Ford - in the process of selling Land Rover and Jaguar to Indian group Tata - has seen its first major setback under new chief executive Alan Mulally - forced to abandon its latest profit target.
It has put questionmarks under the Mulally turnaround and whether the promising start in sorting the ailing carmaker is already running out of speed.
Ford said rising prices for commodities, particularly steel, and an accelerating consumer shift from larger trucks and sport utility vehicles would make it impossible to meet the key milestone of areturn to profitability next year in its efforts to turn around its loss-making North American operations.
Mr Mulally said the No. 2 US auto-maker now expects to be "about break-even" then, on a pretax basis and before special items, with strong results from Europe and South America.
"Unless there is a fairly rapid turnaround in US business conditions, which we are not anticipating, it now looks like it will take longer than expected to achieve our North American automotive profitability goal," Mr Mulally said.
The lowered profit forecast could bring new pressure and investor scrutiny on Ford management at a time when billionaire investor Kirk Kerkorian is tendering to buy more of the automaker's shares.
Mr Kerkorian's investment company, Tracinda, said in late April that it had acquired 100 million Ford shares and planned to buy more, raising his stake to almost six per cent.
Ford said it now expects to cut second-quarter North American production by another three per cent beyond the production cuts it had already announced. It ex-pects to produce 690,000 vehicles in the second quarter, down 15 per cent from 2007 levels.
Third-quarter production will be down between 15 per cent and 20 per cent from a year earlier at between 510,000 and 540,000 vehicles.
Mr Mulally was brought in to save Ford in 2006.
Analysts said the weaker outlook showed Ford's recent gains had been overrun by the weakening US economy.
"This is an embrace of reality," said Pete Hastings, a corporate bond analyst at Morgan Keegan. "The market's very soft, and they can't get the cost savings they need."
Ford's warning marked the second time in 20 months that it has had to scale back expectations for its return to profitability, the ultimate milestone under restructuring plans first launched seven years ago.
Just before Mr Mulally was hired from Boeing, Ford had been projecting a profit in 2008 but the company pushed that forecast back by a year when it announced a stepped-up restructuring plan and suspended dividends in September 2006.
Ford, which has lost more than $15 billion (£7.58 billion) over the past two years, has spun off luxury brands Aston Martin, Jaguar and Land Rover to raise cash - the JLR deal is due to complete next month. It has also bought out more than 38,000 union-represented US workers, slashed cut-rate sales to car rental agencies and pushed to unify its global vehicle development in an effort to cut costs and boost margins.
Analysts had seen Ford as running ahead of its domestic rivals General Motors and Chrysler after it posted a surprise $100 million (£50.5 million) first quarter profit.
But last week's announcement, which followed similar profit warnings from Toyota and Nissan, showed the deepening pressure across an industry strained by overcapacity, analysts said.
"I don't think this is a surprise to anyone given the economic conditions. The question everyone has is what is the depth and the timetable of the recessionary conditions," said Fitch Ratings managing director Mark Oline.
Mr Mulally said Ford would detail steps to cut more jobs and push faster into the market for smaller and more fuel-efficient cars in July. He told employees that Ford expected to complete most of the job cuts by August 1, and the reductions would include hourly and salaried employees.
The lowered profit forecast will be a poser for Mr Kerkorian.
Tracinda has offered to buy up to 20 million shares of Ford at $8.50 -almost 19 per cent above the market rate - in a tender offer that expires on June 9.
Ford's board has said it would remain neutral on the offer.
Analysts and investors have wondered whether Ford would move faster to sell remaining assets if its restructuring faltered. Among the largest of those is Swedish carmaker Volvo, where Ford has said it is working to improve results.
Ford's US sales dropped almost 10 per cent in April. Sales of its F-Series pickup trucks have fallen 15 per cent, hit by slower housing construction and higher petrol prices.
The Ford trucks have been the best-selling vehicles in the US market for over 20 years, and the light-truck segment had been Ford's most lucrative before the recent slump.
US auto sales are on track to drop by about one million vehicles, or about seven per cent, from a 2007 total near 16.1 million vehicles that many in the industry inaccurately read as the low point of the current downturn.
"The recovery will be alittle bit longer and a little bit slower," Mr Mulally said. "Clearly it's going to be slower than we've all thought."
Mr Kerkorian, aged 90, previously held a nearly 10 per cent stake in General Motors and made afailed bid for Chrysler -now owned by private equity firm Cerberus Capital Management - last year.
Analysts have been speculating on what his "end-game" would be for the investment and whether he would push for additional asset sales by Ford.
Tracinda said in April it had been following Ford with interest since the start of the year and had noted the surprise first-quarter profit.
It said it believed that Ford management would continue to show significant improvements in financial results.
Ford said the Kerkorian investment represented an endorsement of its strategy.
The Ford family controls almost 40 per cent of the voting power through a separate class of shares established when the company went public in 1956.
An offer by Mr Kerkorian to buy out the Ford family and an eventual merger with an other international automaker would be "intriguing" but seemed unlikely, Calyon Securities analyst Mark Warnsman said in a note for clients.
"We sense that Mulally's relationship with Kerkorian is, at least for now, fairly cooperative," added JP Morgan analyst Himanshu Patel.
Bear Stearns analyst Peter Nesvold said the action was reminiscent of Tracinda's initial investment in GM, which was considered passive at first. But he said there was less opportunity for Mr Kerkorian to agitate for changes at Ford because the automaker is further along in its restructuring.
Peter Morici, a University of Maryland economist and a critic of the strategic thinking in Detroit, questioned whether the crisis had fully sunk in, even now.
"It is a question in my mind whether Chrysler and Ford will both be around and Idon't know that management at either place has fully reckoned with that reality and built that into their thinking - that they are really in a survival mode, not a fix mode," Mr Morici said.
Robert Streda, an analyst with credit rating agency DBRS, added: "All this boils down to can they survive the next 18 months to 24 months. I think they have enough liquidity to get through, unless the US market falls down a lot farther than it already has, and I would see that as being unlikely."