Ford fights to save future

[Arizona Slim]

With troubles mounting, Bill Ford Jr. has launched his second major turnaround plan in four years. The stakes are higher than ever.

By Eric Mayne / The Detroit News








For the second time in his tumultuous four-year tenure as Ford Motor Co.'s chief executive, Bill Ford Jr. has ordered a major downsizing of the dynasty started by his great-grandfather Henry Ford 102 years ago.

Brutal competition, staggering health care and pension obligations and an unrelenting market share slide have left the affable 48-year-old with little choice but to impose harsh cost-cutting measures across Ford's North American operations.

In recent weeks, the automaker has announced plans to cut more full-time salaried workers and scale back benefits. More is coming by the end of the year. "Nothing is off the table," Chief Financial Officer Don Leclair told analysts last month after detailing dismal second-quarter earnings.

Twice since June, Bill Ford has called about 20 top executives to offsite meetings to rethink the automaker's future, a high-ranking company source told The Detroit News. Leading the frank talks, Bill Ford asked executives to imagine themselves as outside investors and assess the company. Where are the opportunities for growth? Which businesses are losers that should be shuttered?

In other meetings across the company in recent weeks, top managers have been preparing employees for painful measures. Job reduction in some departments could reach 30 percent, but it is unlikely Ford will downsize that extensively across the board.

But the goal is to cut deep enough to ensure Ford's long-term survival and head off the need for more restructuring in years to come.

Company sources say Ford's plan is to negotiate the closure of several North American assembly plants to bring manufacturing capacity in line with lower sales.

Bill Ford has been through this before. In January 2002, he announced plans to cut 21,000 jobs, shutter some assembly and parts plants, and eliminate unprofitable car and truck models to stem losses totaling $6 billion in 2001 and 2002.

Leaner and more focused, Ford became profitable again and earned a combined $4 billion in 2003 and 2004.

But despite improvement in volatile markets such as South America, and signs of recovery by the Premier Automotive Group -- its collection of European luxury brands -- Ford's core North American auto business has suddenly veered off course this year.


Hit from all sides

Ford has been lashed by the same headwinds facing rival General Motors Corp. and the rest of the U.S. auto industry.

Competition is greater than ever from foreign automakers. Rising gasoline prices have curtailed demand for profitable SUVs. Steel prices have skyrocketed. And health care costs keep rising with no end in sight.

The bottom line: Ford's North American auto operations posted a $907 million pre-tax loss in the second quarter, a swing of $1.4 billion from a year ago.

Bill Ford has abandoned his goal of generating $7 billion in annual pre-tax income by 2006. Its credit rating is at junk-bond levels.

More worrisome, in a robust sales climate Ford's U.S. market share has fallen below 18 percent -- down from 26.4 percent a decade ago -- despite near-record incentives. And with investors hammering its stock -- its shares have lost 83 percent of their value since 1999 -- the company has stopped estimating how it will fare financially from quarter to quarter.

"Bill has probably signed on to a situation that has proven to be much more difficult than anybody could have imagined," said veteran auto industry analyst Maryann Keller. "This is a company with a cost structure that reflects a market condition and market share that doesn't exist anymore. (The cuts) have to be big."

With his family's legacy and his professional reputation hanging in the balance, Bill Ford has a small window of opportunity to pull off a difficult repair job.



Protector of legacy

At most other public companies, a CEO in his position would be fretting over job security. But the extended Ford family controls the automaker through a special class of stock and has never flagged in its support of Bill Ford.

He frequently speaks of the tremendous sense of responsibility, even burden, he feels to preserve Ford for future generations.

"To me, this isn't a job," Bill Ford said in a speech last year. "It is my heritage and my children's future."

But protecting that future means taking a cold-eyed approach to downsizing Ford -- again.

The automaker is undertaking an intense review of operations staffed by salaried workers -- particularly in areas such as public relations, human resources, information technology and legal services. Top managers have been asked to identify operations or functions that aren't critical to the company, according to Ford sources familiar with the plans.

Ford managers expect significant cuts in Ford's sales and marketing operations. One idea on the table is to merge the back-office and regional operations of the Ford and Lincoln Mercury divisions.

Since spring, Ford has cut 1,100 white-collar positions -- mostly through buyouts and early retirements -- in addition to 10 percent of its contract employees. And the automaker has pledged to cut an additional 1,750 salaried personnel -- 5 percent of the 35,000 white-collar workers employed by its North American automotive operations -- by Oct. 1.

The first involuntary layoffs hit Ford's public relations staff last month after the company received a tepid response to buyout offers.

Continued...
http://www.detnews.com/2005/autosins...A01-272014.htm

[Ming]

Ford USA's biggest problem is that it is no longer a brand that inspires people to go down to a dealership and "buy a Ford". They'll buy individual models, sure, but Ford just doesn't have the vital brand power of Toyohondassan - more like a geriatric Hercules, they flex their muscle every now and then and keep the Ford die-hards on board while slowly losing market share. The brand name has been tarnished, in my opinion, but a ploddingly slow product refresh cycle fueled by a beancounter mentality that keeps cars like the Focus on an older platform while the European Focus moves onward.

If you don't invest in your brand, why should the public?

Why should people be expected to buy Crown Vics, Rangers, and Focii when they don't get the complete redesigns or major refreshes on the 4 year schedule they deserve? Nissan's recent success is built on product investment and a product overhaul. Ford had a good thing with the Taurus and Focus, but made the choice to blow it by not keeping redesign pace with the Japanese. GM has its share of mistakes like this, but Ford's arrogance that it is going to survive on its brand name recognition without investing in keeping its product constantly NEW - is astonishing.

And some of Ford's recent attempts, like the 500 and Freestyle have been so bland...it leads me to think again that Ford thinks all it needs is a solid product and people will come flocking back to the brand. Why should they when they've seen how Ford treats most of its models, with entusiasm are first, and then gradually moving them into rental duty and bargain bin specials, ala Taurus?

The Japanese have long term, untarnished model names like Camry because they know what constant investment and improvement means. Ford doesn't, as it proved when it decided not to put its Focus on a new platform and keep it as competitive as possible, and when it decided to let the Taurus languish.

I have hope that new Ford product like the Fusion will help, but like the Focus and Taurus before it, will Ford let the Fusion go for 7 or 8 years without a complete redesign? That won't cut it anymore.

[Cortazzo]

There was an analysis a few weeks ago that opined that the US market could soon resemble Europe, where there are no dominant firms, but many firms with nearly equal market share, this could soon be a reality for us.

When you think about it, regional size isn't a benefit anymore (as opposed to global size). The most successful firms are the smaller ones, take Nissan for example. Their operations are lean and efficient, and they are small enough that they can use only a few engines and platforms to supply their entire line of products.

When you look at Ford, not even their modular v8 engines are the same, they change from model to model and depending on what factory they are built in. So they don't get the full potential of scale that they could...

[DirtyMoney]

What is Mercury?? Really??

[Cortazzo]

I agree with you Ming, even when ford and lincoln have revised their products, the restyling looks exactly like the previous design. I think J Mays is to blame and should be shown the door. The Town Car, LS, Crown Vic, Explorer (twice), Expedition, Jaguar XJ, Taurus, Focus are all models that have been redesigned significantly under the skin, but the design was nearly identical to the outgoing model. No other company in our market had their redesigns that were irrecongizable to most customers.

[awalbert88]

Originally Posted by Ming

Ford USA's biggest problem is that it is no longer a brand that inspires people to go down to a dealership and "buy a Ford". They'll buy individual models, sure, but Ford just doesn't have the vital brand power of Toyohondassan - more like a geriatric Hercules, they flex their muscle every now and then and keep the Ford die-hards on board while slowly losing market share. The brand name has been tarnished, in my opinion, but a ploddingly slow product refresh cycle fueled by a beancounter mentality that keeps cars like the Focus on an older platform while the European Focus moves onward.

If you don't invest in your brand, why should the public?

Why should people be expected to buy Crown Vics, Rangers, and Focii when they don't get the complete redesigns or major refreshes on the 4 year schedule they deserve? Nissan's recent success is built on product investment and a product overhaul. Ford had a good thing with the Taurus and Focus, but made the choice to blow it by not keeping redesign pace with the Japanese. GM has its share of mistakes like this, but Ford's arrogance that it is going to survive on its brand name recognition without investing in keeping its product constantly NEW - is astonishing.

And some of Ford's recent attempts, like the 500 and Freestyle have been so bland...it leads me to think again that Ford thinks all it needs is a solid product and people will come flocking back to the brand. Why should they when they've seen how Ford treats most of its models, with entusiasm are first, and then gradually moving them into rental duty and bargain bin specials, ala Taurus?

The Japanese have long term, untarnished model names like Camry because they know what constant investment and improvement means. Ford doesn't, as it proved when it decided not to put its Focus on a new platform and keep it as competitive as possible, and when it decided to let the Taurus languish.

I have hope that new Ford product like the Fusion will help, but like the Focus and Taurus before it, will Ford let the Fusion go for 7 or 8 years without a complete redesign? That won't cut it anymore.

If you've been paying attention, you'll see that Ford intends to update the Five Hundred in a couple of years, and the Explorer has been getting updates every 3-4 years. Although the Focus hasn't gotten major updates, it is not being left to rot like the Taurus, Ranger, and Crown Victoria. The Mustang is getting regular updates (a 2007 refresh is planned), and I have no reason to doubt that the Fusion will also be getting these kind of updates. The F-150 is still highly competitive, but the SuperDuty is being updated again, so I expect the rest of the lineup to be refreshed again. I'm not at all worried about Ford's car, truck or SUV lineup outside of the compact pickups. The Ranger is outdated and pathetic right now, and no replacement or update has been shown or talked about.

More cost-cutting is needed to lean out the company from the monolith it became under Nasser in the 90's. I applaud Bill Ford for having the guts to stand up and do at Ford what so many of us have said needs to happen at GM.

[Kar Krazie]

They need to cut Lincoln and Mercury. They are nothing but 2 brands of rebadges. Just like GMC, a brand of rebadges.

[surferdude00711]

Originally Posted by Kar Krazie

They need to cut Lincoln and Mercury. They are nothing but 2 brands of rebadges. Just like GMC, a brand of rebadges.

It's pathetic. I wrote a piece about it recently:
Ford's Continuing Rebadging Debauchery; Buick and Cadillac School Mercury and Lincoln

[jokuvaan]

Bye bye Ford

[SobeSVT]

Originally Posted by jokuvaan

Bye bye Ford

You mean bye, bye America . . . GM is in a much worse and compromised position.

[mjd1001]

Ford suffers, obviously, from mostly the same issues as GM, but in some cases even worse. Product seems to be more of an issue for them:

-Mustang is selling well now, but how often is it redesigned? Every 8-10 years?

-When was the last time the Crown Vic was refreshed in a noticable way, let alone redesigned?

-Where is Ford's mid sized rear wheel driver performance coupe? We all seem to fret here that the GTO isn't enough, and the Monte Carlo is not RWD, but that at least beats ford (I'm going on the assumption the Mustang is a class in size small, more comparable to a Camaro, not a Monte Carlo).

-The Ranger? I don't even think I need to say anythign at all about how fresh that is.

-The F150 is probably their best vehicle, but it is in now one of the most competitive classes...where a full size truck one year is outdated the next when the competitors come out with new designs.

-The Focus is certainly not new anymore, nor exciting.

-As others have mentioned above...Mercury and Lincoln are almost not even on the map of most consumers.

At least GM is making an attempt to update their product. Where is Fords 'Sky or Solstice'? Where is their G6 GTP? Where are their engines with DOD? Where is their 'HHR'. What Ford has is the Fusion and 500, cars that will appeal to some but certainly not generate any kind of long term buzz or excitment.

[ghughes]

If I was king Id play by Japans rules - merge ford and gm and use govt debt to take care of their pension and health care liabilities - all of our trading partners could like it or lump it- we need to secure this last sliver of us manufcturing if for no other reason than defense -

[Cassie]

Ford's bold P.R. move of the 100 year anniversary was a huge dud, they have gotten a lot of egg on there faces... the Ford GT has been a huge lemon. The have no product that is a huge "must have hot item", most of the current designs are super bland. (not counting the Mustang, which is indeed a huge hit right now) GM seems to have a sense of coming out of the corner swinging right now that Ford could really use as well.... you know my fav Ford of the last 20 years? The Taurus SHO :-) Ford should start thinking of pulling some of those awesome Aussie and Euro Ford's to the US.

[PeterPuck]

I wonder Bill Ford will soon have pompous hotshots blaming him for cutting brands and jobs, and reducing marketshare, while claiming that he has never made a single good leadership decision.

I can envision a "Mercman" arising to "save the day"...

[genjy]

I think Ford makes very sensible and "safe" products that usually aren't flop-baits. Except for the recent Thunderbird, most modern Fords seem to be well-received. I don't really see Ford going bye bye anytime soon as long as it keep its mainstream stuff conservative and its performance stuff competitive. It doesn't need a major overhaul like Nissan, at least.