Facing higher commodity prices and consumer rejection of SUVs and trucks, Ford is doing a quick change on this year's production plans to favor smaller cars and crossovers. President and CEO Alan Mulally conceded that energy costs, commodity costs and the slowing economy are forcing the company to revise its turnaround timetable.
Said Mulally in a release: "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." The company had expected to be profitable this year. Instead, said Mulally, break-even will be in 2009. He said Ford is expecting overall Ford, Lincoln and Mercury market share to be at around 14% this year.
The company says it will make 690,000 vehicles this quarter--down 20,000 units from numbers the company has announced for the quarter, and off 15% versus the quarter last year. The third and fourth quarters this year will see Ford cut production 15 to 20% and 2 to 8%, respectively.
The company says it will boost production of Ford Focus, Fusion, Edge, Escape, Mercury Milan and Mariner, and Lincoln MKZ an MKX while reducing production of large trucks and SUVs. Ford this year will introduce hybrid versions of the Fusion and Milan cars, as well as the all-new Ford Flex crossover, and a new sedan for Lincoln, the MKS.
Currently, Ford has two hybrid nameplates, the Ford Escape and Mercury Mariner hybrid crossovers. Boston-based online market-research firm Compete says sales of such vehicles are following the rise in gas prices. Toyota's Prius is benefiting mightily. Compete says April marked the highest shopper count total ever for Prius, with the hybrid car the fourth-most-shopped model in the U.S. The firm says Prius leads the compact car segment in share of segment interest, and that the compact car segment has grown from 26% of the market in July last year to over 33% today.
IntelliChoice, a Los Angeles-based automotive marketing firm, says that as gasoline costs go up, mileage figures more strongly in the cost of owning a vehicle, which figures into residual value. Per the firm, fuel costs are second only to depreciation in overall cost of owning a vehicle.
"Fuel costs have heavy impact on cost of ownership," says James Bell, editor and publisher of IntelliChoice. He says hybrid vehicles benefit across the range of cost parameters. "The entire cost of ownership for hybrids is a great story. Pretty much across the board non-hybrid equivalents do not do as well from cost of ownership perspective. You see great repair and maintenance scoring, better insurance costs."
Bell says Ford must continue to lift residual values. "Thankfully, they are following the path of limiting fleet business, but they need to lower cost of ownership, and fuel efficiency is a big part of that."
IntelliChoice has just released a ranking of mid-sized cars by cost of ownership for five years. The firm says the median cost of mid-sized cars is $34,755 after five years, including purchase.
The firm lists a series of top cars based on their cost of ownership after half a decade. The firm breaks best-ofs into five different categories--for different price ranges, for example, or best for fuel economy, or for insurance costs. Toyota dominates with 14 entrants, Honda has two, Nissan three, and GM also has three.
Ford is not represented among the top five in these categories. The firm says the highest ranking for Ford in mid-sized cars is Mercury Milan and sibling Fusion 4-cylinder cars, which rank overall 17th and 19th in the cost-of-ownership rankings.