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For almost five years, buyers of sport-utilities have been demanding bigger and bigger vehicles. Auto makers have responded by making personal vehicles out of trucks that were originally designed for farmers, plumbers, and the like. Now, Ford Motor Co. may have hit the Outer Limits of the SUV craze with its giant Excursion models.
The auto maker has decided to scale back production of its hulking Excursion by 25% for the rest of the year, as inventory of the vehicle -- both on dealer lots and in the production pipeline -- has grown to a backlog of 100 days' worth. Ford prefers to maintain about a 60-day inventory of its vehicles. Instead of cranking out Excursions at a rate of 69,000 for the 2000 model year, Ford will cut production at its Kentucky truck plant to 52,000. Originally, "we put production in place that was above expectations," says Ford market analyst George Pipas.
Dealers say the Excursion hasn't clicked with buyers. The SUV was designed to compete against General Motors Corp.'s Chevrolet Suburban and GMC Yukon XL. But the Excursion is built on the same platform as Ford's larger, brawnier pickup trucks. The result is a ride that doesn't suit the needs of the average retail buyer, says Jerry Reynolds, owner of Prestige Ford in suburban Dallas. "It's not a Suburban-fighter," Reynolds says. "It's not for personal use. I had vision of selling 50 a month, and I'm doing half that."
GASAHOLIC.
But the news isn't all bad for Ford. By cutting production of the Excursion, Ford can build more of its Super Duty pickups, which are in short supply with just 40 days' worth of stock on hand. Super Duties aren't quite as profitable as Excursions, but both vehicles are huge moneymakers, and it shouldn't affect the bottom line, Ford executives told analysts at a briefing on May 17. "They swore up and down to me that it was a profitable decision," said Merrill Lynch analyst John A. Casesa.
Timely, too. GM plans to go after the Super Duty pickup market with an all-new One-Ton pickup scheduled for launch in the fourth quarter. Ford will add Super Duty production in August, boosting annual rates to 409,000, compared with a current rate of 374,000 trucks. That should build its stock by the time GM comes to market. "It's in our best interest to have more of a hot-selling product when the competition is coming out with a new truck," Pipas said.
None of this makes environmentalists happy, however. Ford was derided by green activists when it launched the Excursion last year because of the truck's very low fuel economy. The Sierra Club gave the truck the "Exxon Valdez Award" for its environmentally destructive impact. And the Super Duty pickup chugs gas just as quickly.
Welch covers the automotive industry for Business Week from Detroit EDITED BY DOUGLAS HARBRECHT
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