July 25, 2008
Ford Looks to Smaller Cars As Record $9bn Loss Stuns Market
By Stephen Foley
FORD PINNED its future on an ambitious attempt to persuade Americans to drive smaller, European-style cars, after plunging to its biggest loss ever.The car maker had to write off billions of dollars of investment in high-tech factories that build gas-guzzling SUVs and pick-up trucks, vehicles which have fallen suddenly out of favour due to the soaring costs of fuel.
The company's shares fell more than 10 per cent on yesterday's miserable financial results, which were worse even than Wall Street had feared. Its losses for the three months to the end of June were $8.7bn (4.4bn), including $5.3bn in writedowns of its North American factories and a further $2.1bn because the second-hand market for its fleet of SUVs has collapsed.
With petrol prices, unemployment, inflation and mortgage finance costs all rising, vehicle sales have fallen sharply in the US this year, with SUV and pick-up sales sliding most of all. Ford's F- series pick-up had been the best-selling vehicle in the US for 26 years, but in recent months it collapsed into fifth place.
Ford's chief executive, Alan Mulally, said the company would retool three factories to make smaller cars and would introduce six European models - including versions of the Fiesta and the Ford Focus - into the North American market. "We have absolutely the right plan to respond to the changing business environment and begin to grow again for the long term," Mr Mulally said.
It is almost two years since Bill Ford, the company's chairman and great-grandson of founder Henry Ford, lured Mr Mulally from Boeing to take over day-to-day running of Ford. Even then, at the height of a consumer boom, Ford was losing money and losing market share to foreign rivals such as Toyota. Its problems have multiplied since the credit crisis struck and petrol prices spiked. Last month, Mr Mulally abandoned Ford's promise to return the North American business to profitability in 2009.
Originally published by By Stephen Foley in New York.
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