America's second largest automaker, the Ford Motor Company, Friday said it will make big cuts in its North American car and truck production in the final three months of this year. Ford is enduring huge financial losses as it loses U.S. market share to foreign competitors.
Ford says it will cut production in the final quarter of this year by 21 percent to bring output in line with shrinking demand. The Detroit-based company has been particularly hard hit by the doubling of gasoline prices over the past two years as most of its products are larger vehicles with poor fuel-efficiency. Rebecca Lindland is an auto analyst at Global Insights in Philadelphia. She says half the production cuts will be pick-up trucks, which account for about half of Ford's North American sales.
But she adds that Ford may not even be able to sell all the trucks it already has on hand. "The hope is that inventory, which is at 101 days supplies can carry them through. But I think even the company is conceding that they may not sell 900,000 (trucks) units this year," she said.
Ford is now expected to produce only three million cars and trucks in North America this year, a nine percent decline from last year. Ford used to be the world's second largest auto producer but has been surpassed by Toyota, which is fast closing in on General Motors for the number one spot. Ford lost over $2 billion in North America last year and plans to reduce its work force by 30,000 over the next three years.
In other economic news Friday, President Bush said the U.S. economy is headed in the right direction, growing at a four percent annual rate in the first half of the year. The president spoke after meeting with his top economic advisers at Camp David, the presidential retreat outside Washington.
But many economists say the U.S. growth rate for the last half of the year will not match the first half. They say the economy is slowing and will increase only by about two and a half percent for the second half of the year. Consumers have been hard hit by higher energy prices, higher short-term interest rates, and a slowdown in what had been a fast rising housing market. Oil prices remain above $70 a barrel, a four-fold increase since 1999. Oil this week did retreat from the $78 range to just over $70 as tensions in the Middle East were somewhat diminished.