Ford move will loosen supply of commodities
By Tom Stundza -- Purchasing, 8/18/2006 2:38:00 PM
Ford Motor Co. slashed its second-half production plans and announced that 10 North American plants will be shut for extended periods much of the rest of the year as it tries to trim costs and deal with slumping sales of its light trucks. Upshot: A substantial amount of steel, aluminum, plastics, copper wiring, electronic components and other production materials will be available to buyers through the rest of the year. The automaker said Friday its moves will result in a 21% drop in production in the fourth quarter compared to a year ago, as it makes 168,000 fewer vehicles. The company also trimmed third quarter production by an additional 20,000 vehicles from its previously announced production target, leaving it 78,000 vehicles short of year-ago production. "We know this decision will have a dramatic impact on our employees, as well as our suppliers," said a statement from Chairman and CEO Bill Ford. "This is, however, the right call for our customers, our dealers and our long-term future."
Independent automotive market analyst Dennis DesRosiers e-mails Purchasing that “what’s behind the Ford move is that the U.S. market is very soft and is paying for all the foolish incentive dollars poured into the market over the last few years. Pay me now or pay me more later. Well, it is later and the U.S. market is not going to get better without major incentives--and nobody can afford big incentives and nobody has the appetite for big incentive money.” Besides the fact the marketplace pie is shrinking, Desrosiers says that “Ford continues to struggle in the market.” While the Dearborn, Mich., firm isn’t losing a lot of market share in North America, “they are losing some share and this creates a doubling up of the problem. To lose share in a declining market forces companies to react.”
Among the products targeted for production cuts is the F-series pickup truck, the nation's best-selling vehicle, but one which has seen its sales hurt by high gasoline prices. Ford's sales of the pickup were off 46% percent in July compared to a year earlier; for the year, sales are down 12.5%. The companies four F-series plants--in Kansas City, Mo., Norfolk, Va., Dearborn, Mich. and Louisville, Ky.--are among the plants that will see the additional downtime between now and the end of the year. The other six plants that will see periods of closure are in Chicago, St. Paul, Minn., Wayne and Wixom Mich., St. Thomas, Ontario, and another Louisville plant that makes the Ford Explorer and Mercury Mountaineer.
Some of the plants with additional downtime this year have already been identified by Ford for eventual closure as it tries to trim costs long term. The company plans to close 14 plants in the coming year as part of an effort to cut costs and return to profitability.
Now Playing: 
