Ford still in red as cash-strapped Americans stay put

Painful prices at the petrol pump in the US mean that the vehicle manufacturer Ford will miss its target of returning to the black next year.

As cash-strapped American consumers steer clear of car showrooms the car-maker warned that the US market had reached a "tipping point" with consumers shifting in record numbers to smaller vehicles.

Chief executive Alan Mulally said: "The combination of record fuel prices and continued weakness in the housing market has further accelerated a shift from pickup trucks and SUVs to small and medium- sized cars."

Ford has lost more than $15 billion over two years but held to a longstanding goal of returning to profitability in 2009. Dismal market conditions in the US mean that the firm now expects to achieve a break-even level at best.

Ford is cutting US production by 15 per cent in the second quarter - equivalent to 20,000 vehicles. It plans a drop of between 15 per cent and 20 per cent in the third quarter.

High steel prices have pushed up Ford's manufacturing costs. The trend in purchasing tastes towards smaller vehicles has been under way for some years, but Ford believes it shifted up a gear in the first two weeks of May.

"It seemed to us we'd reached a tipping point where customers were shifting away from those (larger) vehicles at an increased rate," Mr Mulally said.

America's economic sluggishness could hardly have come at a worse time for the country's big three car-makers - Ford, Chrysler and General Motors - which were just beginning to show signs of a fightback against Asian imports. The three have cut tens of thousands of jobs to improve productivity.

George Magliano, a motor industry analyst at Global Insight, said light vehicle sales were likely to drop by more than 1m in the US this year, from 16.1 million to an estimated 14.8 million.

"You've got to wake up to reality - this is going to be a tough business," Mr Magliano said. "We've got a recession going on here - 2008 is going to be pretty bad and we don't see any significant improvement in 2009."

America's domestic motor industry has struggled to adapt to making lighter, fuel-efficient vehicles which have traditionally been a strength of competitors such as Toyota, Nissan and Honda.