Ford to retool factories, focus on smaller cars

updated 7:18 p.m. ET July 22, 2008

DETROIT - 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 Tuesday.

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 isn’t 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.

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.

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