Ford cuts North American Production, cuts profit goal

Ford cuts North American Production, no longer expects profit by 2009 as gas prices hurt sales.

Due to fast rising gas, Ford Motor Co. dropped its goal of becoming profitable by 2009 and said it will cut production of trucks and other vehicles through the rest of this year. This was a situation that warned U.S auto industry which is facing its worst sales in the previous years.They will release more detail about its cost-cutting efforts soon and is forecasting light vehicle sales this year to between 14.7million and 15.1 million. This is down from 17 million as recently as 2005. If sales drop as low as 14.7million, it would be the slowest year for U.S since 1993. Ford will cut North American production by 15 percent in the second quarter and this will affect pickups and sport utility vehicles. These have seen sales fall in recent months due to rising gas prices. The automakers’ revenues will hurt from the production cuts because the companies book vehicles as sold when they leave the factory. The President of Ford said that the most important thing we can do for the long-term success of the Ford Motor Company is to deal with this problem.

Ford was doing well at the first-quarter by making 100 million and a billionaire investor Kirk Kerkorian was about to by 20 million shares of Ford stock because of their potential growth. However, the shares dropped to 64 cents which remained 7.16. From this, some experts said that it was a good strategy to respond to the challenging market. Lately, Ford was trying their best to prevent inventories from building up at the dealers and has been very cautious on production.

Looking at their competitors, General Motors Corp. forecast their cuts in the second-quarter production in North America by 5 percent. GM has less pressure on cutting and will have no additional cuts because their motor business was not as serious as Ford’s. Chrysler cut North American production by 16 percent in the beginning quarter of this year. Also, Toyota and Nissan have cut North American production to meet lower demand.

An expert said that the greatest challenge for Ford will be maintaining its U.S market share at 14 percent. But Ford remains heavily reliant on the kinds of large vehicles that have been struggling in the current market. Their F-series trucks were down 16 percent through April. They are trying to improving on fuel economy and is not considering dropping any trucks or SUVs from its lineup.

In my opinion, I think the way Ford had decided to cut the production was a right choice to make during their recession. During their hard time in sales, they made a great judgment on minimizing their loss and searching for new business strategy. They should stop any deteriorates and problems that bothers their business and should be more aware of improving their products to meet the customer’s demands. As it is mentioned in the last paragraph, they should get out of their idea of producing old products and produce innovative commodity to gain more shares in their market.

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