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Ford backtracks on profitability goal

Ford no longer expects to return to profit next year and is instead hoping for a break even result.

The American manufacturer said rising prices for commodities, particularly steel, and an accelerating consumer shift from larger trucks and SUVs would make it impossible to meet a key milestone in its efforts to turn around its money-losing North American operations.

Ford, which has lost more than $15 billion (£7.6bn) over the past two years, has sold off luxury brands Aston Martin, Jaguar and Land Rover to raise cash.

It has also bought out thousands of union-represented workers and slashed sales to rental agencies in a bid to turn a profit at a lower sales volume.

Ford CEO Alan Mulally said the company now expected to be "about break-even" in 2009 on a pretax basis and before special items, with strong results from Europe and South America.

Ford said it expected to reduce second-quarter North American production by another 3% beyond the cuts it had already announced. The company now expects to make 690,000 vehicles this quarter, down 15% from 2007 levels.

Production will be down 15% to 20% at 510,000 to 540,000 vehicles in the third quarter from a year earlier and decline 2% to 8% to between 590,000 and 630,000 vehicles in the fourth quarter, Ford said.

Roy Kishor, automotive analyst and partner at Kroll’s corporate advisory & restructuring group, said: "Mulally has been very upfront compared to his peers at GM and Chrysler, first about the issues he has to tackle at Ford, and secondly the structural and consumer issues in the US.

"His response to the impact of rising oil prices on demand is immediate as is his assessment of their impact on Ford’s recovery."

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