Ford to Boost Production
By: Staff

By Ted Reed
Confident Ford (Stock Quote: F)plans a slight boost in its production rate, a positive sign in a questionable economy.

The automaker, which reported Friday that it beat first-quarter estimates and reduced its cash burn, plans to build 435,000 vehicles in North America during the current quarter. That is 250,000 fewer than last year, but 10,000 more than the company's earlier guidance.

"We believe we have the dealer stocks well in line with what we see with the reception of new products," said CEO Alan Mulally, on an earnings conference call Friday. "We believe we can go up a little bit more to support the real demand."

The announcement comes a day after General Motors (Stock Quote: GM) said it has scheduled shutdowns at 13 of its 21 assembly plants in North America during the next three months, in an effort to remove 190,000 vehicles from production. It provides one more boost in Ford's continuing effort to separate itself from its competitors.

In the first quarter, Ford produced 349,000 cars in North America, a 50% decline, as the auto industry moved to reduce inventory levels and struggled with sharply reduced sales. Ford sales dropped 41% in March. The company now projects full-year North America vehicle sales around 10.5 million, the lower end of its forecast range, but above the 9.8 rate of the first quarter.

"It's been a long journey to get to a point where production matched demand, but now we're in a position to adjust as we see opportunity in the market place, and we see good demand for vehicles such as the Fusion," said Ford spokesman Mark Truby.

At midday, Ford shares traded at $5.18, up about 15%.

The company reiterated Friday that it does not expect to seek a bridge loan from the federal government, as competitors GM and Chrysler (Stock Quote: DAI) have done. But that doesn't mean that it does not expect to secure similar concessions from lenders, suppliers and the United Auto Workers as those competitors get, either by seeking bankruptcy protection or by threatening to seek bankruptcy protection.

Mullaly said President Barack Obama and his administration's auto task force "stated very clearly that it's about a viable industry going forward (and) we want to be part of the solution." He said Ford has "a pretty clear track record now of working with all the stakeholders and we will continue to do that going forward. So I don't think we're going to be disadvantaged."

As Ford watches the government's efforts to restructure GM and Chrysler, Mullaly noted, "the health of the supply base is probably the most critical issue (because) we're so interdependent." He said: "I think they'll continue to pay the highest priority to the supply base as they restructure, to make sure it remains intact for all of us."

During the first quarter, Ford lost $1.4 billion or 60 cents a share. Analysts surveyed by Thomson Reuters had estimated a loss of $1.23. Revenue fell 37% to $24.8 billion. Analysts had estimated $22 billion. In the same period a year earlier, Ford earned $70 million, or 3 cents a share.

Despite declining sales, Ford said it reduced its cash burn to $3.7 billion in the quarter, or $3.2 billion after a $500 million to Ford Credit, compared to $7.2 billion in cash burn in the fourth quarter. Additionally, it reduced costs by $1.9 billion, which Mullaly called "a very good start" to meeting or exceeding a targeted $4 billion cut this year.

After drawing $10.1 billion from its revolving credit line, Ford had $21.3 billion in cash at the end of the quarter. The company said it "remains on track to meet or beat its financial targets, including the target for its overall and North American automotive pre-tax results to be break-even or better in 2011, excluding special items."

During the quarter, Ford reduced its debt obligations by $10.1 billion and reduced interest payments by more than $500 million. CFO Louis Booth said that reduction would be "mostly offset" by a $10.1 billion draw on the revolving credit line.

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