Ford Motor Co. is ahead of where it expected to be in reducing an overhang of excess production capacity at this point in its turnaround effort and has made encouraging progress in stabilizing its U.S. market share, a senior executive said on Friday.
Overall, we're ahead of where we expected to be in capacity reduction, Mark Fields, Ford's president for the Americas, told reporters in an update on the automaker's 18-month-old restructuring.
Ford, which lost $12.6 billion last year, still faces economic headwinds, including the slump in the U.S. housing market and higher gasoline prices, Fields said.
Economic conditions continue to make it more and more difficult for our suppliers, and that means we are going to have to work even harder to reach our targeted material cost reductions, he said.
Also, Fields said the housing slump affects Ford more profoundly because of the automaker's heavy reliance on pickup trucks, many of which are bought by construction workers.
Overall U.S. vehicle sales, which had slipped about 1 percent from a year earlier through May, were tracking fairly closely to Ford's expectations, Fields said, adding that the automaker had shown encouraging progress in stabilizing its retail market share near 13 percent in recent months.
Ford's own sales were down almost 12 percent through May, reflecting the automaker's decision to pull back on low-margin sales to car rental agencies.
Ford is now about halfway through a plan to cut its fleet sales by 135,000 vehicles this year, Fields said.
The automaker plans to reduce discounted sales to daily-rental car companies by an additional 20,000 vehicles this month, he added.
Fields said Ford sees recent sales success for new crossover models like the Ford Edge and quality accolades from independent services such as J.D. Power and Associates as evidence that a revamped product strategy is starting to show progress.
We knew that restructuring this business was not going to be a quick fix, Fields said. But we're seeing -- and we hope you're seeing -- some progress.
Although Fields said Ford has ample liquidity to fund its restructuring program, he said the automaker is also continuing to evaluate options for its Land Rover and Jaguar brands.
We're continuing to evaluate everything, he said.
Fields declined to comment when asked whether the automaker had received indications of interest from a potential buyer for the British luxury brands.
Nothing to talk about at this point. At the appropriate point, I think we'll give an update on where that stands, he said.
Ford, which has lost about 1 percentage point of U.S. market share every year since 2000, is slashing capacity by shuttering 16 plants and cutting more than 50,000 jobs under a plan it calls the Way Forward.
The automaker is gearing up for labor contract talks with the United Auto Workers union, starting mid-July, which Fields described as very, very important for Ford's future.
Fields said the automaker's biggest challenge is to close the perception gap among consumers, so that the recent gains in quality and design of Ford vehicles are fully appreciated by buyers.
American automakers, including Ford, have long argued that consumers' perception of quality has lagged real improvement in engineering and design.
Ford showed strong gains in this year's closely-watched J D Power Initial Quality Survey, placing four brands among the top 10.
Fields said the automaker's new crossover, or car-based, vehicles like Edge and Lincoln MKX represent a big opportunity to win back U.S. market share.
Ford posted a 67-percent rise in sales of its line-up of crossover utility vehicles in May and has said it was on track for a similar gain this month.
(Additional reporting by Kevin Krolicki)