Ford to Make Big Move to Cut Large Trucks, Build More Small Cars

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Ford Motor Co. plans to revamp some U.S. plants and bring six small vehicles to the U.S. market from overseas to meet customers' growing demand for more fuel-efficient options, a person briefed on the company's plans said.

Ford has no immediate plans to close U.S. plants despite overcapacity in a slumping market, the person said. Instead, the automaker will retool plants to increase production of smaller cars and engines. The person requested anonymity because Ford is not confirming details until Thursday, when it releases second-quarter earnings.

The moves will further accelerate Ford's efforts to ease its dependence on trucks, sport utility vehicles and vans, which accounted for 45 percent of its sales in the first half of this year. Ford's U.S. sales dropped 14 percent in the first six months of 2008 as consumers shocked by rising gas prices sought smaller vehicles.

The steep sales decline is expected to drag down Ford's second-quarter results after a surprise $100 million profit in the first quarter. Ford had warned that the results were an anomaly, and in May it abandoned its long-stated goal of returning to profitability by 2009. Analysts surveyed by Thomson Financial predict a second-quarter loss of 27 cents per share.

The moves to be announced Thursday are Ford's latest efforts to deal with plunging truck and SUV sales, which have also forced production cuts at General Motors Corp., Chrysler LLC, Toyota Motor Corp. and Honda Motor Co. In May, Ford announced it would slash truck and SUV production and cut several thousand salaried jobs on top of the 8,000 U.S. hourly jobs it is trying to cut this year.

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On Monday, Ford said it plans to begin offering buyouts to workers at facilities in Michigan and Ohio, building on targeted buyouts offered in June at other plants in Kentucky and the Midwest.

Ford announced last month that it was cutting truck and SUV production for the rest of the year and increasing production of the Focus small car and Ford Escape and Mercury Mariner small SUVs. It also delayed the launch of its new F-150 pickup until fall.

Also in June, Ford revealed that it will build the global Fiesta subcompact at its factory in Cuautitlan, Mexico, which has been making trucks, and that it will build the European Focus small car in North America. Both cars are set to go on sale in the U.S. in 2010.

The company now plans to bring even more vehicles over from Europe and produce them in North America, according to the person briefed on the plans. They could include the Kuga small crossover vehicle, the Transit Connect and C-Max small vans and the next-generation Mondeo midsize car, which likely would replace the current Ford Fusion and Mercury Milan.

Some factories, the person said, will be retooled to produce more fuel-efficient four- and six-cylinder engines and more efficient transmissions for the new vehicles.

Also, to meet high demand for the current Focus small car, Ford will retool part of the Michigan Truck plant in the Detroit suburb of Wayne to build Focus bodies. The bodies would then be shipped next door to the Wayne Assembly plant, where the Focus is made, the person said. Ford has been trying to crank out more Focuses at the Wayne Assembly plant, but analysts have said its body shop can't move as quickly as the rest of the factory, and that has slowed production.

Production of the Ford Expedition and Lincoln Navigator SUVs, which are currently made at the Michigan Truck plant, would be moved to another location, likely the Kentucky Truck Plant in Louisville, which builds Ford F-250 and F-550 Super Duty pickup trucks.

Rocky Comito, president of the UAW local in Louisville that represents workers at the plant, said Tuesday he had not been told of any changes, although Ford promised new products for the truck plant and the Louisville Assembly plant in its national UAW contract reached last year.

"We tell them we'll build whatever they bring us," Comito said.

Greg Gardner, an analyst for the consulting firm Oliver Wyman, which publishes the annual Harbour Report on auto manufacturing, said converting an auto plant's operations from trucks to cars is no easy feat and could easily cost tens of millions of dollars per factory. But the changeover is critical, he said, since Ford has lost small-car sales because it didn't have enough inventory.

"You can't use the same conveyor system for trucks as you can for cars," Gardner said. "There's some equipment, like torque wrenches and things like that ... those are common to any vehicle. But really heavy-duty capital equipment has to be different."

But it's unclear if Wall Street will be satisfied with Ford's latest plan. Brian Johnson, an analyst with Lehman Brothers, said Tuesday in a note to investors that Ford still has too much North American plant capacity and needs to close plants.

Ford shares rose 36 cents, or 6.6 percent, to $5.84 Tuesday.