How plans went sour for Ford's turnaround

[Ming]

How plans went sour for Ford's turnaround
Gas prices dent truck sales
July 22, 2006
BY SARAH A. WEBSTER
www.freep.com



As Ford Motor Co. embarks on an effort to revise its 6-month-old turnaround plan, workers, analysts and industry insiders have found themselves asking: How could it go wrong so fast?

But inside Ford, the trouble started as early as April. Ford researchers and executives started to take notice of worrisome trends in the sales of full-size pickups -- trends that would grow alarming in the ensuing months and help convince company leaders that even more belt-tightening would be needed.

"What we saw in the full-size truck segment was very important," George Pipas, Ford's top sales analyst, told the Free Press late Friday.

Just a month ago, Ford proudly stood by its Way Forward turnaround plan -- the effort launched in January that calls for closing 14 plants, eliminating 34,000 jobs and boosting new car and truck sales by 2012.

On June 21, the Dearborn-based automaker invited more than a hundred automotive journalists to its new test track to review the company's 2007 lineup -- including the critical Ford Edge crossover due in showrooms this fall -- and several of Ford's top executives spoke enthusiastically about all of the progress being made.

"We are on track," reported a confident Mark Fields, Ford's executive vice president in charge of fixing operations in North America.

Fields had just finished taping a similar message to employees, and, with confidence in his air, he shrugged off criticisms from outsiders, who felt the plan was moving too slow.

"I don't spend a lot of time worrying about what the outside world thinks," Fields told journalists.

Inside Ford headquarters, though, concern was building that additional cost-cutting might be needed, as gas prices were expediting a consumer shift out of money-making trucks into cars and crossovers.

That concern culminated Thursday, when Ford Chairman and Chief Executive Officer Bill Ford announced that a more aggressive plan would be announced within 60 days. Ford said "everything" is on the table for examination: Plants. Jobs. Buyout programs. Benefits. Even the timetable for previously announced factory idlings.

It's bad news -- but bad news that the company needs to deal with sooner rather than later.

Analysts at Ford began paying particular attention to monthly sales of pickups after industrywide pickup sales fell 6% in April. It was a crucial development.

Gas prices had been higher than consumers liked for more than a year, causing a steady exodus out of SUVs. But for the first time, the data suggested highly profitable pickup sales might be vulnerable, too.

In the past, pickup sales were largely viewed as resistant to increases in gas prices, since most full-size pickup buyers use the vehicle for work on farms and construction sites. But an estimated one-fourth of pickup buyers -- about 600,000 a year -- drive the big, powerful vehicles even though they don't need them.

F-Series sales were still strong, but the model accounts for nearly 30% of the company's total sales in the United States. So if a new trend in pickup sales were under way, Ford wanted to be the first to know -- and react.

One Ford analysis showed that if the new lower level of pickup sales were sustained throughout the year, there would be nearly 350,000 fewer truck sales than two years ago -- a decline that could have perilous ramifications for many truck sellers, including Ford.

When dealers closed the books on May, Ford observed that full-size pickup sales fell nearly twice as much as in the month before -- 11% -- prompting an even closer examination of trade-in data.

Pipas recalls telling Ben Poore, Ford's truck group marketing manager: "We need to get our arms around whether buyers are leaving the segment or delaying purchases."

If consumers were delaying purchases, the problem might not be so bad. But if they were leaving the segment, Ford might have to readjust its plans.

Before the final numbers were in for June, Chairman Ford gave hints that trouble might be in the air and that changes to the Way Forward might be coming.

In an interview with the Free Press on June 20, the day before Fields' speech to the news media, Ford said he was generally pleased with the progress being made at the company.

"But we are dealing with some new realities that have really accelerated since Way Forward was launched, which, by the way, was only back in January," he said.

"But in those months, we have had a mix shift driven by -- principally by -- the price of gasoline, which has not been advantageous to us. And material costs remain stubbornly high. So I want us to have a renewed effort on getting our costs out."

Source / Continued: http://www.freep.com/apps/pbcs.dll/a.../1014/BUSINESS

[steverino]

Ford's problems sound worse than GM. Could be a good investment project for Kerkorian

[poncho1982]

Yeah, let Nissan "Ally" themselves with Ford, and leave GM be.

[Havasavana]

The article says that 25% of pickup sales are to people who don't really need a truck. I wonder if this figure is low. I see a LOT of pickups driving around on Sundays; I think nearly all of those could be replaced by a car. I think a high percentage of true truck needs aren't satisifed by a 1/2 ton. I haven't seen figures on the breakout of truck sales by size (1/2, 3/4, etc.) but it would be interesting. Another interesting figure would be breakouts by sales to business (construction, farming, etc.) vs. personal. The appeal of that boat or fifth-wheel might fade with gas prices as they are.

It'll be interesting to see what GM does with DoD on the 900s. Surely it'll be available on all 5.3L and up as a minimum. But other than DoD, why should be expect GM's experience to be any different than Ford's? New styling appeals to some, but I doubt it carries much weight in business truck sales.

So what trick will Ford pull out of the bag next? A new slogan maybe? Or a new saviour? I think they're in real trouble. I read something yesterday about the Ford family possibly trying to take Ford private. I very much doubt that. Why would they want to do that when they already control 40% of the voting stock with just 4% ownership if I remember correctly? And we complain about GM's board. If Ghosn is as good as he and some others think he is, let him take this one on.

[XCR440SP]

Originally Posted by steverino

Ford's problems sound worse than GM. Could be a good investment project for Kerkorian

He won't mess with Ford, The Ford family's special stock keeps them in control of the company so investors like Kerkorian can't buy shares and then part out the company like he's doing with GM, making it a poor investment for individuals like him.

[triadecho]

Originally Posted by Havasavana

The article says that 25% of pickup sales are to people who don't really need a truck. I wonder if this figure is low. I see a LOT of pickups driving around on Sundays; I think nearly all of those could be replaced by a car.

You have to ask yourself if pickups are sort of a fashion statement or if people really need them. Peek in a few beds during your next trip to the mall and you will find most of them empty.

We tried pickups for in-town delivery and found either the cargo got wet, got damaged sliding around, blew out, was stolen or the driver hurt his back due to the high lift height. Small cars, full size and mini vans provided a better solution for us.

[LAMRONH]

Originally Posted by Havasavana

The article says that 25% of pickup sales are to people who don't really need a truck. I wonder if this figure is low. I see a LOT of pickups driving around on Sundays; I think nearly all of those could be replaced by a car. I think a high percentage of true truck needs aren't satisifed by a 1/2 ton. I haven't seen figures on the breakout of truck sales by size (1/2, 3/4, etc.) but it would be interesting. Another interesting figure would be breakouts by sales to business (construction, farming, etc.) vs. personal. The appeal of that boat or fifth-wheel might fade with gas prices as they are.

It'll be interesting to see what GM does with DoD on the 900s. Surely it'll be available on all 5.3L and up as a minimum. But other than DoD, why should be expect GM's experience to be any different than Ford's? New styling appeals to some, but I doubt it carries much weight in business truck sales.

Many folks in Arkansas drive pikkumupps as the primary "car." I'd guess half the pickups on the road function as cars. The psychology of that appears to be the PUT image, whatever that is, must be maintained despite a gas bill that's half the truck payment. I knew lots of people whose commute was 30-60 miles a day in these 15 MPG "cars."
I'm amazed at the size of vehicles on the lots these days. I was cruising a Ford lot last week, and everything from the pickups to the suvs to the minivans to the Ranger "small" truck is just huge, much larger than ten years ago. Where is a pickup that gets in the 20s on the highway?
How about a half-ton that's modeled on something from the 50s or 60s (again!), that weighs 3500-3800 lbs max, with a 3.8 or 4.0 ohv bumped to 225-240 HP and 240-260 TQ, with the 6-speed trannie or a 6-speed stick and RWD with positraction?
For that matter, someone could build a PUT off a minivan [FLAMES!] platform, but instead of the Ridgeline which is so bulked up it looks like the BBonds of platform sharing, it would have just a king cab and a bed with handy compartments.
Most minivans manage 25 MPG highway, and with less weight and fewer parts this should do better and be cheaper. Of course, it wouldn't be as MANLY as a RWD, but at $3+/gallon, some folks can make the adjustment. My biggest disappointment with the Ridgeline is its huge bulk, that thing's so big it looks like a typical Wal-Mart customer.
Either of these small-PUTs should get at least 25 mpg highway, with the potential for near 30. Give it some aerodynamics and make it less than 6 feet high, and they'll still have enough load-carrying ability for at least half the folks who drive pickups.
The automakers have themselves to blame for this, IMO there is no excuse for a lot full of basic PUTs that all have 14/18 window stickers. They took advantage of the government's truck MPG exceptions, with absolutely no vision regarding the future. These companies have been run by PROFITS-TODAY FOOLS whose idea of long term planning is two years.
The chickens have come home to roost.

[mr_bots]

I do think Ford is in worse shape than GM. Examples of this are in products, Ford just keeps putting new grills on old cars or they leave the same side sheetmetal on supposed "all-new" vehicles (Explorer, Expedition,...).The Edge seems promising and hopefully they won't let it wither like everything else in their line-up. Also, from what I hear from friends and relatives, Ford is on the verge of losing it's F250 and F350 fleet sales due to severe wheel hop on their heavy-duty work trucks that Ford won't fix.

[01cavalier]

Ford does seem worse off in the long run than GM. They really only have a few cars that do well. Depending on the trucks so much seems to have a lack of foresight. Still, at least they realize where they went wrong in the turnaround plans and will change as they need to.

[TiburonJT]

Originally Posted by LAMRONH

I was cruising a Ford lot last week, and everything from the pickups to the suvs to the minivans to the Ranger "small" truck is just huge, much larger than ten years ago. Where is a pickup that gets in the 20s on the highway?
[/b]

The Ranger hasn't grown in 13 years (same size since 1993), but I agree with you that nearly all vehicles that are redesigned are getting bigger. The Ranger seems to be the only true compact truck left, although the Colorado is smaller than a lot of the midsize competition IIRC.

As for mileage, the 4 cylinders in the Colorado and Ranger get good mileage. I get 24 in the city in my Ranger and 28/29 on the highway. However, most trucks don't get nearly as good mileage like you said. Even the mileage I get will not be enough if I have to drive a lot, but at this point it is okay. My next vehicle will probably be much more fuel efficient.

[igor]

Product wise - Ford is really only about 2 years behind GM - Yes, GM had a renewal of models recently, but with few exceptions, the new models are nothing spectacular ... the Cobalt platform is mediocre, most current Epsylon sedans are also mediocre or worse - etc. Now GM has near term product releases that will really target the tops of the class.

the difference in Ford is that they didn't have this middle step with all vehicles - they have Fusion and Five Hundred - in this stage, but the rest they simply left old - however they have the same wave of very good new products coming starting in 15 months.

Saleswise, Ford is doing better than GM overall ... GM has been greatly falling on salescharts across the board, and the 60 000 unit reduction of fleet sales (too small IMO) cannot account for all the loss... Ford on the other hand, while falling in trucks has been doing very well in cars - and the cars pulling the sales - Fusion trio, Five Hundred trio and Mustang are all new and all have sub 15% fleet sales (of course mainly thanks to the 100% fleet Taurus).

Ford is in a tough spot - but for now, I hink they are doing well - the ability to say "we were wrong" only 6 months after announcing Way Forward is sight unseen ... to me it shows they really are constantly working with their plans and adjusting them to make sure they succeed ....

Anyways - this is interesting development - and it has potential for being very good .... though it does also have potential to not be as good ... we shall see when it is announced, what they will say.

Igor

[steinravnik]

But an estimated one-fourth of pickup buyers -- about 600,000 a year -- drive the big, powerful vehicles even though they don't need them.

Well, Toyota and Nissan and especially Honda really ought to be worried then. Because almost no one buys one of their trucks for work.

[cfch3399]

They are a fashion statement and appeal to people's huge egos.
Giant ego-giant house-giant truck/SUV.

Originally Posted by triadecho

You have to ask yourself if pickups are sort of a fashion statement or if people really need them. Peek in a few beds during your next trip to the mall and you will find most of them empty.

We tried pickups for in-town delivery and found either the cargo got wet, got damaged sliding around, blew out, was stolen or the driver hurt his back due to the high lift height. Small cars, full size and mini vans provided a better solution for us.

[LAMRONH]

Originally Posted by cfch3399

They are a fashion statement and appeal to people's huge egos.
Giant ego-giant house-giant truck/SUV.

Giant kadoodlehopper, giant kids, giant stretch pants, giant Wal Mart shoppers, giant big gulp.
NOW I SEE!

[LAMRONH]

Originally Posted by TiburonJT

The Ranger hasn't grown in 13 years (same size since 1993), but I agree with you that nearly all vehicles that are redesigned are getting bigger. The Ranger seems to be the only true compact truck left, although the Colorado is smaller than a lot of the midsize competition IIRC.

As for mileage, the 4 cylinders in the Colorado and Ranger get good mileage. I get 24 in the city in my Ranger and 28/29 on the highway. However, most trucks don't get nearly as good mileage like you said. Even the mileage I get will not be enough if I have to drive a lot, but at this point it is okay. My next vehicle will probably be much more fuel efficient.

I stand corrected, I don't really stay up to date on that segment. Glad to hear about your MPGs. I'll have to check the Ford and GM small truck sites. When I was overseas in '91, there were zillions of four-door Datsun & Toyoter PUTs everywhere. That's when the Japanese trucks were small like their small cars, those little PUTs looked very handy with their 4' (?) beds and 4-5 passenger capacity. Never saw them over here.