Ford Cuts Production
Ford’s been pushing hard to recover from the slump that all the North American auto manufacturers find themselves in. Calling their program the “Way Forward” plan, Dearborn’s great leap forward has thus far been mostly a marketing move, with better ad campaigns and increased product awareness plus development aimed at turning more customers into fans of the Blue Oval. But all this has changed.
For Ford, arguably America’s most pioneering company, has been forced to cut production. By aggressively slowing production at the company’s less successful factories, Ford expectrs to cut the number of vehicles it builds by as much as 21 percent in the fourth quarter of this year. That equates to 168,000 fewer units than last year’s fourth quarter, plus the revised production plan will even reduce third quarter production by 20,000 units. The overall result will be a 9 percent reduction over 2005’s build figures.
Bill Ford, the company’s chairman and CEO, outlined the decision to cut production in a note to employees, explaining the decision is part of broader efforts to accelerate the company’s North American turnaround, adding that full details of additional actions will be announced in September.
“We know this decision will have a dramatic impact on our employees, as well as our suppliers,” Bill Ford told employees. “This is, however, the right call for our customers, our dealers and our long-term future.”
The reduced product availability is hopefully going to alleviate some of the stress placed on showroom sales, which in turn would allow Ford to lay off of the exorbitant sales incentives for a while; something the other manufacturers have been remiss to do. Could such a move potentially put Ford on the top of the heap? In a word, yes. For reducing the money-losing but product-moving incentives is the only way to regain some of the much-needed profits in order to regain profitability. And by cutting production of their slowest moving models, Ford will minimize its chances of losing potential sales; an obvious, but still smart move.
The models affected? The Ford Crown Victoria, Five Hundred, Freestyle, Explorer, Expedition, Ranger and F-series trucks as well as Lincoln’s Town Car and Navigator. The facilities producing the other Ford models will be working straight time or overtime depending on consumer demand.
Will it be enough? Well, having already allegedly gone through extensive lengths to increase their product quality and now trimming the excessive fat from their showrooms, those models that have been left languishing on dealer’s lots will finally make way for the more successful products. Although, with fewer sales incentives, Ford may see fewer sales than it did last year, and potentially could lose its number two spot. But more importantly to its shareholders, it could potentially see more profit, and at the end of the day, that’s all that counts.