The sufferings of the world’s number two vehicle manufacturer are continuing apace. Recently announced cuts in Ford’s production and earnings targets have added to market doubts over the sustainability of the company, which has made losses of over $US6.4 billion over the last two years. One hope is that a new version of its F-150 pickup truck could help stabilise Ford’s revenues.
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Ford aims to earn $1.2 billion this year, despite its recently slashed production targets and rising overheads. Costs have grown despite the company’s extensive efforts to re-organise operations to be more cost-effective. It expects the US market as a whole to decline slightly during 2003 to 16 million vehicles but may well be counting on a slight rebound in the aftermath of any conflict with Iraq. However, many in the industry are now expecting the company to post further losses this year, which could severely destabilise its future financial success.
The company’s fiscal troubles have been extensive recently, with decreasing share prices and credit ratings adding to the misery of several years in the red. It remains the only ‘Big Three’ player to have made a loss on cars and trucks in 2002 and many in the industry are predicting further problems ahead if the company fails to meet its targets this year. Ford has already had to reduce its vehicle production by 17% in the US during the second quarter of this year, in response to a widely perceived dip in demand.
The impact on the company is also extending beyond its core operations. Ford’s financing and leasing arm, Ford Credit, is beginning to suffer due to Ford’s worsening credit status. It is increasingly having to change its loan strategies as borrowing on the commercial paper market becomes too expensive.
However, one ray of hope for the company could come in the form of its most successful product, the F-150 pickup truck. A new version of this vehicle will be launched in large volumes later in the year and, if successful, could go a long way toward stabilising the company revenues. As a result, the company is prioritising the on-time delivery of this vehicle to the market.
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