Ford downshifting to small cars

Henry Ford II was famous for saying "Big cars, big profits. Small cars, small profits."

Now a better mantra for the country's second-largest carmaker might be "Big cars, no profits."

Faced with crashing sales of big sport utility vehicles and pickups and an increasingly dim financial outlook as a result, Ford Motor Co. said Friday that it hoped to eke out small profit margins by ramping up production of small cars, cutting production of large trucks and SUVs and delaying release of its redesigned F-Series pickups by two months. But many of the fuel-efficient sedans and hatchbacks aren't expected to hit dealer lots for at least 18 months.

"We view the move to smaller, more fuel-efficient vehicles as permanent, and we are responding to customer demand," said Ford Chief Executive Alan Mulally, blaming gasoline prices, which have climbed above $4 a gallon, in part for the shift.

Because of sagging sales, Ford said it did not expect to reach profitability in 2009 and that even its long-profitable lending division would lose money this year, largely because of declining resale values for SUVs and pickups.

Ford has not shown a profit since 2005, when it earned $2 billion. Over the last two years, it lost a combined $15.3 billion.

The Dearborn, Mich., automaker said it would cut overall production significantly for the remainder of the year, as much as 25% in the third quarter. At the same time, Ford plans to increase production of its sole compact car, the Focus, as well as of the Ford Escape and Mercury Mariner small SUVs.

Ford also confirmed plans to begin U.S. sales of its well-regarded European Ford Focus -- a more refined, higher-end car than its North American counterpart. Ford previously had announced plans to produce the new Fiesta, a European-styled economy car, in North America as well. Neither will be released until 2010.

"The revamp of Ford's product line can't come fast enough," said Aaron Bragman, industry analyst at forecasting firm Global Insight. "Ford needs these cars right now."

It's difficult to overstate how large a change such a downshift is for Ford.

For nearly two decades, the SUV and full-size pickup have been emblematic of the fortunes of American carmaking. And arguably no company benefited more from them than Ford, which pioneered with the medium-size SUV Explorer, the full-size Expedition and super-size Excursion (no longer in production).