Ford Tough Situation

[doh]

http://biz.yahoo.com/minyanville/080...h_id.html?.v=1

Domestic automaker Ford (F) is in a Ford Tough situation. The Federal Reserve has signaled that it's unlikely to cut interest rates further, consumer spending has slowed, gas prices are at an all-time high and there are concerns that demand for trucks, SUVs and other large vehicles the company's known for will wane. So, how does Ford answer these threats? Job cuts.

According to Reuters, “Ford will cut expenses for its white-collar work force by 15 percent over the next two months through job cuts, attrition and other actions.”


To be fair, job cuts aren’t the only thing Ford's doing to hunker down during these trying times. It’s management team has been working like the dickens to trim fat wherever it can and has also announced plans "to cut production by 15% in the second quarter, 15% to 20% in the third quarter and 2% to 8% in the fourth quarter,” according to the Associated Press.


There's more. Just four days ago, the company completed the sale of its Land Rover and Jaguar brands to Tata Motors, a move that reportedly put $1.8 billion in its pocket.


In spite of such aggressive action, there's little sense that management's going to get to holster its surgical scalpel anytime soon: There are often upfront severance costs that must be paid to employees that are let go (especially the white-collar crew). This could translate into future charge-offs against earnings and push profits back even further.


Why the skepticisim? Simple. Beyond the macroeconomic concerns cited above, the company has whipped out the knife several times over the last few years and still oozed an awful lot of red ink (much like an old oil-dirpping Bronco I used to have when I was a teenager).


About 38,000 emoloyees have left Ford through buyout programs and the company has reportedly cut off the ties of about 11,000 more since 2005. Given that Ford is expected to lose a hefty $0.50 per share this year and profits going forward are a big question mark, even more cost-cutting could be coming down the pike.


Still, there are those out there that say Ford, which trades at about two times book value and at rougly 0.08 times sales, is a bargain, and that sooner or later it's going to come back. And there's a chance they're right. I think we all want to believe that because, let's face it, Ford's as true blue American as it gets (to be fair, chief U.S. competitor General Motors (GM) is struggling as well). However, with about $169.2 billion in debt and its bread and butter North American business in a state of decay -- in May, overall North American sales were down 15.8% and its once-popular F-Series trucks witnessed a 30.6% decline -- Ford deserves to trade in the single digits.

[likearock00]

AHHHHH! Ford's gonna go under!! Everybody run!

Their cars are doing pretty well, and globally they're pretty healthy. I'm not too worried about Ford just yet. This guy needed an article before deadline and Ford was easy prey today.

[PA Dweller]

I see plenty of Fusions, and Edges. The MKS looks awesome, Ford's reliability and quality is way up, and Ford is going to have some of the best small cars in another year or two. Right now things seem bad, but in the long term I feel things will improve for Ford in North America.

[JBsZ06]

The mondeo and the upcoming taurus offshoot in the next year or so..... are hot.

Mustang and the Verve was sharp at the show..

Ford needs to bring the verve in just as it sat at this years autoshow..

That was one hot looking sedan.

[blank disk]

I see sales in trucks picking up significantly soon. Trucks are not done. Especially with their new truck coming soon and the housing market no longer choked off. It is all cyclical, nothing more. And if gas settles down after July 4th a bit, then all the better. Will they ever sell as well as they once did? Not until the F-100 comes out and is much more fuel efficient.

Ford is just fine.

[Bravada]

(much like an old oil-dirpping Bronco I used to have when I was a teenager)

If that's the reason you doubt Ford will be OK, dear author, I think I smell "b", and it's a four-letter "b", not the other one

ANYHOO

Why I am still worried about Ford is that cost-cutting and selling subsidiaries doesn't alleviate Ford's largest problem - too many vice-presidents, divisions and all, allowing for corporate infighting, too many sacred cows (protected by the magical "Ford" name), too much focus on North America as a market treated totally separately. Even GM seems to operate more globally.

[tgagneguam]

Domestic automaker Ford (F) is in a Ford Tough situation. The Federal Reserve has signaled that it's unlikely to cut interest rates further, consumer spending has slowed, gas prices are at an all-time high and there are concerns that demand for trucks, SUVs and other large vehicles the company's known for will wane. So, how does Ford answer these threats? Job cuts...

Why the skepticisim? Simple. Beyond the macroeconomic concerns cited above, the company has whipped out the knife several times over the last few years and still oozed an awful lot of red ink (much like an old oil-dirpping Bronco I used to have when I was a teenager).

Yup. They've followed the surgeon's rule of treatment-"to cut is to cure"-for too long. Ford, and all of Detroit, needs a new game plan.

[wescoent]

Originally Posted by Bravada

If that's the reason you doubt Ford will be OK, dear author, I think I smell "b", and it's a four-letter "b", not the other one

ANYHOO

Why I am still worried about Ford is that cost-cutting and selling subsidiaries doesn't alleviate Ford's largest problem - too many vice-presidents, divisions and all, allowing for corporate infighting, too many sacred cows (protected by the magical "Ford" name), too much focus on North America as a market treated totally separately. Even GM seems to operate more globally.

Well, so far, it appears Mullally gets it. His primary goal at the moment is to merge Ford's global operations into a single company, and unify the global Ford brand. Sacred cows don't matter if you're owned by the bank.

Ford is reacting to the current problems by doing exactly what it planned to do 2 years ago... bring out smaller and more fuel-efficient vehicles. The unification of C2 and B2 around the world in the next year or so will allow US Ford dealers to carry a much wider range of vehicles with common parts, and allow US factories to build more vehicles that in the past, they would have needed to import at a massive loss.

Ford isn't in great shape, but they're in better shape than they've been in years, and I feel their stock is significantly undervalued, even with the risk.

[lio45]

Originally Posted by doh

Domestic automaker Ford (F) is in a Ford Tough situation.

Meanwhile, Chevy sales are in a "like a rock" situation.

[kgm777]

Gee, first it was GM that was on the precipice, then it was Ford, and finally Chrysler had its chance. Then the order changed, changed again, and changed again. Come on "newsies" and "analysts," spare us the B.S. as most of us don't read the National Enquirer and don't want to.

[vcs2600]

Ford has a pretty good product lineup ... that nobody is buying.

I can't explain how ye olde Impala is kicking the Taurus' butt, nor how even the Pontiac G6 outsells the Fusion. But the Edge is doing OK.

Consumers must have it wired in their brain that "Ford=Trucks/SUVs Only". Maybe Ford is just one good advertising campaign away from breaking out in the auto market.

[BrickTamland]

Originally Posted by Yahoo

There are concerns that demand for trucks, SUVs and other large vehicles the company's known for will wane.

Umm..Ya think so? They already have waned. They have been waning for a while.

[PA Dweller]

Originally Posted by vcs2600

Ford has a pretty good product lineup ... that nobody is buying.

I can't explain how ye olde Impala is kicking the Taurus' butt, nor how even the Pontiac G6 outsells the Fusion. But the Edge is doing OK.

Consumers must have it wired in their brain that "Ford=Trucks/SUVs Only". Maybe Ford is just one good advertising campaign away from breaking out in the auto market.

Its almost hard to beleive, I see the Fusion's, Focus's, and Edge's on the road all the time. I only see a few Taurus per week, however.