Ford Warns Losses Could Top $2.7bn

The American car maker Ford is cutting production of trucks and promoting European-style smaller vehicles such as the Fiesta and Focus as it struggles to stem billions of dollars in losses arising from the rocketing price of petrol.

In its second profits warning in a month, Ford said it would fare worse this year than its $2.7bn (£1.3bn) loss in 2007. In a sign of the enduring nature of its difficulties, it believes it will struggle to break even next year.

The Detroit-based car maker's traditional specialty of pick-up trucks and sports utility vehicles has been hit particularly badly as consumers seek out more fuel-efficient transport to limit their outgoings at filling stations.

Ford's chief executive, Alan Mulally, said the trend was no flash in the pan: "We view the move to smaller, more fuel efficient vehicles as permanent."

In cutbacks likely to mean more job losses in Ford's already reduced workforce, the number of vehicles rolling off the company's production lines will fall by 25% year-on-year in the third quarter and by between 8% and 14% in the fourth quarter.

Ford is delaying manufacturing of a new version of its F-150 pickup truck which was launched with a performance by country music star Toby Keith amid great fanfare at the Detroit motor show in January.

Instead, the company is gearing up its US plants to produce Fiesta hatchbacks and Focus sedans which are popular in Europe but little known in the American market.

"We sell some of the best smaller cars and utility vehicles in the world in our profitable European and South American operations and our plan is to introduce these same vehicles in North America as quickly as possible," said Mulally.

On Wall Street, Ford's shares slumped by 6.8% to $5.89. A year ago, they were changing hands for nearly $10. The billionaire Las Vegas casinos tycoon Kirk Kerkorian has taken a 5% stake in the company and recently met senior executives to discuss the prospects for a turnaround.

Ephraim Levy, an equity analyst at Standard & Poor's in New York, said: "This shows you how horrendous the market is now for the pickups and SUVs which are Ford's bread and butter."

He said Ford was struggling with the technical practicalities of altering its product mix towards smaller vehicles: "American automakers trail the Japanese in flexible manufacturing - the Japanese can often switch from producing trucks to sedans on the same production line."

As the price of petrol reaches £1.20 a litre in Britain and $4 a gallon in America, the auto industry around the world is feeling the pinch.

General Motors is considering selling its military-style Hummer brand which is loathed by environmentalists for its poor fuel consumption.

Elsewhere, in Milan yesterday, Fiat shares dived by 9% to a two-year low as its chief executive described car sales as a "disaster" following a 17.6% drop in the number of new vehicles sold in Italy during May.