Ford said it will make a loss this year and predicted that the worsening US economic situation would make it difficult for it to break even in 2009.
Alan Mulally, Ford president and chief executive, said: "Demand for large trucks and SUVs is at one of the lowest levels in decades.
"We view the move to smaller, more fuel-efficient vehicles as permanent, and we are responding to customer demand."
Ford said it expected to produce 90,000 fewer vehicles in the second half of this year Production in the third quarter will now be 475,000 vehicles, 25% fewer than during the same period in 2007. Ford plans to increase production of its smaller vehicles.
The company will increase the production of smaller vehicles including the Ford Focus sedan, the Ford Escape and the Mercury Mariner.
Earlier this month, General Motors said it was closing four SUV and truck factories in the US, Canada and Mexico in response to falling demand.