By on December 2, 2008

Between the release of its congressional bailout term paper and November sales results, it’s been a big news day for Ford. And the hits keep happening. Automotive News [sub] reports that Ford will cut its 2009 Q1 production by 37.9 percent to 430k units, No surprise there; FoMoCo’s monthly sales are sitting at under 125k– and dropping. Dow Jones (via CNN Money) says that Ford’s 2009 Q1 production plan consists of 305k pickup trucks and 125k cars, compared to this quarter’s 255k pickups and 175k cars. A quick look at Ford’s November sales shows that cars are down 31.5 percent while total truck sales are down 29 percent. So what’s the deal? Is Ford signaling to congress that it plans on asking for $13b ($5b more than they asked for on 11/18) only to turn around and ramp-up truck production? Or is there some play here that I’m missing? I can’t make sense of it, so I’m asking: what’s the deal?

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19 Comments on “Ask The Best And Brightest: Do Ford’s Production Plans Make Sense?...”


  • avatar
    Paul Niedermeyer

    You got to be earning $25 mill a year to understand it. Or $1 if it doesn’t add up.

  • avatar
    Droid800

    Easy: Ford has a new F150, and they’re betting (probably correctly) that sales will increase for the new model.

  • avatar
    cmcmail

    “probably correctly” but they are still asking to bet with your money.

  • avatar
    kericf

    Well, if they are forecasting a GM AND Chrysler Ch.11 filing, then it could potentially give their truck sales a bump and they would be the only one left save for the Tundra. If a lot of contractors and governments are given the choice of Tundra VS F-150, Ford could potentially see an even bigger increase than what is forecasted. Again, that is only IF GM and Chrysler file or go under.

  • avatar
    bunkie

    BTW, Great photo from one of my favorite movies. Chuck behind the wheel of 1970 Mustang? Seriously cool.

  • avatar
    guyincognito

    It makes perfect sense in that it is the only path Ford has for short term revenue growth. Ford loses money on every car it sells, therefore it stands to reason they should build less of them. However, trucks make a ton of profit.

    Of course there is the question of whether people will buy all of those trucks. I would wager that they will. A global recession will keep gas prices low. With low gas prices Americans will flock back to trucks and SUV’s because that is what they really want to buy.

    It is the plan for the hybrids and electric vehicles they announced earlier that makes little sense in the short term. Those vehicles will not sell for a profit or in any significant volume in the near future. Ford should develop that technology on a long term basis only, while taking this time to focus on their bread and butter vehicles while also getting rid of their glut of overlapping crossovers.

    If Ford continues to develop their Euro platforms to be saleable across the globe at a profit and gets rid of Mercury, Volvo, and Lincoln, and cuts 2,000 dealers and many plants, plus outsources all vendor parts to China, and gets the UAW to give up the jobs bank, the plan just might work.

  • avatar
    Ryan

    Yes, build more pickups when people want cars… I wonder why Dirt-troit is in trouble?

  • avatar
    Dimwit

    Ford wants the balance of 2009 production done before the parts suppliers declare bankruptcy in 2Q because GM has gone titsup.

  • avatar
    Droid800

    @Ryan

    Actually, the market as a whole is still heavily dominated by trucks. Ford is likely anticipating a further decline in the new car market, but less of a decline in pickup truck sales. (where most buyers will buy regardless of market conditions)

  • avatar
    RobertSD

    Well, technically what Ford is asking from the government is a line of credit that they can access if need be (ie – if they don’t need it, they won’t touch it – but they’ll probably end up touching some of it).

    So, really, they aren’t using our money to ramp up truck production. What they are doing is using their money to ramp up production from current levels that have left Ford with its lowest inventory of trucks in probably decades on a product that is in demand and is profitable for Ford in hopes that they won’t have to touch our money.

    Increased production of what people demand (we seem to forget that side of the equation so often) does not preclude development of fuel-efficient vehicles. I see nothing in what Ford is doing as fundamentally bad for the company or potential taxpayer investment or contrary to the spirit of how an enterprise operates.

  • avatar
    Point Given

    Running up the inventory…interesting.

    Could be a prelude to mid summer plant idlings/retoolings, Could be they expect it to sell well (the 09 is a decent enough truck), could be fear of parts suppliers going under sometime this year and wanting to have inventory on hand, could be to grab the marketshare that will gravitate away from GM/Chrysler if one should go under….

    The only problem is….it’s all could be.

  • avatar
    RedStapler

    The F-150 is still their bread and butter. They are doing a good job of balancing out their product portfolio with the Focus and Fiesta on the small end.

  • avatar
    maniceightball

    Yes, build more pickups when people want cars… I wonder why Dirt-troit is in trouble?

    I think what’s happening right now makes sense — casual truck buyers are disappearing, leaving those who actually need a truck to haul crap around. I’m willing to bet a lot of them will stick with their Fords.

    In any case, Ford is the only one of the three that has a legitimate plan for the future (namely through globalizing the platforms, despite the roadblocks they’re facing [such as the idiotic Australian engine issue]).

  • avatar
    brush

    maniceightball
    “Idiotic Australian Engine Issue”

    is that because Ford Australia is dropping the straight6 and turbo 6 for the american v6?

    plus dropping the falcon (slightly smaller than a taurus but larger than the mondeo) for the Mondeo.

    Should they have re-engineered the Taurus to RHD and austrailan tastes or the falcon to lhd and american tastes?

  • avatar
    Acd

    F150 sales were down a lot less than car sales this past month and Ford gets a lot more revenue out of an F150 than they do a Focus or Fusion so their numbers may make sense. At this point the name of the game for the domestics is bringing in revenue however they can get it and they need to sell as many $30,000+ vehicles as they can if they stand a chance to survive.

  • avatar
    cpmanx

    Yes, build more pickups when people want cars… I wonder why Dirt-troit is in trouble?

    Hmmm…have you looked at the sales figures for November? The only thing selling at Toyota is the Sequoia SUV. The only thing selling at Honda is the Pilot SUV. Relatively speaking the F-150 is doing well right now at Ford. Meanwhile Civic Hybrid and Prius numbers look terrible.

    It would be nice to think that in times of trouble people flock to green, rational cars. In reality, gas prices are low and people at the bottom end of the market are the ones who are cutting back most aggressively. Ford’s strategy may not be PC, but it *is* responsive to what customers are actually asking for right now.

  • avatar

    What Droid800, guyincognito, and Dimwit said.

    Also, fuel around here is about 50%+ off the summer highs, so even though their cost-structure still sucks, they’re making the most sure-fire of what they can while they can.

    The bigger % numbers they’ll post relative to GM because of that fuel/profit arbitrage may be used as a tool later on.

    If I knew there were an impending disruption, I’d be banking transition elements like cash, product (& Milanese hookers) the way a squirrel stashes nuts.

    -That and Toby Keith gets free F-150s and the Holiday Season is rolling around.

  • avatar
    geeber

    cpmanx: In reality, gas prices are low and people at the bottom end of the market are the ones who are cutting back most aggressively. Ford’s strategy may not be PC, but it *is* responsive to what customers are actually asking for right now.

    It’s not just in cars.

    We want our floors refinished. The contractor who came to give us an estimate told us that in this area, the very high end market for houses (and remodeling projects) is going ahead full steam. But anything below that is virtually dead.

    As for Ford – I wonder if the first quarter production cuts for cars reflect the switch to production of the 2010 Mustang, Fusion, Milan and MKZ.

  • avatar
    Ralph SS

    Given the facts as they are now, it appears to be a fiscally sound plan.


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