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Ford plans to cut production in N. America by 8% to 12%

October 31, 2006|From Bloomberg News

Ford Motor Co. said Monday that it planned to cut North American production as much as 12% in the first half of next year as the company's truck sales decline.

The reduction in output is expected to be at least 8%, spokesman Oscar Suris said. Ford assembled 1.77 million cars and trucks in North America in this year's first half.

Ford's 2007 reductions come on top of a 16% production cut in this year's second half. Production in the second half of next year should recover, with the automaker expecting an increase of 5% to 10% from this year's levels, Suris said.

The automaker "can expect lower volumes, especially for things like F-Series pickups," said analyst Erich Merkle of consulting firm IRN Inc. "We're seeing some softness" in auto sales as U.S. economic growth slows, he said.

Ford, based in Dearborn, Mich., reported a $5.8-billion third-quarter loss last week. Contributing to the results were a $1.98-billion pretax loss at its North American automotive unit and a $2.2-billion write-down of auto assets in the region.

Light trucks -- pickups, sport utility vehicles and minivans -- account for more than 60% of U.S. sales at Ford and generate the bulk of its automotive profit.

Sales of Ford's F-Series trucks fell 11% in the first nine months of this year from the same period in 2005. Sales of mid-size and large SUVs also slipped, with the Explorer declining 27% in the first nine months.

Ford's overall sales of cars and light trucks slid 8.6% in the first nine months. The automaker's U.S. market share fell to 17.9%, one point lower than in the same period in 2005.

Ford's market share has declined each year since 1995, when the company had 25.7% of U.S. sales. North American production has dropped almost 25% since then, to 3.12 million vehicles last year, according to trade publication Automotive News.

Production affects profit because automakers record revenue when vehicles are shipped to dealers. Ford plans to shed 30,000 factory jobs by 2008 and 10,000 salaried jobs by the first quarter of 2007.

Automotive News reported the 2007 production plans Monday, citing an interview with Chief Financial Officer Don Leclair.

Ford shares fell 4 cents to $8.25.

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