Business
Ford Cuts Production In Response To US Demand
Just one year removed from record sales, Ford is temporarily halting production of its best-selling model, the Ford F150. Is this the beginning of the end for the Detroit automaker? Is Ford leading the pack or following an ugly trend?
Ford Paused F150 Production Due To Slow Demand in US Market
Ford representatives announced Tuesday that the company would temporarily pause production at four North American assembly plants this month to account for slowing demand in the US economy. However, none of the other major automaker brands are doing the same. Does Ford know something the rest of the auto industry doesn’t? What’s the company’s play here?
As previously noted by The Capitalist earlier this year, the “car buying honeymoon” seems to be over. Since the 2008-2009 recession, US auto sales have been steadily rising. August 2015 was the first month U.S. auto sales fell, and that drop was about 3.5 percent. And while the U.S. auto industry outperformed the overall U.S. economy during that time, the ride now seems to be over, with Ford being the first to pull over.
Ford sales fell 8.4 percent in August, with the Ford F-Series pickup truck, the number 1 selling model in the USA, falling 6 percent. Now, Ford is making a smart decision in temporarily pausing production at four assembly plants to level out supply and demand. Other companies are looking at the drop as a fluke, with Toyota announcing its plans to increase production of its Tacoma pickup trucks at the company’s Baja California, Mexico plant.
There is a glut of cars, both new and used, in the market today. In September, Ford had a 78 day supply of vehicles on dealers' lots and its luxury Lincoln brand had a 101 day supply. The industry average was 65 days, leaving a surplus of vehicles for dealers to contend with. In response to that surplus, Ford is closing its Kansas City and two Mexico assembly plants (which produce the F150) for one week, and its Louisville, KY plant for two weeks to reduce the supply of Lincoln SUVs.
Ford still expects a pretax profit of $10.2 billion this year and says the cuts won't impact its financial guidance. Ford is choosing to slow production and manage existing inventories in response to the impending slowdown of sales. The move makes perfect sense. As other automakers find themselves slashing prices to reduce inventory once sales really decrease, Ford will continue on a smooth ride.
Wonder how is this famous F150 being made? Take a look in this 15 minutes video by Kryptoniteone.
Ford Motor Co.(F) sales ticked up on the news and should continue to rise once production resumes.
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