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escalating gas prices

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Ford Sees Market Realities

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Looks like the high price of gas is here to stay. And Ford sees the writings on the wall. The demand for their vehicles have been going down, no thanks to escalating gas prices. It’s a market shift they say, and Ford says that it is scaling down its production. A big reversal after the company has announced a surprising first quarter profits. But it isn’t just Ford who feels the pinch of the times. General Motors and Chrysler also saw their market affected. This is because these two companies heavily relies on profits delivered by their trucks and SUVs. The changing face of the market saw a diminished popularity for SUVs and trucks as consumers find ways to address escalating gas prices. Ford said that they would drastically scale back production and step-up cost-cutting efforts in response to the sharp drops in sales and sport utility vehicles. Ford has now forecasted that the industry demand for cars and light trucks will stand at 14.7 million 10 15.1 million vehicles and this figure is considered as the lowest in more than a decade. Alan Mullaly, chief executive of Ford said that they saw a real change in the industry demand in pickups and SUVs in the first two months of May. He added that this seems to be a tipping point. One indicator of the market performance is the sales of pickups. Pickup sales are closely tied to housing and construction activity. Last year the sales of pickups accounted to 14 percent of the US market, but this year the figure is down to 9 percent.

As a response, Ford will cut down its North American production by 15 percent in the current quarter, as well as 15 to 20 percent in the third quarter and 2 to 8 percent in the fourth quarter. Though production of pickups and SUVs will be cut, it is expected that Ford will increase its output of more fuel-efficient models like the Focus and the Fusion.

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