Ford Shortens Summer Shutdown

Ford Motor Co. (F - Analyst Report) plans to boost output by 40,000 vehicles by shortening the summer shutdown at its 13 North American plants to one week from the traditional two weeks. The move is based on the company’s aim to match output with improving demand for its vehicles and is consistent with its target to enhance annual production capacity by 400,000 vehicles.

Recently, the automaker revealed its fear to lose market share due to insufficient capacity to meet consumer demand. Most of the company’s plants are already operating at maximum capacity. As a result, adding a week of production to the plants turned out an easy way out from the capacity bottleneck issue.

The 13 plants include 6 assembly including Chicago Assembly, Dearborn Truck, Kentucky Truck, Louisville Assembly, Michigan Assembly and Kansas City Assembly. The remaining 7 plants include Dearborn Engine, Chicago Stamping, Cleveland Engine No. 1, Lima Engine, Essex Engine, Sterling and Rawsonville.

These plants are normally closed for two weeks around the U.S. Independence Day holiday on July 4 in order to switch production to the next model year. At that time, automakers gear up the facilities for the next vehicle models by making changes in engineering and design systems.

Ford is not exception to the capacity issue. Recently, Chrysler Group LLC – controlled by Italy’s Fiat SpA (FIATY) – revealed its plan to give up normal two-week shutdown in summer for 2012 due to the same problem. However, no one has heard from General Motors Company (GM - Analyst Report) regarding its production schedule.

Last month, U.S. saw a sluggish 2.3% growth in light vehicle sales to 1.18 million units from 1.16 million units in the same month last year. Meanwhile, it rose 9.5% to seasonally adjusted annual rate (SAAR) of 14.42 million units from 13.17 million units in April 2011.

The sluggish growth can be attributable to lower sales recorded by GM and Ford and fewer selling days (due to more Sundays than April last year). But thanks to the fuel-efficient lineups and pent up demand that kept the auto sales recovery on track.

Ford’s sales slid 5% to 180,350 vehicles due to shortages in production. The company’s top selling vehicle during the month was F-Series pickup trucks, which saw a 4% rise in sales to 47,453 units. Meanwhile, sales of the recently revamped models – Lincoln MKS sedan and MKT crossover – surged more than 50% during the month.

Ford, a Zacks #3 Rank (Hold) stock, posted a sharp 20% fall in profits to $1.6 billion in the first quarter of the year from $2.0 billion in the same quarter of 2011. On per share basis, profits ebbed 17% to 39 cents from 47 cents in the first quarter of 2011. Nevertheless, it was higher than the Zacks Consensus Estimate of 35 cents.

The automaker has attributed the decrease in profits to higher tax expense, lower operating results and higher charges emanating from buyouts of hourly workers in the U.S. as part of its UAW agreement in 2011.

The company’s profits drastically fell in all its operating regions, except North America. In fact, it recorded a loss in Europe and Asia Pacific Africa compared with a profit in the comparable quarter of 2011.

Total revenue in the quarter slipped 2% to $32.4 billion, barely surpassing the Zacks Consensus Estimate of $32.0 billion. The fall in revenues was attributable to lower wholesale volumes in Europe and Asia, partially offset by higher volumes in North America and South America.