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Old 09-16-2004, 07:19   #1 (permalink)
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Canada:Ford to slash output as inventories swell

Ford to slash output as inventories swell

By GREG KEENAN
From Thursday's Globe and Mail

Ford Motor Co. is planning to reduce bloated inventories by slashing vehicle production at its two Canadian assembly plants in the fourth quarter of this year and the first quarter of 2005, union and industry sources say.

The world's second-largest auto maker, facing soft sales for minivans made in Oakville, Ont., and full-sized sedans assembled in St. Thomas, Ont., has scheduled seven weeks of layoffs at each plant between the beginning of October and March 1, the sources said.

The cutbacks affect 4,000 workers who assemble Ford Freestar and Mercury Monterey minivans at the Oakville Assembly Plant and another 2,600 who put together Ford Crown Victoria and Mercury Grand Marquis cars at the St. Thomas Assembly Plant.

The assembly plant shutdowns also are expected to lead to cuts at Ford's Essex Engine Plant in Windsor, Ont., which makes engines for the Freestar and Monterey.

Suppliers such as Intier Automotive Inc., the interiors arm of Magna International Inc., which makes the seats and other components for the minivans, will also be affected. Ford Motor Co. of Canada Ltd. spokeswoman Lauren More would confirm only that the St. Thomas plant will be shut the week of Oct. 4. It's too soon to discuss any potential shutdowns later in the fourth quarter or in 2005, Ms. More said.

The shutdowns in Canada are part of fourth-quarter production cuts the auto maker announced earlier this month when it posted a 12-per-cent drop in Ford brand sales in August from year-earlier levels and a 16-per-cent slide in Mercury brand sales.

Ford said then that it was cutting fourth-quarter output in North America by 8 per cent to 830,000 vehicles from 900,000 in the fourth quarter of 2003, but did not specify where.

It appears now that production will be trimmed in the first quarter of 2005 as well, although Ford has not discussed the outlook for next year publicly.

Michael Bruynesteyn, who follows the industry for Prudential Equity Group LLC in New York, said in a note yesterday that he is trimming his production outlook for Ford for 2005 by 50,000 vehicles -- down to 3.5 million cars, trucks, minivans and sport utility vehicles. Mr. Bruynesteyn also cut his outlook for production by General Motors Corp. to 5.2 million vehicles next year, down 160,000 units from his previous estimate of 5.36 million.

The production cuts in Oakville are particularly troubling for the auto maker because it spent $600-million to redesign its minivans for the 2004 model year that began last fall, but has watched sales of Freestar and Monterey fail even to match those of the model they replaced -- the Windstar -- let alone surpass it.

"They blew it," one industry analyst said of Ford's redesign last year of the Freestar. "They didn't differentiate themselves. They came up with a me-too product that was obsolete before it hit the streets."

The key feature of the redesign was a third-row seat that folded into the floor and was designed to catch up with the Odyssey from Honda Motor Co. Ltd., which at the time was the industry leader.

But both were trumped earlier this year by the Chrysler division of DaimlerChrysler AG, which introduced two rows of fold-flat seats.

So Chrysler bested Ford in seating, while minivans from Nissan Motor Co. Ltd. and Toyota Motor Corp. offered more features, better styling and more value, the analyst said.

The fierce competition in the segment has bloodied Ford and it won't get any easier because Honda comes out with a new Odyssey this fall and GM will introduce new sport vans, as it's now calling its Pontiac and Chevrolet people haulers.

The continuing problems at the Oakville plant underline the need for the Ontario and federal governments to come up with about $200-million to convince Ford to go ahead with a $1.2-billion redevelopment it is proposing for the site, a senior Canadian Auto Workers union official said yesterday.

The auto maker has been told that Ontario is prepared to come up with $100-million if certain commitments are met, but negotiations continue.

Ford's minivan sales fell 3 per cent in the first eight months of 2004 from year-earlier levels in the U.S. market, which is the destination for about 80 per cent of the vehicles made in Oakville.

Meanwhile, overall minivan sales jumped 7 per cent in that period to 752,056 from 702,779, according to data compiled by industry publication Automotive News.

Ford has 101 days worth of Freestars on hand, the largest inventory of any minivan model. That compares, for example, with 21 days for the Honda Odyssey, an industry average of 65 days for all vehicles and the industry standard of 60 to 70 days worth of inventory, according to the Automotive News data.

It's now offering Freestars in the U.S. market with a $5,000 (U.S.) rebate on the base price of $24,600 or interest-free financing for five years, or a combination of a $2,000 rebate and 1.9-per-cent interest rates on a three-year loan.

In Canada, Freestar starts at $27,295 (Canadian), which is reduced by $4,500 cash or an interest-free loan for three years accompanied by $2,000 cash. In addition, both those options come with another $1,000 in bonus cash.

Sales of Crown Victoria and Grand Marquis fell 5 per cent in the first eight months of 2004 in the U.S. market.

Slumping sales, bulging inventories

Production cuts will hot two Ford plants in Canada in the fourth quarter amid disappointing sales for the Ford Freestar and Mercury Monterey - the $600-million replacements for the Windstar minivan - and slow sales for the Crown Victoria and Grand Marquis sedans. Sales of the cars have fallen from last year's level and sales of the new minivans are lower than those of the Windstar in the same period last year.

Minivans

SALES, Jan. 1-Aug. 31

2004: 88,252*

2003: 91,178#

UNSOLD-VEHICLE INVENTORY, SEPT.1, 2004

Freestar: 26,800 - 101 days supply

Monterey: 6,600 - 84 days supply

-*2004 figures include the new Ford Freestar, Mercury Monterey models, plus 2003 Windstar models sold in 2004.

-#2003 figures are for the Windstar model.

All data for U.S. market only.

Full-sized sedans

CROWN VICTORIA SALES, JAN.1-AUG.31

2004: 51,965

2003: 55,399

GRAND MARQUIS SALES, JAN.1-AUG.31

2004: 58,118

2003: 60,831

UNSOLD INVENTORY, SEPT. 1, 2004

Crown Victoria: 12,100 - 94 days supply

Grand Marquis: 19,000 - 69 days supply

SOURCE: COMPANY REP, AUTOMOTIVE NEWS
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