For months now Ford executives have been signaling a cautious note on truck sales. Now, they are taking action by temporarily idling production of its F-150 at the Kansas City assembly plant for a week. Also, it is halting production of the Ford Escape and Lincoln MKC at the Louisville Assembly Plant in Kentucky for two of the next three weeks.
These preventive actions are aimed at reducing inventory which has grown to a 95 days’ supply of pickups on dealer lots. Ideally, automakers try to have a 60 day supply (or less).
By taking these actions now, Ford is hoping to avoid dropping big incentives in order to move product to make sales quotas.
“During our second quarter financial call, we said we expected the overall retail industry to decline in the second half of the year from the same period last year. We also said to expect to see some production adjustments in the second half – this is one of them. We continue matching production to meet demand,” said Kelli Felker, Ford spokeswoman in a Fortune.com article.
Last year, car sales reached a record of 17.47 million units sold. This year, analysts expect sales to come in .3 percent less at 17.1 million with consumer demand dropping. In the coming years, sales could continue to drop with many analysts pointing to post-recession pent-up demand fueling a lot of the growth in the past few years.
This news is sure to have a sour effect on financial markets as well as other automaker’s plans. Currently, Ford has really been the most vocal about future sluggish sales with other automakers taking a more positive viewpoint.
It remains to be seen what will happen, however, August sales were down 4.3 percent and this followed a flat July. This could definitely be cooling and Ford’s preventative approach maybe perfect timing.