Can you say duh! What the hell took so long?

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The rise in gas prices, has been forecast for years and years. Why wasn't it better anticipated by the auto industry? These companies have a strategic planning division. Have they been on vacation for the past ten to twenty years? Or did they just not see this? Did the corporate leadership turn a blind eye toward their warnings content to ride the wave of bigger car sales? Dang that sounds just like our political leadership (BOTH parties!)

Ford to Make Broader Bet on Small Cars

By BILL VLASIC

Published: July 22, 2008

DEARBORN, Mich. — The Ford Motor Company, which devoted itself for nearly 20 years to putting millions of Americans into big pickup trucks and sport-utility vehicles, is about to drastically alter its focus to building more small cars.

The struggling automaker, reacting to what it sees as a rapid and permanent shift in consumer tastes brought on by high gas prices, plans to unveil its new direction on Thursday, when it will report quarterly earnings.

Among the changes, Ford is expected to announce that it will convert three of its North American assembly plants from trucks to cars, according to people familiar with the plans.

And as part of the huge bet it is placing on the future direction of the troubled American auto industry, Ford will realign factories to manufacture more fuel-efficient engines and produce six of its next European car models for the United States market.

The company will also end speculation about its Mercury division by making the brand an integral part of its new small-car strategy, according to these people, who spoke on the condition that they not be quoted by name because of the timing of the official announcement on Thursday.

The sweeping changes are the result of months of strategic discussions by Ford executives, and represent a dramatic response to the woes afflicting Detroit’s automakers.

United States vehicle sales have slumped 10 percent so far this year, with Ford down 14 percent, and the industry is headed for its worst annual sales in more than a decade.

Moreover, $4-a-gallon gas and a weak economy have battered the market for big S.U.V.’s and pickups, and sent automakers scrambling to revamp their product lineups.

No company has more at stake than Ford, which popularized the S.U.V. in the 1990s with its truck-based Explorer and led the boom in pickups with its best-selling F-series model.

After losing $15.3 billon in 2006 and 2007 combined, Ford had hoped to stabilize its operations this year and return to profitability in 2009.

But rising fuel prices and the collapsing truck market forced the company, the second-biggest United States automaker, to abandon its profit target in May and accelerate its shift to smaller vehicles.

Since then, Ford’s chief executive, Alan R. Mulally, has directed an unprecedented overhaul of the company’s future products.

Mr. Mulally, who joined the company from aircraft maker Boeing in 2006, is committed to reducing Ford’s dependence on large vehicles, according to people familiar with his plans.

“We don’t have a sustainable company if we don’t do this,” Mr. Mulally recently told members of his management team.

For at least a decade, about 60 percent of Ford’s United States sales came from trucks and S.U.V.’s, compared to 40 percent from cars and car-based crossover vehicles.

Eight of the company’s 14 plants in North America now build trucks, S.U.V.’s and full-sized vans.

Those numbers are shifting rapidly as consumers turn away from large vehicles, and the chief goal internally is to make cars and crossovers the bulk of its product lineup to better align the company with market demand.

A Ford spokesman, Mark Truby, declined to comment Monday on the details of the company’s plans.

“We said when we made our June announcement about accelerating our transformation plan that we would have more details to share when we report our second quarter financial results in July,” he said.

Industry analysts believe Ford cannot wait any longer to reshape its manufacturing operations and step up production of smaller cars.

“Trucks and S.U.V.’s have been so central to their strategy for so long, but the bottom line is that consumers have moved on,” said David E. Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.

The sharp drop in vehicles sales this spring and summer has raised fresh concerns about the viability of Detroit’s automakers.

With its stock hovering around $10 a share and speculation growing about a possible bankruptcy filing, General Motors last week announced broad plans to cut costs and increase its cash reserves by $15 billion.

Ford has already slashed more than 40,000 jobs in the past three years, and sold off three of its European luxury brands to raise money.

But the company is now about to address its long-term, and increasingly precarious, reliance on big vehicles by transferring billions of dollars in product development and manufacturing costs into car programs.

Ford is expected to convert three of its big assembly plants from truck-based products to cars, including its so-called Michigan Truck plant in Wayne, Mich., that builds Ford Expedition and Lincoln Navigator S.U.V.’s.

The company plans to use the plant to increase its output of the Ford Focus, a compact car that has become one of its best sellers this year. Ford also plans to retool two of its V-8 engine plants to add production of more fuel-efficient 4-cylinder and V-6 engines.

A large part of its future car lineup will be based on vehicles currently under development for the European market. By 2010, Ford plans to begin assembling six of its upcoming European car models in North America, starting with the Ford Fiesta subcompact.

And while Ford has shed upscale brands like Land Rover and Jaguar, the company will keep the Mercury brand and use it as another distribution channel for small cars.

Some analysts have speculated that Ford might abandon Mercury as it streamlines its overall operations.

By shifting to smaller cars, Ford is attempting to reverse a strategy that generated big profits in the 1990s.

The automaker, along with G.M. and Chrysler, created sport-utility vehicles to combat the popularity of cars made by Toyota and Honda.

“The baby-boom generation didn’t want American cars,” said John Wolkonowicz, an auto industry analyst with the forecasting firm Global Insight. “But the Ford Explorer was the first family-friendly, four-door sport utility, and people bought it like crazy.”

In the mid-1990s, Ford introduced its full-size, seven-passenger Expedition and Navigator S.U.V.’s, which were built on a pickup-truck chassis.

The big vehicles got less than 15 miles a gallon of gas, but consumers hardly cared when gas was inexpensive. Other manufacturers followed suit, and the big S.U.V. became fashionable.

Ford and other automakers earned up to $15,000 in profit on each full-size sport-utility vehicle. At the company’s Michigan Truck plant, employees worked weekends to keep up with demand.

“It’s hard to blame Ford for building vehicles that consumers wanted to buy,” said Mr. Wolkonowicz.

Cheap gas also fueled the astronomic growth of the pickup truck market. In 2004, Ford sold a record 939,000 full-size pickups, and nearly two-thirds of its overall sales in the United States were trucks, vans and S.U.V.’s.

At the same time it invested in the growing truck market, Ford cut back spending on its cars. Its Taurus sedan, once the market leader, fell to a distant third behind the Toyota Camry and Honda Accord.

While it concentrated on trucks, Ford fell out of step with larger market trends. In 2004, only 28 percent of its United States sales were cars, compared to 43 percent for the overall market.

When Mr. Mulally was recruited as Ford’s chief executive in September of 2006, he began questioning the company’s dependence on pickups and S.U.V.’s.

Ford managers said Mr. Mulally repeatedly referred to charts that showed large vehicles constituted only 15 percent of the global automotive market. Small cars, by comparison, made up 60 percent.

At Mr. Mulally’s urging, Ford embarked on a longer-term strategy to globalize its car platforms and expand its car lineup in the United States market.

But the task took on greater urgency this spring, when rising gas prices drove consumers away from trucks in droves.

Between January and June, pickups tumbled from 13 percent of the overall market to 8 percent, and unsold S.U.V.’s stacked up on dealer lots. The company announced wholesale cutbacks in truck production and the elimination of 15 percent of its white-collar workforce.

Almost every day for the past three months, Mr. Mulally assembled his senior executives in his office to pore over future product plans. A consensus emerged to accelerate the switch to cars and further downsize truck production.

The plans will begin to take effect later this year when production of the Expedition and Navigator is moved from the Michigan Truck plant to another factory in Kentucky.

Then, in a move that symbolizes the company’s overall change of direction, workers will quickly shift to making body panels for the Focus compact.

http://www.nytimes.com/2008/07/22/business...amp;oref=slogin

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Hey........don't make fun of Ford. They were only feeding demand. It's business. Now they have to adjust in a very short order. I feel bad for the company, as I am a Ford guy who has a Focus and a Mercury Mountaineer in my garrage. It's a shame a man can't drive a pickup anymore unless it's a Ranger or other small type. I love the F-150.