Ford Can’t Keep Up With Auto Demand

Tags: Auto Demand, ford, Keep Up

Ford Motor Co. President and Chief Executive Alan Mulally says his company can’t build enough vehicles to meet demand.

Mulally said Wednesday Ford will continue boosting production this year, acknowledging that crimps in the parts supply chain are among the challenges that will prevent it from making as many cars and trucks as it wants — at least in the short run.

“We’re going to increase production through the rest of the year,” Mulally told reporters after making the rounds among Michigan’s congressional delegation and other key Washington officials on several issues.

“We have limits on our production as we’re going up, because as we restructure the entire business, we’re bringing along the entire supply chain, so we really can’t make as many vehicles as people want right now.”

Ford and other automakers are adding shifts, tweaking work schedules and boosting production to meet North American demand.

“Within the next two quarters,” Mulally said, “we’ll be adding all the third shifts and the extra production so by the end of the year, we’ll be able to produce the amount of vehicles that people want.

“But we’ll take a hit in the near term — just because we’re limited in production.”

Some of its hottest vehicles, including the Focus, Fusion and Explorer, are in relatively short supply.

Ford’s first quarter U.S. market share was 15.2 percent — down from 16 percent in the same period in 2011. The Dearborn-based company had projected it would own about 16.5 percent of the U.S. market this year, but it withdrew that forecast in April. It gained market share for three straight years.

Rebecca Lindland, an auto analyst at IHS Automotive, said Ford’s market share is down for a number of reasons — and said production is a “contributing factor.”

“The industry is so pared down; there was such a dramatic drop-off and (suppliers) are terrified of retooling for 15 (million) or 16 million (sales a year),” Lindland said.

U.S. sales last year totaled 12.8 million, and recent estimates put this year’s sales at 14.4 million cars and trucks. Many analysts expect May sales, to be announced Friday, will have risen nearly 30 percent over May 2011.

Lindland said Ford faces pressure from competitive General Motors and Chrysler products, as well as Japanese automakers recovering from last year’s natural disasters that hamstrung their production. “The amount of competition Ford is facing, like everybody, is incredible,” she said.

Sweeter incentives may be luring more buyers to Ford vehicles, leading to further dwindling inventories and increased pressure on its factories. Ford said Wednesday it raised incentives this month after reducing them by about $300 a vehicle in April, Bloomberg News reported.

“We pulled back perhaps a little too much in the month of April, which is why we had a bit of a dip,” Erich Merkle, Ford’s sales analyst, said Wednesday in Dearborn. Ford boosted its incentives to be in line with the industry, which remains “very disciplined” in its use of discounts, Merkle said.

Suppliers hesitant

Automakers closed dozens of plants over the past decade and are running those that survived at close to 100 percent capacity. But some suppliers are hesitant to dramatically boost capacity, keenly recalling the sharp decline in auto sales in 2009 that forced many of them out of business, and two of Detroit’s three automakers into bankruptcy.

Ford has been bulking up production by adding shifts — a third shift this month at Michigan Assembly in Wayne, where it builds the Focus, plus a third shift at its Chicago Assembly, where it builds the Ford Taurus and Taurus SHO, Lincoln MKS, Police Interceptor and Explorer.

Ford’s Kansas City Assembly plant got a second shift to build the F-150 truck, which is the best-selling vehicle in the country.

By September, the automaker will add a third shift at Louisville Assembly where it builds the new Escape — a key vehicle in its lineup.

Summer schedule tweaked

Ford also is paring back its customary two-week summer shutdown. It will shutter for just a week at 13 plants, and the additional plant time will enable it to produce nearly 40,000 more vehicles.

Five of those plants are in Michigan, and another is in Windsor.

The altered summer shutdown schedule is part of Ford’s plan to increase annual production capacity by 400,000 vehicles by the end of September, to 3 million.

Mulally said Ford has room to grow in North America, but has no plans to bring additional plants online.

Ford isn’t the only automaker to tweak its summer schedule to boost production.

Auburn Hills-based Chrysler has canceled the traditional summer shutdown at three more of its factories to keep up with demand.

The Toledo Supplier Park in Ohio, the Belvidere Assembly Plant in Illinois and Chrysler’s plant in Toluca, Mexico, will join Detroit’s Jefferson North plant in working through the summer.

In addition, Chrysler’s factories in Sterling Heights and Saltillo, Mexico, will close for just one week this year. Detroit-based GM has announced no recent production changes.

“We build to meet market demand,” said GM spokesman Greg Martin.

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