Ford Motor Co. is preparing for the risk that higher oil prices and a slowing U.S. economy crimp demand and will cut production as needed to avoid building costly inventories, senior executives said on Tuesday.
Speaking to reporters in advance of the Los Angeles Auto Show, Ford Chief Executive Alan Mulally said the economic concerns for Ford included tighter credit markets and a U.S. housing market that could remain weak for another year or two.
When you add that together, it's a very concerning environment, Mulally said.
But Mulally said Ford would be more disciplined than it has been in the past about cutting production if it sees sales slipping, including the pickup trucks and SUVs that represent the heart of the automaker's current line-up.
The business environment has clearly gotten tougher, he said. It's gotten tougher and we want to be ready to move if we need to.
Mark Fields, Ford's president for the Americas, said the automaker would be watching sales results every week to keep its inventory levels in balance.
Taken together the comments pointed to the prospect of U.S. factory layoffs by Ford at a time when the struggling automaker is on the cusp of clinching a cost-saving, four-year deal with the United Auto Workers union.
Ford rivals General Motors Corp. and Chrysler LLC both moved quickly to cut production levels in the wake of their own contract deals with the UAW in recent weeks.
Mulally declined to comment on Ford's expectations for an expanded round of worker buyouts and early retirement offers under the automaker's still-pending UAW contract.
Ford has been waiting for the deal to be ratified by its roughly 58,000 UAW-represented workers and could brief analysts and investors on the deal as early as Wednesday, he said.
Fields said with gas prices on track to approach $4 per gallon in some U.S. cities, consumers were bound to rethink planned purchases of bigger and less fuel-efficient vehicles.
I think it will change behavior in a big way, he said.
Given the economic situation, Fields said Ford executives were kind of surprised by the relatively stable share of pickup truck sales as a share of total U.S. vehicle sales over the past three to four months.
But if sales show signs of slipping, Ford will act quickly to trim production rather than wait for a turnaround as it might have in recent downturns, Fields said.
This is a different approach than we've had in the past, said Mulally, who left Boeing Co. to take the top job at Ford just over a year ago.
Ford dominates the market for pickup trucks with its F-150 series, but the No. 2 U.S. automaker been struggling in segments such as smaller cars it had neglected in recent years when more profitable truck and SUV sales were booming.
Ford's U.S. sales have dropped 13 percent through October compared with the same period a year earlier.
Mulally said Ford did not need to bring in a strategic partner or an outside investor to complete its restructuring and return to profitability in 2009.
Ford's bigger cost-saving opportunity is to integrate regional operations by sharing development and procurement costs, Mulally said.
I think a link-up would be a distraction, Mulally said. The real synergy for Ford is to integrate Ford.
The first test of the new global development plans will be a compact car now under development that Fields said would mark a departure from Ford's history of trying to lure entry-level buyers with something cheap and cheerful.
Mulally said the goal for Ford was to develop a more balanced vehicle line-up by adding the more fuel-efficient cars and car-based crossovers to round out its truck offering.
I think we're getting back to the history of Ford and that is Ford for all, he said. That's what built Ford.
(Editing by Louise Ireland)