Ford today gave warning that the high oil price and anxieties about the US economy would plunge the carmaker even further into the red as it cuts production by a quarter.

The Detroit-based company said that demand for the iconic Ford pick-up truck and people carriers, known as sports utility vehicles, had fallen as motorists struggled to cope with the $4 a gallon price of gasoline.

Shares in Ford plunged 7 per cent on Wall Street to a near all-time low.

The company said its financial performance for 2008 will be worse than 2007 when it reported a loss of $2.7 billion (£1.3 billion). It also said that it would struggle to break even on an operating basis in 2009.

Ford is planning to reduce costs by slashing production during the third quarter of the year by 50,000 vehicles to 475,000. That cut represents a 25 per cent fall in production compared with last year. As part of the reductions, Ford said that it will delay rolling out its new F-150 pick-up truck by two months in a move that will make some workers redundant from its Kansas manufacturing plant.

The Ford 150 truck, which dates back to the 1930s, has been the company's bestselling vehicle and its most profitable. The truck was designed during the Depression for families who could not afford a car and a farm truck, so the 150 was a version of the two, pushed together.

Fears that the US is facing a severe recession, coupled with rising food prices and the record cost of gasoline, have led to Ford reducing its forecast for total car sales across the country. It had estimated that Americans would buy around 15.4 million new cars in 2008, but today revised that forecast to between 14.7 million and 15.2 million.

The company said that it will try and boost the manufacture of smaller, more fuel-efficient cars, such as the Ford Focus, the Mercury Mariner and the Ford Escape.

Alan Mulally, chief executive of Ford, said in a statement: "We view the move to smaller, more fuel-efficient vehicles as permanent, and we are responding to customer demand. For the long term, we are moving fast to introduce more small cars, crossovers and fuel-efficient powertrains — including more hybrids — and we will adjust our manufacturing facilities to match our updated product line-up.”

Earlier this week, Kirk Kerkorian, the billionaire activist shareholder, raised his stake in Ford to 6.49 per cent, up from 5.5 per cent. He increased his holding after a meeting with Mr Mulally and Bill Ford, the chairman, about the board's turnaround plan for the carmaker.

When Tracinda, the investment vehicle of Mr Kerkorian, owned 9.9 per cent of General Motors (GM) in February 2006, Jerome York, Mr Kerkorian's adviser and former chief financial officer of Chrysler, was elected to GM's board. It is not known whether Mr Kerkorian is seeking a seat on the Ford board.

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