Bumpy road ahead for automakers

Auto executives recount sales drops that led to production cuts.

DEARBORN, Mich. (AP) — Every morning, just after getting coffee, Mark Fields fires up his laptop to pore over a computer model showing real-time U.S. auto sales figures.

On this morning in the middle of May, the man who heads Ford Motor Co.’s Americas operations has seen enough.

The line on a chart showing subcompact car sales for the first two weeks of the month goes almost straight up. The one for pickup trucks, Ford’s biggest profit center, runs almost straight down.

High gasoline prices and the economic downturn are changing the market far faster than anyone anticipated. Without action, Ford would be making too many trucks and not enough cars, a recipe for a balance sheet peppered with parentheses.

“This is going on 10 weeks where we’re seeing this not get any better,” Fields recalled in a recent interview. “So we’d better act, and we’d better act now.”

Eleven miles away at General Motors Corp., they were reaching the same conclusions. Consumers were delaying big-ticket purchases. Those who bought weren’t going for GM or Ford trucks and sport utility vehicles, instead snapping up just about anything that gets more than 30 miles per gallon.

At both companies, executives were alarmed. Eventually they made almost desperate decisions that will cost thousands of jobs, change the vehicles people drive and determine whether their businesses survive.

“We need to get in front of it,” Mike DiGiovanni, GM’s executive director of global market and industry analysis, recalls saying. “If you wait too long on it, the pain would get a lot worse.”

While both companies say they took quick action, critics wonder why they didn’t make more fuel-efficient vehicles sooner. After all, there were many signs that gas prices would do nothing but rise.

“Obviously they were making just too much money off their SUVs and pickups,” said Roland Hwang, vehicle policy director for the Natural Resources Defense Council. “They couldn’t really fully conceive of a world where they would have to rapidly extricate themselves from those markets and those profits.”

At GM and Ford, the pain came quickly. Ford was first, announcing May 22 that it would dramatically cut truck and SUV production and slash its salaried work force. Factory closures are possible when the company announces specifics next month. A week later, Ford announced accelerated plans for a super-compact car to be built in Mexico and sold in the U.S.

GM followed with larger, more specific cuts, announcing at its annual shareholders meeting June 3 that it would close four truck and SUV factories, cutting more than 8,000 jobs. The company, which is clinging to its title as world’s biggest automaker, also announced it would build a new small car at its Lordstown plant, powered by a 1.4-liter four-cylinder engine capable of getting up to 45 miles per gallon of gas.

But neither company’s new compacts will reach showrooms for two years, and when they do, their profit margins will be far smaller than those from trucks and SUVs. Both automakers know they’ll have to make it in the meantime with models already on the market or ones that are planned for the next year.

Industry analysts now are starting to question whether both companies, as well as Chrysler LLC, will have to borrow billions more to cover losses until sales recover.

Whether Ford, GM and Chrysler LLC can go forward fast enough remains to be seen. But even Hwang of the Natural Resources Defense Council says he thinks the companies will have a brighter future because they are more focused on fuel economy.