Ford solidifies Louisville plans

Ford Motor Co. today solidified plans for its two Louisville production facilities, notifying local and state officials that it plans to spend more than $100 million on improvements at the plants.

Dearborn, Mich.-based Ford (NYSE: F) will add six small vehicles, already produced in Europe, to its North American production.

As reported earlier this week, the company will convert three truck and sport utility vehicle plants, including the Louisville Assembly Plant, into small-car production facilities by 2011. The Louisville Assembly Plant has produced the Ford Explorer SUV since 1990.

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At a news conference Thursday afternoon, Bill Russo, manufacturing manager for Ford’s North American car, SUV and crossover vehicle lines, said Ford officials plan to retool Louisville Assembly Plant by mid-2010.

He declined to say when Ford will cease making Explorers at the plant but did say that it would take about six months to install the tooling needed to make a new product.

He declined to say how much it would cost to retool the Louisville Assembly Plant.

Russo also declined to disclose which product will be made here or if any hybrid vehicles will be made at Louisville Assembly Plant. He did say that a new generation, unibody Explorer, “is not slated” to be made in Louisville.

Ford has not disclosed where it will make the new Explorer, but analysts have predicted that it likely will be made at a plant in Chicago.

The Ford, Lincoln and Mercury brands all will revamp their product lineups by the end of 2010, and hybrid-vehicle production and offerings will double by 2009.

Ford also announced that production of the Ford Expedition and Lincoln Navigator SUVs will be moved to the Kentucky Truck Plant on Chamberlain Lane from the Michigan Truck Plant by early next year.

In conjunction with those moves, Ford will spend $100 million on improvements at the plant, Kentucky Gov. Steve Beshear announced during a Thursday news conference in Louisville.

Beshear added that local and state economic development officials are negotiating with Ford to offer additional state incentives to help retain and expand jobs at the plants.

He declined to disclose details of the incentives package, which still is being negotiated and is expected to be presented within a few weeks.

Beshear said officials were given the good news — the first official notice that Ford officials have firm plans to make additional investments in manufacturing at both the Kentucky Truck and Louisville Assembly plants — during a morning conference call with Joe Hinrichs, Ford’s vice president of global manufacturing, and other Ford officials.

“When it comes to Ford Motor Co., Louisville has had more lives than most cats,” Beshear said. “For many months, the future of Ford Motor Co.’s two Louisville plants and the thousands of workers employed there has been in jeopardy. Today, Ford is making it perfectly clear that the company is betting its future success in the automotive industry on Louisville, Ky.”

Louisville Metro Mayor Jerry Abramson acknowledged that although local officials hope the investments by Ford will lead to more jobs at the plants, Ford officials “made very clear” that buyouts for early retirements will continue to go forward and might lead to continued cuts among the plants’ combined work force of about 6,000.

Ford’s decision comes as the company works to find the right product mix to appeal to consumers coping with high fuel costs. The company also is fighting stiff competition from foreign automakers.

During the first six months of 2008, Ford’s North American sales declined 14.3 percent, to 1,155,241 units from 1,347,349 units.

The company, which long has touted its top-selling pickup trucks and SUVs, attributed the sales declines to a rise in fuel prices and a continued drop in demand for those SUVs and trucks.

For the first six months of the year, Explorer sales declined 33.2 percent, to 49,935 units, from 74,704 units during the same period a year earlier.

F-Series sales for the first half of 2008 declined 22.7 percent, to 274,713 units, from 355,438 units in the first half of 2007.

Ford does not separate the sale of F-Series Super Duty trucks, made at the Kentucky Truck Plant, from its overall F-Series truck sales figures.

One bright spot for Ford in the first half of 2008 was the compact Ford Focus.

Ford sold 123,449 units in the first six months of 2008, up 27.6 percent from the same period a year ago, when Ford sold 96,732 units.

During a Thursday morning conference call with analysts and media members, Ford’s president of the Americas, Mark Fields, said the company is confident that continued high fuel prices will drive demand for small cars.

“We’re starting to see a number of people trading in sedans or otherwise” for a smaller car, Fields said.

Tom Libby, a Detroit-based analyst with J.D. Power & Associates Inc., said June compact car sales accounted for 18.7 percent of all North American car sales, up from 14.9 percent a year earlier.

Subcompact sales in June accounted for 4.1 percent of total sales, up from 2.5 percent in June 2007.

“In the short term, there is a lot of strength in small cars,” Libby said. “What remains to be seen is the long-term demand.”

Fields added that for small cars to be more appealing to consumers than they have been in the past, Ford needs to offer many of the creature comforts now found primarily in larger vehicles.

Aaron Bragman, an automotive research analyst in the Detroit office of Global Insight Inc., said he believes that consumers will respond favorably to Ford’s new lineup of small cars.

“I don’t think it will be a tough sell,” Bragman said. “I don’t see the market drying up. The global demand for oil is only going to increase in the foreseeable future. You might see fuel prices go down a bit, but they’re not going to return to what they once were.”

For the same reason, Bragman said, Ford likely won’t be able to sell as many pick-up trucks and large SUVs in the future.

“There will continue to be demand because there is a certain segment that still needs that kind of power and rigidity to haul and tow things,” Bragman said. “But it’s going to be a much smaller segment than we saw previously.”

For months there has been wide speculation about the future of the Kentucky Truck Plant and the Louisville Assembly Plant, which is located on Fern Valley Road.

As a part of its four-year master agreement with the United Auto Workers, Ford agreed last fall to bring major body-stamping work to Kentucky Truck and new flexible body shops, capable of making more than one type of vehicle, to both plants.

On Nov. 27, the Kentucky Economic Development Finance Authoritygranted Ford $24 million in tax incentives over 10 yearson an investment of $200 million at Kentucky Truck. KEDFA also allowed Ford to transfer as much as $36 million in unused credits for which it was approved in 1998 and 2001.

Today’s announcement brought some certainty to a situation that has been unclear at best since Ford executives announced their “Way Forward” restructuring and cost-cutting plan in January 2006.

By September 2006, Fields said the automaker’s restructuring would be largely complete by the end of 2008. By that time, the company planned to close 16 North American manufacturing facilities, including seven assembly plants.

When the “Way Forward” plan was announced, the company set a goal of returning to profitability by next year.

Although the future of the Kentucky Truck Plant — the company’s largest North American manufacturing facility — seemed to be secure under that plan, many observers saw the aging Louisville Assembly Plant as vulnerable.

The plant, opened in 1953, is equipped to build a vehicle that isn’t selling well, and retooling the plant to produce a new vehicle likely will cost Ford hundreds of millions of dollars.

But the new national contract signed last fall by Ford and the United Auto Workers union, in which Ford promised to bring production of a new vehicle to the plant, seemed to solidify Louisville Assembly’s future.

At the afternoon news conference, UAW Local 862 president Rocky Comito said Ford’s announcement validated concessions hourly workers have made over the past 18 months.

“This is a very good day for the employees and the community,” Comito said. “There have been numerous ups and downs with layoffs and changing work times over the past few months. Our members have sacrificed more than people in the community realize. They deserve this vehicle.”

In addition to the announcement about the Louisville plants, Ford officials on Thursday outlined plans for other manufacturing facilities.

•The Michigan Truck Plant, in Wayne, Mich., which had produced Ford Expedition and Lincoln Navigator SUVs, will be retooled beginning this December to produce small cars, beginning in 2010.

• The Cuautitlan Assembly Plant in Mexico, which currently produces F-150 pickups, will begin making the Fiesta subcompact car in 2010.

• The Twin Cities plant in Minnesota, which had been slated to close in 2009, will continue production of the Ford Ranger pickup through 2011.

• The Kansas City Assembly Plant will add a third crew to its small SUV line to build the Ford Escape, Escape hybrid, Mercury Mariner and Mariner hybrid.

“We are transforming Ford’s North American manufacturing operations into a lean, flexible system that is fully competitive with the best in the business,” Fields said in a news release. “We remain committed to matching our capacity with real consumer demand, and we are equipping nearly all of our assembly plants with flexible body shops, ensuring we can respond quickly to changing consumer tastes.”

Fields also announced that the company will increase production of its four-cylinder and EcoBoost engines and six-speed transmissions, all of which are designed for optimum fuel economy.

In addition to the new products, Ford plans to accelerate the launch of many new models of existing vehicles.

• The 2009 F-150, which had been delayed because of declining demand, now is expected to roll into showrooms in late fall.

• The 2010 Ford Fusion, Mercury Milan, Lincoln MKZ will go on sale in early 2009.

• The 2010 Ford Fusion hybrid and Mercury Milan hybrid will begin production late this year and show up on dealership lots in early 2009.

• A new Mustang will hit the market in early 2009.

• A redesigned Ford Taurus sedan with EcoBoost engine will be released in mid-2009.

• A small, multipurpose van will be released in mid-2009.

• Four- and five-door Fiesta subcompacts will be sold in early 2010.

• A new Ford Focus, based on European styling, and a Mercury-branded small car will be released sometime in 2010.

• The next-generation Ford Explorer , with an EcoBoost engine and six-speed transmission, will be launched in 2010.

Ford will continue to offer buyouts to hourly workers at its U.S. production operations, and the company is on track to reduce its salaried work-force costs in North America by 15 percent by Aug. 1, the company reported in the release.

The automaker said it is on track to trim $5 billion in annual operating costs from its North American operations by the end of 2008.

Despite the cost-cutting measures, Ford officials were noncommittal Thursday when asked about the possibility that the company will return to profitability by 2010.

But during the conference call, chairman and CEO Alan Mulally declined to say whether he believed the company would be profitable in 2010.

“Our 2010 profitability goes with the economy, both in the U.S. and worldwide,” Mulally said.

Business First staff writer Ed Green contributed to this report.