Ford Making Adjustments For Consumer Shift Away From SUVs

No. 2 automaker plans to bring new products to market faster, including more fuel-efficient, compact cars

Traverse City, Mich. (AP) – Ford Motor Co. misjudged the speed at which consumers would shift from truck-based sport utility vehicles to cars and crossover vehicles and now is accelerating plans to deal with it, a top company official says.

In appearances Tuesday and Wednesday at the Center for Automotive Research Management Briefing Seminars in Traverse City, Mark Fields, Ford’s president of the Americas said the company will announce adjustments in its “Way Forward” restructuring plan by the end of September that include faster cost cuts and new products.

The company also is considering a $1 billion investment in manufacturing and research in its home state of Michigan, Fields said.

“We are rebuilding our business for the future with an emphasis on more new products faster – and that includes more customer features and advanced technologies throughout our entire lineup,” Fields said in a speech on Wednesday.

“Even as we reduce our overall capacity in line with demand and make the tough but necessary cutbacks throughout our business to secure our future, we are not retreating one bit from the necessary investments to bring out more products for our customers,” he said.

Fields also announced that Ford is invigorating its product line with a limited-edition, souped-up Mustang designed with racing legend Carroll Shelby, and a new flagship sedan for the Lincoln luxury brand.

But Ford’s reaction to the rapid shift away from SUVs and trucks dominated Fields’ Wednesday speech and a nearly two-hour interview Tuesday night with reporters.

He said the automotive market “seized up” last fall after hurricane Katrina struck New Orleans and drove gas prices beyond $3 per gallon.

Although gas prices subsided a bit, when prices hit $3 again this summer, people rapidly shifted to car-based vehicles or delayed purchases of highly profitable trucks and SUVs.

“I think the segment shifts have been much swifter and more permanent than we expected,” he said.

The shift, as well as external factors such as higher material costs, has brought on a higher sense of urgency at Ford, he said.

The company has seen its sales slide this year, especially in trucks and SUVs, and it lost $1.45 billion in the first six months of 2006.

Although Fields wouldn’t give details, he said Ford is working to roll out more new models soon, including a fuel-efficient compact car and an update of its aging Focus small car, which was introduced in 1999.

“We’re not going to rest on our laurels in terms of updating that product,” Fields said.

He predicted the compact car market would grow to 600,000 units by the end of the decade, but he wants to make sure the company enters the market with a distinct car and “not just get in there with an econobox.” He said Ford would “not just check the box to say we have a vehicle in the segment.”

Fields said Americans now rank fuel efficiency among their top three concerns when buying vehicles, up from seven or eight a year ago, and research shows that 70 percent of people are concerned about the environment, up 10 points in the last five years.

Americans also want to become less dependent on foreign oil, he said.

“It’s up to us to take that and turn it into a product solution,” he said. “From our standpoint it’s offering a suite of solutions to the customer.”

Fields also said he stands by the company’s prediction that it will return to profitability by 2008.

“We’ve always said it’s going to be linear, and it ain’t gonna be smooth,” he said.

The $1 billion investment in Michigan has yet to be approved by the company, he said.

It would fund research and development of future products, advanced powertrain technologies and hybrid vehicles.

He said the company is focusing on moving new products to the market faster and making sure they are what people want to buy.

“We have nine new Ford and Lincoln Mercury products going on sale in the next six months alone and we are rebuilding our business for the future with an emphasis on new products,” he said.

Among them: the Ford Shelby GT, on sale in January, and Lincoln MKS flagship sedan to replace the aging Town Car, which will arrive in showrooms in 2008.

Ford, which had about $24 billion in cash at the beginning of 2006, still plans to have at least $20 billion available by the end of the year, Fields said.

He wouldn’t directly answer questions about the company hiring a sales and acquisitions expert as an adviser or about speculation about selling the Jaguar and Range Rover brands.

The interview Tuesday night came after the company had a spate of bad news in the past week. The nation’s No. 2 automaker expanded a major recall, said its second-quarter loss was more than double what it previously reported and, for the first time, fell behind Toyota in U.S. vehicle sales.

Under its restructuring plan announced in January, the Dearborn-based company wants to shed 25,000 to 30,000 jobs and close 14 plants by 2012.

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