise in commodity prices and the weak U.S. economy," said Ford President and CEO Alan Mulally in a May 22 statement.

Ford expects to be "about break-even companywide" in 2009 after previous forecasts that it would return to black.

"Unless there is a fairly rapid turnaround in U.S. business conditions, which we are not anticipating, it looks like it will take longer than expected to achieve our North American automotive profitability goal," Mulally said.

Other risk factors cited by the company include work stoppages at Ford or supplier facilities, postretirement expenses, increased emissions regulations and increased competition from banks or other financial institutions seeking to increase their share of financing Ford vehicles.

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