Ford's (NYSE: F) latest PR push is based around the idea that the company can make money on smaller cars. Traditionally the big margins in the car industry have been on pick-ups and SUVs. But consumers don't want those anymore.

According to The Wall Street Journal (subscription required), "Ford Motor Co. is expressing new confidence about the auto maker's ability to sell new small cars at a profit in the U.S. market, citing new data about how Americans are beginning to value premium features and dynamic design over vehicles desired simply for their size." That assumption is based on two factors, neither of which is likely to be true.

Ford believes that it can cut its cost base low enough to make money on cars that retail for $20,000 or less. Chopping production expenses may lower overall costs, but it also cripples the company's ability to "turn on the juice" if car sales make a sharp rebound. Fewer factories with fewer workers puts some brake on the company's ability to quickly push out more vehicles in a short period of time. Cars that can't be made can't be sold.

The other challenge to Ford's assumption is that it can get a large market share in a part of the industry that is already dominated by Toyota (NYSE: TM), Honda (NYSE: HMC), and Nissan. As Ford ramps up, the Japanese car makers are moving into hybrids and improving their own small cars. Most consumer satisfaction surveys put Ford behind the Japanese in terms of the quality of their products.

Aside from those few small details, Ford's plans should work just fine.

Douglas A. McIntyre is an editor at 247wallst.com.

Ford's fantasy: Making money on small cars originally appeared on BloggingStocks on Sat, 06 Sep 2008 13:10:00 EST. Please see our terms for use of feeds.

It may be too late for Ford (NYSE: F) to get back some of its market share in the U.S. It may have waited too long to offer a wide variety of small cars with good gas mileage.

But, the company refuses to give up the ghost, at least for now. According to The Wall Street Journal, Ford "is preparing plans to retool some U.S. plants to produce small passenger cars that the company has been making and selling mainly in Europe."

By using products that are already fully developed, Ford will cut its time to market with cars designed for an environment with high gas prices.

Making the plant changes necessary to manufacture the car will take over a year-and-a-half. Because the new product is not a hybrid, it does not help Ford offer direct competition to the best cars from Toyota (NYSE: TM).

Ford has a band-aide, but it will not work on a wound that is gushing blood.

Douglas A. McIntyre is an editor at 247wallst.com.

Ford to bring in small car from Europe originally appeared on BloggingStocks on Sat, 19 Jul 2008 15:40:00 EST. Please see our terms for use of feeds.