DETROIT Faced with a continuing plunge in pickup truck and sport utility vehicle sales, Ford Motor Co. on Friday tried to deal with the mess by delaying production of the new F-150 pickup truck and announcing further factory cuts.
Shortly after Ford's announcement, Standard & Poor's Ratings Services said it is reviewing ratings on Ford, Chrysler LLC and General Motors Corp. with the possibility of lowering them due to the deteriorating U.S. auto market. Also, Moody's Investors Service changed its ratings assessment for Ford and Chrysler from stable to negative.
Lower credit ratings can boost the a company's borrowing costs.
Shares of GM sank to their lowest level in more than 26 years while Ford tumbled more than 8 percent.
Dearborn-based Ford also said Friday that its loss on automotive operations will worsen in 2008 and that it will be difficult for the company to break even in 2009 as it had predicted just one month ago.
Ford's moves are the latest in a series from U.S.-based automakers as they struggle against an economic downturn and $4 per gallon gasoline that has sent buyers fleeing from pickups and sport utility vehicles, their traditional moneymakers.
"It's a critically tough environment," said Efraim Levy, a senior industry analyst with Standard & Poor's. "It's almost like anything that can go wrong is going wrong."
Ford conceded in a statement that the U.S. market is declining this year, reducing its industrywide light vehicle sales forecast. The company now predicts sales will not rise above 14.9 million and could go as low as 14.4 million, which would be the lowest level in 13 years according to Ward's AutoInfoBank.
Just a month ago, Ford dropped its forecast to a range of 14.7 million to 15.1 million. The company's sales fell 16 percent in May.
Because of the crumbling sales, Ford said Friday it will cut third-quarter production by another 50,000 vehicles. It now plans to produce 475,000 vehicles, 25 percent fewer than the third quarter of last year.
The company also says fourth-quarter production will drop by another 40,000 vehicles to a range of 550,000 to 590,000. That's on top of a previously announced 8- to 14-percent cut from the fourth quarter of last year.
Most of the production cuts will come from extending the normal two-week summer shutdown at pickup and SUV plants, as well as shift and assembly line speed reductions, the company said in a statement.
Ford said it will now introduce the new F-150 model two months later than normal, in late fall instead of its earlier target of late summer. F-series trucks accounted for 27 percent of Ford's U.S. sales last year, generating much of the company's revenue. But sales are off 19 percent for the first five months of the year and plummeted 31 percent in May.
The Dearborn-based automaker also said it will increase production of its Focus small car, as well as the Mercury Mariner and Ford Escape small SUVs.
It also said it will bring production of the next generation European Focus and Fiesta small cars to North America starting in 2010 "as Ford confirms it is revising its product plan to add more small cars, crossovers and fuel-efficient powertrains."
Ford expects to detail further changes to its restructuring plan when it announces earnings in July. It would not rule out plant closures and further layoffs. Already the company is looking to cut about 12 percent of its salaried work force.
On Friday, Ford announced cuts at seven truck and SUV factories during the remainder of the year, including the idling of the truck factory in Dearborn for most of the third quarter and the temporary closure of a Wayne truck factory for nine weeks during the summer.
It also announced production increases at three factories that make small SUVs and cars.
"We view the move to smaller, more fuel-efficient vehicles as permanent, and we are responding to customer demand," Ford CEO Alan Mulally said in the statement. "For the long term, we are moving fast to introduce more small cars, crossovers and fuel-efficient powertrains including more hybrids and we will adjust our manufacturing facilities to match our updated product lineup."
Ford shares fell 51 cents, or 8.1 percent, to close at $5.81. GM shares dropped $1, or 6.8 percent, to close at $13.79 after dropping as low as $13.65. The Center for Research in Security Prices at the University of Chicago said that was their lowest level since GM shares changed hands at $13.59 in February 1982.
The company also said its 2008 automotive financial results will be worse than in 2007, when the company posted an overall net loss of $2.7 billion. As late as May 22 the company predicted it would break even in 2009, but Ford now warns that will be difficult on a pretax basis.
Levy said it's not just the decline that's troubling, it's the rapid shift away from trucks, the traditional money makers for the Detroit Three.
"If people aren't buying pickup trucks, that's where Ford's bread and butter is, so where are they going to make their money?" Levy asked. "The shift in cars is so rapid that the domestic brands in particular aren't going to be able to produce enough to match demand."
Ford, which has mortgaged its factories and blue oval logo to stay in operation, should have enough cash to stay afloat into 2010 when the economy is expected to recover and the Detroit Three begin to see savings from shifting hourly retiree health care costs to the United Auto Workers, Levy said.
"I think they had some cushion for the cash needs when they mortgaged the Ford brand, but the environment that's appeared since then has changed," Levy said. "It's going to make it ever more difficult for them to make the turnaround. That's not saying they can't."
Earlier this month, GM announced it would close four truck and SUV factories. On Thursday the company said it would delay work on the next-generation of full-size pickups and SUVs to focus resources on more fuel-efficient vehicles.
Chrysler made cuts earlier in the year and has confirmed the idling of its Warren, Mich., truck plant for five weeks this summer before it begins production of the redesigned Dodge Ram.
Spokesman Ed Saenz said the company has no immediate plans for further cuts in its truck production and the Ram would be launched on schedule this summer.