"We see the economy improving, but the strength of the recovery in individual markets has been uneven," said John Fleming, head of Ford's global manufacturing, in a webcast from an analyst conference. While demand remain strong in Asia, it's moderating, said Fleming, formerly the automaker's top European executive.
To meet rising demand, Ford is expanding production in China by opening two new factories and is introducing eight new models in India. In Europe as well as the U.S., Fleming expects that auto sales will slowly gain momentum as credit becomes more readily available, but sales will still be hampered by high unemployment.
August Was Tough in the U.S.
In Europe, sales have been driven by so-called "scrappage" programs, similar to the "cash for clunkers" program the U.S. government instituted last year. With the European programs winding down, however, the market there is likely to weaken, Fleming said.
August was a tough month for auto sales in the U.S., and Ford was among those reporting lower sales compared to a year ago, when "cash for clunkers" was in full swing. The Dearborn, Mich., automaker reported sales fell 11%. Still, that was a better outcome than many of its rivals. General Motors reported a 25% drop in sales, while those at Toyota Motor (TM) fell by more than a third.
Ford is also the only U.S. automaker not to succumb to bankruptcy following the financial crisis two years ago, unlike GM and Chrysler Group, which were bailed out by the federal government. Ford's ability to stay afloat has engendered goodwill among buyers looking to still purchase American cars but who aren't willing to consider GM or Chrysler vehicles.
Shrinking for Profitability
In his presentation, Fleming noted that in the past five years, Ford has cut structural costs by some $15 billion and slashed its hourly workforce by half. The company also will have reduced North American production capacity by 40% by the end of 2011, he said.
Ford's restructuring has resulted in the sell-off of its stable of European luxury brands, such as Volvo and Land Rover, to focus more resources on the company's core Ford brand. To that end, Ford also said in June that it is shutting down the 70-year-old Mercury brand. Worldwide, the automaker has reduced the number of nameplates in its vehicle stable to 59 in 2008 from nearly 100 in 2006, and it plans further reductions.
Ford has also reduced its dependency on sales of less-fuel-efficient trucks in the U.S. Passenger-car sales now make up about 37% of its sales mix year-to-date, up from 32% in 2005. Accordingly, trucks as a percentage of sales have fallen to 36% from 44% in 2005, while utility vehicles have risen to 27% so far this year from 24% in 2005. Fleming said the shift reflects changing consumer demand.
Ford's plans also call for it to accelerate product development with the goal of bringing fresher models to showrooms with greater frequency, Fleming said.
Staying in Germany After All
In other Ford news, the automaker has canceled plans to move production of a small sport-utility vehicle from Europe to Kentucky, Bloomberg News reported, citing unnamed sources familiar with the matter.
Ford had planned to shift the Kuga model next year to Louisville from Saarlouis, Germany, to take advantage of lower labor costs and the weaker dollar. With the euro falling, the sources said, Ford now plans to continue producing the Kuga in Germany.