Ford Hits Brakes on Production, Outlook - TheStreet

Ford Hits Brakes on Production, Outlook

The automaker said it likely will not return to profitability in 2009, as it shifts production to more fuel efficient vehicles to satisfy consumer tastes.
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Updated from 1:59 p.m. EDT

High gasoline prices are moving

Ford

(F) - Get Report

to alter its production plans to stress smaller cars, which the automaker on Thursday said will prevent it from becoming profitable next year.

Ford said it will increase production of smaller, hotter-selling vehicles like the Ford Focus, Fusion, Edge and Escape, while cutting back on gas-guzzling SUVs and large trucks as consumers "move quickly" to more fuel efficient vehicles. The company also said it would cut overall production of vehicles for the rest of the year, which will impact it

earlier forecast

of returning to the black in 2009.

"Unless there is a fairly rapid turnaround in U.S. business conditions, which we are not anticipating, it now looks like it will take longer than expected to achieve our North American Automotive profitability goal," President and CEO Alan Mulally said in a company statement. "Overall, we expect to be about break-even companywide in 2009 -- with continued strong results in Europe and South America."

Ford Drops a Bomb

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Crude oil has set several records this week, soaring to more than $133 a barrel Wednesday. American Airlines parent

AMR Corp.

(AMR)

on Wednesday

sharply reduced capacity

, signaled jobs cuts and added a new, $15 fee for checking a first piece of luggage, saying the industry "not built for $125 or $130 oil."

For Ford, it is the higher cost of fuel's affect on the consumer that is the problem. "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," Mulally said.

Higher costs for steel and other commodities also are impacting sales and manufacturing operations, said Mark Fields, Ford's President of the Americas.

Ford intends to produce 690,000 vehicles in North America during the second quarter, 20,000 units less than it had earlier intended and 15% from the year-ago period. The company plans to make between 510,000 and 540,000 vehicles in the third quarter, down 15% to 20% from the comparable 2007 period. In the fourth quarter, Ford plans to roll out between 590,000 and 630,000 vehicles, a 2% to 8% drop from last year.

In addition to Ford's Focus, Fusion, Edge and Escape, the company plans to increase production of the Mercury Milan and Mariner, as well as the Lincoln MKZ and Lincoln MKX.

Ford shares were down 8.2% to $7.16 in recent trading and rival

General Motors

(GM) - Get Report

was down 3.6% to $18.43. Japanese competitors

Toyota

(TM) - Get Report

and

Honda

(HMC) - Get Report

were up slightly.

This article was written by a staff member of TheStreet.com.