Even though gasoline prices are down to almost $2 per gallon around here as election day approaches, Ford CEO Alan Mulally apparently doesn't think the current situation will last. Mulally told Automotive News that the Dearborn automaker is staying the course on its plan to introduce a half dozen new smaller vehicles in the U.S. market in the next couple of years. The respite in fuel prices may give Ford some breathing space on the launch of its new F-150 pickup truck. Last week the company announced it would bring back 1,000 workers at its Dearborn truck plant. However, the company has not changed plans to close and/or retool several truck plants over the next 18 months to build smaller cars.

Mulally also told the interviewer that the company is still considering bringing the Ka to the U.S. market and will be watching demand for smaller cars. The challenge for Ford and other automakers is offering small cars like the Ka and Fiesta at a profitable price point. That's even more of an issue with the current economic conditions. Prior to the recent financial collapse, it was hoped that they could offer small cars with the levels of equipment offered in bigger cars and thus command a high enough price to make money. That may prove to be more difficult now as Mulally acknowledged that we could see U.S. car sales dip to as low as 11-12 million annually next year compared to a high a few years ago of 17 million. You can check out video of the AN chat with Mulally here.

[Source: Automotive News - sub. req'd]

While General Motors recently announced plans to shutter four factories that had been building pickup trucks and SUVs, Ford may announce as soon as this week plans to shift some of its own truck plants to building smaller cars. Ford already decided that a Mexican plant that currently builds F-series pickups will be the source of the new Fiesta mini-car in early 2010. The second quarter results call on Thursday may bring more information on other truck plants that will build the next generation Focus and Mondeo. Now that the US dollar is so weak against other currencies, it no longer makes much sense to import small cars from other countries. The combination of more refined cars and the increase in fuel prices has also driven up demand for smaller cars to the point where they can actually be sold profitably in this country.

[Source: Wall Street Journal]

In a particularly bleak sales month in June, there were some surprising numbers hidden deep in the sales reports. A month ago, sales of small cars like the Honda Civic, Ford Focus and Toyota Corolla all had record sales. All three of those cars had major drops in June, even though gas prices continued to rise above $4 a gallon. The main reason sales of those and other cars - including hybrids - dropped is that there simply aren't enough available. In general, car dealers try to keep about a 60-day supply of each model they sell in stock. That gives a buffer against supply interruptions and moderate increases in sales as well as providing a reasonable selection of option and color combinations for consumers.

Through April and May, sales of small cars were so strong that inventories of small cars were almost completely depleted. By the end of June, Toyota only had a 15-day supply of Corollas and 7-days worth of Yaris models. On the hybrid front, Toyota had essentially no Priuses or Camry hybrids in stock anywhere. At the beginning of June, (end of June figures aren't yet available) Ford had only a 24-day supply of Focuses while Honda had a 20-day supply of Civics. Automakers are scrambling right now to shift production capacity with Ford adding a third shift to the current Focus assembly plant while working on shifting the Explorer plant to Focus production. Toyota is also adding capacity for Camrys at its Princeton, Indiana plant and Honda is surely looking for more Civics as well.

[Source: Reuters]