- The Washington Times - Friday, August 18, 2006

2:45 p.m.

DETROIT (AP) — Ford Motor Co. today announced sharp cuts in its 2006 North American production that will force it to temporarily shut down plants in the U.S. and Canada as it struggles to boost profits against intense foreign competition.

The company said fourth-quarter production would be down 21 percent, or 168,000 units, from last year. Third-quarter production will be 20,000 units below what was previously announced and 78,000 units below last year.

For the full year, Ford plans to produce about 9 percent fewer vehicles than last year for a total of just above 3 million.

“We know this decision will have a dramatic impact on our employees, as well as our suppliers,” Chairman and Chief Executive Bill Ford said in a note to employees. “This is, however, the right call for our customers, our dealers and our long-term future.”

He said it was the company’s biggest North American production cut in more than 20 years.

In response to the announcement, Fitch Ratings downgraded Ford’s debt further into junk status, while two other ratings agencies placed the company on review.

The Dearborn, Mich., company, which lost $254 million in the second quarter, vowed last month to speed up its North American restructuring.

Mr. Ford told employees the cuts are part of that acceleration and said details of more actions will be announced in September.

The nation’s second-largest automaker, which has been losing market share to Asian manufacturers for a decade, said the cuts are an effort to match inventories to demand and avoid costly incentives. The plan also reflects reduced expectations for big trucks and sport utility vehicles, considering high gas prices, the company said.

The new plan will result in temporary halts in production this year at assembly plants in St. Thomas, Ontario; Chicago; Wixom, Mich.; Louisville, Ky.; Wayne, Mich.; St. Paul, Minn.; Kansas City, Mo.; Norfolk, Va.; and Dearborn, Mich., Ford said.

Mark Fields, Ford’s president of the Americas, said the plan reflects the need “to match production and inventories with consumer demand.”

“In doing so, we’ll reduce incentive spending and inventory carrying costs for our dealers — with the intent to improve residual values for our customers and stabilize operating patterns for our plants and our suppliers,” he said.

Company officials would not say what specific impact the production cuts would have on workers. In general, hourly workers placed on temporary layoff receive 95 percent of their wages through state unemployment benefits and a supplement by Ford.

The United Auto Workers had no immediate comment on the announcement.

Bank of America analyst Ron Tadross said the cuts are a sign that “Ford is getting more realistic about its share trajectory.”

He said he would not rule out similar cuts at rival General Motors Corp., which is in the midst of its own restructuring.

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