Ford shifting to smaller cars
After posting a record second-quarter loss of $8.7 billion, Ford has announced plans to create more small car models. John Dimsdale reports.
Ford headquarters in Dearborn, Michigan (Bill Pugliano/Getty Images)
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Kai Ryssdal: As soon as I heard the Ford news today, I thought back to an interview I did with CEO Alan Mulally about six months ago. We'd been talking about how he'd been trying to turn the company around and why it was taking so long.
Alan Mulally: We are a little bit behind of where we maybe could have been, staying in the big trucks and SUVs a little bit too long, maybe not appreciating as well as we could that the fuel prices were going to stay up, that the consumer was going to continue to move towards smaller cars and utility vehicles.
So that was six months ago. This morning, Mulally found himself on a conference call with Wall Street analysts telling them he's found the answer, as Marketplace's John Dimsdale reports.
John Dimsdale: Ford will start building six new small car models in the U.S. by 2012, models that Ford now sells profitably overseas and it's writing off $8 billion worth of inventory, mainly unsold trucks and SUVs. Their value falls in inverse relationship with gas prices. Gone are the company's projections of a turnaround by 2009.
David Healy: At 2010, I think there's a convergence of factors which will push these companies back into the black.
That's Burnham Securities analyst David Healy. He says in 2010, union agreements reached last year kick in. Those include concessions that will ease the pension and health care burdens on U.S. car companies.
But Global Insight auto director Rebecca Lindland warns Ford shouldn't overreact to the downturn.
Rebecca Lindland: We don't want to see this sudden turn away from all SUVs because consumers aren't necessarily really making that commitment. We're in a little bit of a kneejerk panic reaction right now.
Lindland says SUV and pickup truck sales will return, especially once the construction business recovers. She says Americans only began abandoning big vehicles when gasoline hit $4 a gallon.
Lindland: Everyone sort of bought into the perception the U.S. wanted trucks, which was very true right up until about 90 days ago.
Even Asian carmakers were caught off guard by changing U.S. demand, says Lindland. Otherwise, she says, Toyota's new factory churning out big Tundra pickup trucks would be producing Prius hybrids instead. In Washington, I'm John Dimsdale for Marketplace.
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