I wrote about this last week in my newspaper column; the only two choices in the auto industry are to overspend on incentives, or cut production. Here is the first sign of things to come.
In an indication of pressure on U.S. automakers, Ford Motor Co. said it will shut down production of its best-selling F-150 pickup truck for a week at a Kansas City assembly plant, and temporarily idle three other plants over the next several weeks.
The F-150 is the best-selling vehicle model in North America, and a key profit-maker for Ford. U.S. sales of the F series are up 5.5 percent this year but deliveries fell 2.6 percent in September. Ford dealers had a heavy 95 days’ supply of the pickups on their lots at the end of September, according to data compiled by Automotive News.
F-150 production at the Dearborn Truck Plant in Michigan will continue without interruption, Ford said.
About 13,000 Ford hourly workers will be laid off during the temporary shutdowns. There are nearly 14,000 workers at the four plants, the company said. Some of them are salaried managers. Of the layoffs, about 4,000 will be in Mexico and about 9,000 in the United States. The cuts will hit Ford’s three highest-volume models in the United States.
“During our second quarter financial call, we said we expected the overall retail industry to decline in the second half of the year from the same period last year. We also said to expect to see some production adjustments in the second half — this is one of them. We continue matching production to meet demand,” Ford spokeswoman Kelli Felker said.
Ford is also suspending production of two crossovers, the Ford Escape and the Lincoln MKC, at its Louisville Assembly Plant in Kentucky for two of the next three weeks. The compact Escape, one of Ford’s most popular models, is under increasing pressure from Japanese rivals. U.S. sales of the Escape fell 12 percent in September and have edged up 0.8 percent for the year.
Ford said it also is temporarily shutting two plants in Mexico. One is a plant in Hermosillo that makes the Ford Fusion and the Lincoln MKZ sedans, and the other is in Cuautitlan that builds the Ford Fiesta small car. U.S. sales of all three models have slipped this year amid an overall slump in car demand.
Ford warned investors last month that its profits would decline next year, and lowered its 2016 pretax profit forecast to $10.2 billion from at least $10.8 billion because of a charge in the third quarter for an expanded vehicle recall.
U.S. workers with more than one year of experience will get about 80 percent of their normal paycheck during the shutdowns, combining state unemployment benefits and Ford supplemental pay, Ford said. The company did not immediately have details on compensation for idled workers in Mexico.