Ford Raises Production Shifts

Ford Motor Company (F - Analyst Report) has revealed that it will add shifts at its truck plants in Michigan and Missouri on the back of increased demand for its F-150 pickup trucks and Escape SUVs. Both of the company’s manufacturing units -- the Dearborn, Michigan truck plant and the Kansas City, Missouri assembly plant -- will return to a three-shift operation in September and October, respectively, this year.

The increase in shifts will help gear up the production of F-150 pickup trucks by about 10,000 units. The manufacture of Ford Escape and Mercury Mariner SUVs together will increase by 2,400 units this year.

The actions are perfectly in line with the automaker's plan to enhance production for the third and fourth quarters driven by strong sales due to the Cash for Clunkers program. The program, launched by the U.S. Government in late July, allowed consumers to trade in their old gas-guzzling cars and trucks with a mileage of 18 miles per gallon (mpg) or less for a value of up to $3,500-$4,500.

Ford had two models in the top-10 buy list of the Cash-for-Clunkers program. The company’s Ford Focus (30 mpg) ranked fourth and Ford Escape SUV (24 mpg) ranked tenth. In terms of market share, Ford ranked third with 14.4% following Toyota (TM - Analyst Report) (19.4%) and General Motors (17.6%).

Ford plans to boost third-quarter production in North America to 495,000 vehicles from the previously announced 485,000 vehicles. Thereafter, it will increase production to 570,000 vehicles for the fourth quarter, a 33% rise from the year-ago period.

For July, Ford has reported an astounding 2% year-over-year sales gain when other major automakers have all reported declines. The sales gain was the company’s first since November 2007.

On August 7, the company announced plans to replace or refresh 70%-90% of its lineups by volume in each of its three largest markets -- North America, Europe and Asia-Pacific & Africa -- by 2012. Thereafter, the lineups will be refreshed 140%-160% by 2014. The company aims to enhance its volume per core global platform from the present 345,000 to 680,000 vehicles within five years.

We continue to recommend the shares of Ford as Neutral with a target price of $8.

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