Ford Death Watch 3: With Friends Like These…
It’s been said that walking on quicksand with helium balloons will keep you from going under. Now that The Blue Oval has finally realized that the sands have shifted beneath its feet, there are plenty of people selling the automaker balloons. The United Auto Workers (UAW) has publicly pledged to help Billy’s Ford’s boys “any way they can.” Michigan Governor Jennifer Granholm has proclaimed her willingness to sacrifice voters’ taxes to keep the Wolverine State’s assembly lines rolling. At the same time, Ford is contemplating radical solutions: cutting dealers, selling assets, forming alliances. Is Ford finding buoyancy or grasping at straws?
The UAW’s Koala Brothers’ announcement (“We’re here to help!”) stems from a general acknowledgement that Ford’s Way Forward has lost traction– if indeed it ever had any. At the same time, the union’s faux altruism seeks to overturn the common perception that “if you’re not part of the problem, you’re not part of the UAW.” To that end, Ford Division UAW Vice President Bob King recently signaled that Ford’s talk of inter-company alliances and another round of worker buyouts would “not be out of the question” provided they ensure “mutual survival.”
Of course, King’s statement reveals the obvious (if overlooked) fact that the UAW would have to approve any hook-up between Ford and another automaker. Which they would– provided Ford’s new partner agrees to maintain current salaries, pensions, working practices and benefits. (File that one under “Not Very Likely.”) As for the UAW’s willingness to accept further blue collar buyouts, the UAW’s members have a history of “helping” Ford by taking money for not working. Perhaps Mr. King would like to extend his assistance to closing Ford’s infamous, expensive and still not fully disclosed “jobs bank.”
In short, don’t look for the UAW to make any bold moves (a.k.a. “historic givebacks”) beyond pocketing Mr. Ford’s cash to leave the building. Why would they? Ford’s buyout offers only extend to high-seniority workers. Workers without a parachute won't entertain “short term” cuts to their compensation knowing that a new four-year contract with The Big Two Point Five is under negotiation for fall ’07.
Michigan Governor Jennifer Granholm’s relief plan is also a lot less than it seems– but in a nice way. Gov. Granholm and Michigan Economic Development Corporation (MEDC) President and CEO James Epolito want to save 56k Ford jobs (their estimate) by granting FoMoCo $151m worth of tax credits. Ford’s part of the bargain: invest a billion dollars in its Michigan facilities over the next 20 years. A billion bucks shared amongst nine major facilities is a laughably small amount. Unless Ford’s pulls the plug, the company will invest that much money in its Michigan plants as a normal part of doing business. When that inconvenient truth emerged, Granholm’s plan submerged, taking a lot of good will towards Ford with it.
And then there’s the real deal: Ford’s plan to trim its 4300 member dealer network. According to press reports, metropolitan dealers in 18 urban areas will close or merge with successful locales to streamline sales, increase margins and free-up overhead. This is a much needed, long overdue move; Detroit is home to 31 Ford peddlers and 14 Lincoln floggers. But the maneuver’s mechanics are murky. Ford spinmeister Jim Cain claimed "It's totally voluntary… We'll handle this in private and in a very collaborative way." Voluntary? Private? Collaborative? That sounds an awful lot like "cha-ching" to me.
Just like Ford’s plan to slice 30k jobs and close 14 plants, the dealer downsizing program will not be cheap. But hey, you gotta spend money to save money. As Ford has already dropped $10b on Jaguar, many have come to believe that selling the British brand will be Ford’s next great leap forward. Despite last week’s frantic comments by Ford CEO Mark Fields– “We will sell the furniture if it helps fund new products”– Ford’s not going to not let the Cat out of the PAG. As revealed on a recent TTAC podcast, Ford’s brand management has rendered Jaguar virtually worthless. They’d have to give it away. So Ford’s decided to [re]reposition Jaguar as a “niche” luxury brand, to give Jaguar buyers more of what they love: Ford Five Hundred switchgear.
Seriously, there is no newfound cash flow at FoMoCo, nor is there likely to be any in the near future. If things get bad, Ford will sell Volvo and team-up with anyone with deep enough pockets to bail it out. But we’re not there… yet.
President Kennedy once said “The great enemy of the truth is very often not the lie–deliberate, contrived, and dishonest— but the myth– persistent, persuasive, and realistic”. The myth is that Ford is a can-do company can turn itself by sheer force of will. The truth is that Ford is at least three years too late and a few billion dollars short, wearing a union-made straight jacket, slowly sinking into bankruptcy.
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The J.D. Powers survery is based on owner opinions but I want something based on actual repair statistics. The way I see it is different brands, different vehicle prices appeal to different demographics and those different demographics have different expectations, and often take care of their cars differently. I don't fit the typical consumer demographics very well and my cars always preform (last) better than the average example. I take care of my cars way better than the just get in and turn the key crowd. While the JD Powers survey are great if you are a Lexus, if you are a number of other brands, you could be getting an unfair rap. Buicks - great ratings but consider who buys them (retired crew). What do they do with them? Travel, run back and forth to the store or church. No stress for the car. No racing. No hauling. VW - Driven hard because "they are German". Riiight. VWs break too. I see two types of VW drivers - the hard driving street racers and the type that just turns the key and goes. When it breaks off to the shop it goes. Hopefully the shop has fair prices, honest mechanics. If the driver knows nothing about cars they have to rely on the honesty of the mechanic. Every little thing that goes wrong - be it a fuse or a belt requires a trip to the mechanic. Maybe there is another demographic that deals with these little things themselves. Would that group reply that their car was more reliable than the 24 yr old VW driver that totally relys on the mechanic to replace even light bulbs? I think so. I think the JD Powers surveys tell you as much about the owners as the cars they drive. Find an expensive car with a low rating and open a specialty shop to service those cars. You'll get car ignorant owners (people who are smart but know nothing about cars) and cars which MAY or MAY NOT break often to repair. Maybe the car breaks becuase it has low quality parts or designs. Maybe it breaks because the owners don't know how to drive a car so it lasts!!! I own 3 VWs. Excellent cars, excellent prices if you know where to look for parts, and reliable well beyond 200K miles. I'm a big bearded burly guy with wife and two kids and I drive a '97 VW Cabrio. And like it... No, not a Miata threat but it will carry the family and I can go to the hardware store to retrieve 100% of the project materials I need using our utility trailer. It will tow as much as our CR-V. Hondas - Ours (5 of them) have been A+. Our current CR-V has been flawless for 130K miles. Maintenance only. Tow with it, dirt roads, snow, mud, towed a Dodge Spirit 40 miles with it (not recommended - plenty of power, not enough brakes). Cheap cars - plenty of cheap people driving cheap cars. Cheap people cheap out on repairs and use cheap parts. Lots of coat hanger and duct tape repairs in this crowd. Of course their cars die young. Why is it that cheap car people seem to also batter their cars to death? I feel certain that I could get 200K out of a cheap Kia car if I bought it new. The car companies have a tough field to play. To win the quality wars they have to beat the public's perception that the imports are better. Tough battle. I don't think they can do it. I hope they can and I hope it wrecks whatever corporate culture they have that holds them back. Oh and the unions too. They used to try to win the "big SUV" battle. And for a while they did win.When I was a kid in the 80's they were trying to sell us big cars back then too. And their compacts were a joke. A Celica or VW GTI or Accord vs a Fairmont or Citation (we got ALOT of good service from one though) or a K-car. Not even a battle. Imports won on MPG, handling, "content", style, etc. They were at the head of the pack on looks too. Show a kid an iPod and a Walkman cassette player. Both make equally good music. Which one will they take? Even if the iPod is a larger financial risk, it is just cool-er, it does more things, and a great style. The Walkman does it's thing well too but it is out of date. Out of date is okay with if there is a financial advantage. I'd buy a brand new 1985 VW GTI if I could but the price better be the same 1985 price plus inflation. I'm not going to pay premium prices for old designs. (In a way whoever bought my '97 cabrio new did pay a premium price for the old design. This car is not that different mechanically from my 1984 Rabbit convertible! ). I guess another difference is that the import manufacturers seem to refine, refine, refine a design. The domestics give something all new, cancel the old model and the new model is no better than the old model but they'll tell us it is. Now we are back with the same battlelines. Big, thirsty domestics vs the trendy imports. As soon as incomes catch up with the price of gas Americans will buy big again and the domestics will make a comeback b/c Americans seem to think big is better - when they can afford it. Suddenly the small car crowd has been be noticed again (now) and are welcoming the newcomers to the small car party. And then the price of gas will fall (relative price of gas vs income) and slowly the small car crowd will quietly and slowly thin again. It's a cycle. Look at the decades of cars since the depression. Happens about every 10 yrs. Prob each time fuel goes up, the domestics lose more and more market share as public perception "remembers" that Detroit is stupid, and new oil fortunes are made in the time between rising oil prices and the time when "most" Americans are shopping for frugal gas sipper cars. The imports build clever compacts with good style by default. They add larger vehicles when the market supports them. They build these smaller cars and sell them worldwide. The domestics by default build large vehicles that only sell in North America (and a few other markets where gas is "cheap") and only the price of gas forces them to give attention to the smaller vehicles. Their fortunes lie in the price of gas. Cheap gas = profit for Detroit. I think b/c they don't build smaller vehicles all the time and b/c they build different cars for different markets worldwide, their designs are not as trendy, not as clever, not as good as the imports b/c they don't have their heart in it. They can do it in Europe though. Saab and Volvo and Jaguar, etc are nice if you can afford them. If you want something under $20K then you get cars that just compete well with the imports. GM COULD do better if they would bring us the Opel lineup WITHOUT alterations... Sorry for all the CAPS but GM brings us their Opels and screws them up in the process - witness the Catera and the LeMans. Go look at the Opel website. Some nice cars, and some nice plain/basic city cars. Wish they would apply no-haggle pricing to all their models, just leave the Opels named Opel (kill the Saturn brand), and roll all of their brands into GM and sell them at GM dealers. I see the coming of CarMax style "all-brand" dealers someday. Back to my rant: Also b/c the big vehicles offer more profit, the domestics try to motivate us into the larger vehicles with plain, miserable compacts. Maybe that is a result of trying to build a compact that is as cheap as possible since there is so little profit in them and b/c they have to rely on incentives and fleet sales to move them. All the discussion of conspiracy, poor management, union antics, styling, and percieved quality all work against the domestics and are OFTEN but not always excuses for former domestics customers to justify their decision to go with an import. Later they will use a "need" for towing capacity, hauling capacity, off-road ability, passenger capacity to justify a larger vehicle once fuel prices come down relative to their income. We all know that most of these vehicles seldom haul 7 passengers, tow boats week in and week out, and will hardly ever see slippery or muddy road conditions. Some will of course, not many though. It is not a dislike for large vehicles or a true admiration of smaller cars that these "turn-coats" have, but rather a dislike for the higher fuel prices that cramps their spending power. They aren't going to let fuel prices change their lifestyle. Europeans I knew (lived in Italy for 3 yrs, Navy) had a much more frugal lifestyle to offset the cost of transportation (taxes, vehicle prices, fuel prices, taxes, taxes, taxes - did I mention taxes? Universal health care = taxes!). There middle class had a good life but not the big houses, mutliple cars, boats, motorcycles, etc like folks around here do. However most had no mortgage, nice clothes, nice homes, nice cars, travelled more than us, vacationed more than us. They didn't consume as much STUFF as we do. The domestics ceeded the compacts market to the imports while they built the "real" cars and trucks. Now the imports are building ever larger vehicles that compete directly with the domestics last hot market. Once the imports win that market the domestics will be dead. They will come back but hopefully a much smaller and leaner corporate culture that builds cars we want. I work for a company which gets much of it's bread and butter from the auto manufacturers and their suppliers. I recently read that the experts are predicting 50-65% fewer parts suppliers after GM and Ford and DCX stabilizes. That's going to hurt our company to I feel certain. Maybe when GM and Ford makes their "comeback" they will build more SSR and GT-40 STYLE vehicles - something interesting that doesn't cost a small fortune (i.e. a Civic or an Accord). They spent so much money on "halo" cars and luxury brands only to shelve the designs. How about a T-bird at Miata prices? How about a SSR at Colorado prices? Might not have all the high end materials and the high end performance but leave that to the aftermarket. It shouldn't have to be a Corvette or a GT-40 to be interesting... Look at the GM of America lineup. How many brands? How many models within those brands? How many rebadged varients on those models? Then looked Opel or VW or Renault on the Internet. Many of those European brands have 5-7 models. 1 per class. Maybe multiple trim levels per model. GM and Ford have too many brands and too many of these brands compete against each other inside the same corporation. DUMB. Kill of Buick or Caddy. Kill of Pontiac or the Chevy equivalent. Kill off Saturn or Opel (Saturn please). Kill off GMC or Chevy trucks/vans. Kill off that ugly SUV snouted minivan that I refuse to even learn the name of. In Ford's case Volvo, Jaguar, and Land Rover are plenty distinct enough but rather than The luxury brands teaching Ford new ideas, and boosting it's image, I think Ford's image has hurt Jaguar, Volvo, and Land Rover. Maybe it is time to get 'rid of them.
I have "A better idea:" Fire the current designers at Ford. My friend bought a 2002 Explorer, which sold at 12,000 and with all the ridiculous fees and taxes, cost 19,000. The real problem is: The idiots who designed this model decided to make the outside air permanent, instead of providing a switch to turn it off when on dusty roads, behind diesel vehicles or in heavy traffic with exhaust. Even worse: He keeps foil packets of ketchup in the glove compartment, and had some in the hatch. Guess who decided to move in and sample them: mice. This is SUPPOSED to be a vehicle with almost all gaps to the outside either closeable or nonexistent. Yet a field mouse entered, with it's extensive family, and chewed everything. My friend keeps a toilet paper roll for tissues, but now it was a nest! The packets of condiments: all over everywhere, ketchup smeared on everything. He had a bag in the back. Guess what was in it: ACORNS!!!! How did acorns get in the bag, if he didn't want them there? Yes, folks, the creatures that are NOT supposed to be in a car-mice. I have heard of mice nesting in a car's air filter, but in the car itself?!! All because Ford, or rather F(ound) O(n) R(oad) D(ead); F(ix) O(r) R(epair) D(aily) or any other acronyms you can think of feel removing the option of outside air is a better idea. How do they know what I or anyone else wants? Why is removing the outside air switch a good idea? Why is it a good idea to allow disease-carrying rodents to come and go as they please? All for the good of FORD, not you and me. I would rather have a Toyota, Nissan, Hyundai, Yugo or Volkswagen ANY DAY than a Ford. Even the Mitsubishi sounds good at this rate, and I am wondering if Xerox will be entering the ring as well! I would rather drive a copier to work than a Ford Explorer!