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Clunkers prompt Ford to boost production

Ford said Thursday it will build more of its popular Focus and Escape models and boost overall production of cars and trucks this year to help dealers restock depleted showrooms.
/ Source: The Associated Press

Ford said Thursday it will build more of its popular Focus and Escape models and boost overall production of cars and trucks this year to help dealers restock depleted showrooms.

Ford Motor Co. needs to keep up with demand for its Focus compact and Escape crossover, both ranked as top sellers under the federal government's Cash for Clunkers program. It also wants to maintain a reasonable level of cars and trucks so its dealers won't run short on hot models later this year.

Cash for Clunkers, which kicked off last month and has revived industry sales for the moment, uses rebates of up to $4,500 to entice drivers to trade in older, gas guzzlers for more fuel-efficient vehicles. To be eligible, vehicles must have combined city/highway mileage of 18 mpg or less when they were new.

Ford's overall vehicle production will be 2 percent higher than it expected in the third quarter. It also plans to boost its fourth-quarter output of cars and trucks by 33 percent from a year earlier.

While funding for the Clunkers program is likely to run dry by September, the company said, the additional vehicles produced in the quarter will go to replenish dealer stocks. Ford is struggling to keep up with demand after paring down inventories earlier this year.

"That should give us some time to reload before 2010 begins," said George Pipas, Ford's top sales analyst. "Dealers will be dealing with historically relatively low inventories for some time to come."

Pipas said there would probably be some drop-off in sales when the program ends, although Clunkers will have succeeded in providing a small kick-start to the economy.

The automaker, which has steadily been gaining sales since GM and Chrysler took government aid and went through bankruptcy proceedings, reported a year-over-year sales increase of 2.4 percent in July, the first such jump since November of 2007.

Ford is the latest automaker to raise production.

Foreign automakers with U.S. plants are taking similar steps. Honda Motor Co. is also adding Saturday overtime shifts at its auto assembly plants in East Liberty, Ohio; Lincoln, Ala.; and Greensburg, Ind.

Toyota Motor Corp. last month began increasing production of "core" models such as the Corolla sedan — the best-selling new model for traders of clunkers — the RAV4 crossover and the Tacoma truck at its U.S. plants. And Hyundai Motor Co. is recalling more than 3,000 employees at its plant in Montgomery, Ala.

Chrysler is now adding overtime at most of its plants to respond to expected demand for its 2010 models.

GM is being more cautious. Mark LaNeve, GM's vice president of U.S. sales said the company is doing careful analysis on whether to increase production but no final decisions have been made. Inventories are low, he said, because GM slashed production earlier in the year. But it's unclear whether July's sales momentum will continue through the remainder of the year.

Ford plans to build 10,000 more Focuses and Escapes this quarter. As a result, total production will rise to 495,000 vehicles in the period, up from the 485,000 expected.

The increase includes more than 6,000 Focuses, which get 35 mpg and rank as the second most popular seller under Clunkers. Boosted production also includes 3,500 Escape crossovers, among the 10 most popular cars under the program.

The Focuses will be built at the Wayne Assembly Plant in Michigan, where Ford will add Saturday shifts and weekday overtime to boost production. The Escapes will roll out of Ford's Kansas City Assembly Plant, where employees have agreed to work two days during a planned shutdown week in August.

Ford plans to produce 570,000 vehicles in the fourth quarter.