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The Honolulu Advertiser
Posted on: Friday, July 25, 2008

FORD
Ford turns to Europe for help after its worst quarterly loss

By Tom Krisher and Dee-Ann Durbin
Associated Press

Hawaii news photo - The Honolulu Advertiser

Ford Explorers and Sport Trac SUVs roll off the assembly line at the Louisville Assembly Plant in Kentucky. The plant will be retooled to build smaller vehicles that the company currently makes in Europe.

BRIAN BOHANNON | Associated Press

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CHANGING THE PLANTS

Ford Motor Co. announced several factory changes yesterday in response to the ever-changing U.S. market.

Michigan: This truck factory will continue to build Ford Expedition and Lincoln Navigator SUVs until the end of this year, then will be retooled to build the new European Focus compact or other small cars starting in 2010.

Kentucky: The assembly plant and the truck factory in Louisville will undergo changes. The assembly plant, which makes Ford Explorer and Mercury Mountaineer SUVs, will be retooled to make vehicles on the European Focus frame in 2011. The truck factory, which now makes Super Duty pickup trucks will add production of Expedition and Navigator from Michigan Truck early next year.

Minnesota: The Twin Cities assembly plant in St. Paul, which makes the Ranger small pickup truck, was scheduled to close next year. It will now remain open through 2011 because of slightly higher demand for the Ranger, whose sales are down just 4 percent in the first half of this year, versus 18 percent for the U.S. light truck market as a whole.

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DEARBORN, Mich. — Bleeding cash and with its very survival uncertain, Ford Motor Co., an icon of American automaking, will try to import some of its success from across the Atlantic.

Ford reported its worst-ever quarterly loss yesterday and announced plans to bring over six small, fuel-efficient cars it makes in Europe and start selling them in North America, where Ford is losing billions on its truck-heavy lineup.

The company burned through nearly $11 billion of its cash stockpile in the past year and reported a second-quarter loss of $8.7 billion.

Ford is trying to save itself by quickly morphing from a truck company into a car company. But the help from Europe won't arrive until 2010: It takes time to retool U.S. plants, and importing the cars directly is too costly.

Industry watchers wonder whether Ford has enough cash to survive until then.

"You have the gap before the plan can be fully executed," said Jeff Schuster, executive director of global forecasting for J.D. Power and Associates. "You kind of have to weather the conditions, and you have to weather the fact that you're still the old company in transition."

Ford has successfully sold cars in Europe for years, and it made billions of dollars selling trucks to Americans. But U.S. drivers have recoiled this year from high gas prices and opted for smaller cars.

Most of the European models will be built in North America. The Fiesta subcompact will be built in Mexico, the European Focus will be built in Kentucky and Michigan, and the Transit Connect small van will be imported from Turkey.

Ford won't identify the other three. But analysts are betting on the Kuga, a small crossover vehicle, and the C-Max small van, both of which are built on the same underpinnings as the European Focus.

Ford also could bring its Mondeo midsize car from Europe to replace the Fusion and Mercury Milan.

Past efforts by U.S. automakers to bring in European cars have flopped, but Ford CEO Alan Mulally said the U.S. market is vastly different today. With gas at $4 a gallon, consumers are cleaning showrooms out of small cars.

"They want the vehicles to be neat and have a lot of features," Mulally told reporters and industry analysts yesterday on a conference call. "We have seen this and the success of this in Europe and around the world."

James E. Schrager, clinical professor of entrepreneurship and strategy at the University of Chicago Graduate School of Business, said Mulally has been talking about bringing over European cars since he arrived at Ford in 2006 from Boeing Co.

Ford gave no forecast for a return to black ink, but Chief Financial Officer Don Leclair said Ford had enough cash and credit to make it through the downtown. He said he didn't expect a recovery to start until 2010.

The company has about $38 billion in cash and credit lines, Leclair said, including more than $26 billion in cash. It burned through more than $2 billion in the second quarter alone.