Ford And GM Shift Out Of High Gear

The world's two largest automakers are slashing vehicle production in the second quarter as sales continue to fall amid the possibility of war with Iraq and lagging consumer confidence.

Ford Motor Co. announced a 16.6 percent second-quarter cut on Thursday, following the lead of General Motors Corp., which said at the beginning of the month that it would cut production by 10.5 percent in the April-June quarter. GM's sales fell 19 percent last month.

No. 2 automaker Ford said it plans to produce 980,000 vehicles at North American assembly plants during that period, down nearly 200,000 vehicles from what it produced during the same time a year ago.

On Thursday, J.P. Morgan Securities analyst David Bradley said he expected GM, the No. 1 automaker, to further reduce production, although he didn't offer a specific amount. A GM spokesman said he knew of no further planned production cuts at this time.

U.S. auto sales, hurt by harsh winter weather and a sluggish economy, fell 6.5 percent in February, and analysts' sales forecasts for March are equally chilling.

Goldman Sachs & Co. reports that sales in the first two weeks of March were weak and "may weaken further as the month progresses because the potential war with Iraq would seem to be a late-month event."

That may mean more production cuts to offset rising inventories.

Aside from concerns about war and skittish consumers, Ford will begin making its new F-Series pickup in Norfolk, Va., at the end of June, said George Pipas, Ford's top sales analyst. Such a changeover requires major adjustments at the plant.

"It basically wipes out June production in Norfolk for all intents and purposes," Pipas said.

DaimlerChrysler AG's Chrysler division announces its production schedule on a weekly basis. Spokeswoman Mary Beth Halprin said Thursday the automaker has had "a mixed trend" in recent weeks, "but we haven't had a continued downturn."

A production cut is significant because automakers consider a vehicle sold when it's shipped from the manufacturing plant to a dealer, not when the dealer reaches an agreement with a buyer. As such, diminishing production can reduce the automaker's bottom line.

Bradley said he expects sales to bottom out in the coming months.

"If we had to take a guess today, this should happen in April, concurrent with an Iraqi war climax," he said.

By John Porretto