Ford Death Watch 26: Of Mice and Men

Henry Ford knew a thing or two about motivation. “Enthusiasm is the yeast that makes your hopes shine to the stars,” Crazy Henry opined. “The grip of your hand, the irresistible surge of will and energy to execute your ideas.” Yes, well, Blue Oval morale is at an all time low. After watching Billy’s Boyz lose over $24k per second, faith in The Glass House gang is fading. Faced with a failing grade on an interim report and a Way Fordward that needs to be Fixed Or Repaired Daily, Mulally’s masses are about as enthusiastic as Dick Cheney’s hunting buddies.

It’s true; not even Mercury’s curvaceous raison d’etre (a.k.a. Jill Wagner) could rally Ford’s troops at a recent USO show. In a survey included with FoMoCo’s recent NorAm report card, less than 45% of the 15k employees polled expressed faith in the new new turnaround plan. Ninety-three hundred respondents simply don’t believe that the vehicles within Ford’s “showroom of the future” have what it takes to pull Toyota’s next victim out of its tailspin.

The survey-sporting internal audit indicates that Dearborn’s darlings are missing their spending targets. Sales are still falling quicker than Mercury in the cold. Save for one Edgey new product, January saw Blue Oval sales submarine expectations by some 10,600 units.

The reason is (again, still) a “greater-than-expected segment shift out of pickups and SUV’s.” Look for a greater-than-expected 6k more units to litter dealer lots by the time Spring rolls around. For those keeping score, at quarter’s end, an additional 1.5 percent of Ford’s market share will have melted away.

The report also predicts that the first three months of ’07 will suck up lots of Big Al’s newly leveraged liquidity. The Blue Oval’s bean counters have been clamoring for 50% cost reductions. This month’s savings barely scratch 25%. What’s more (much more), FoMoCo’s spending will miss the bulls-eye again in March. You don’t need a magic eight-ball to predict that the highly touted “we’ll be fine in 09” is quickly becoming a [crack] pipe dream.

The negative results are clearly a blow for The Man from Boeing. The report reveals Big Al’s first fiscal kick at the can as a swing and a miss. Not to put too fine a point on it, Ford’s North American unit is still failing, despite Mulally’s humbly mutated metrics.

Unbelievably, despite Ford’s failing grades, cataclysmic losses, epic layoffs, plentiful plant closings and uninspiring products, market mavens have yet to abandon Ford. Right about now, Ford shares are up 5.6% from this time last year. In fact, Ford’s share price is at its third highest market value. Wall Street Journal (WSJ) scribe Robert Schwartz doesn’t get the math.

Mr. Schwartz estimates that even if Dearborn’s Darlings can convince the United Auto Workers to convince its members to slough 25% of Ford’s health costs, The Blue Oval will still be $58b in the hole. Factor in family assets like Mazda, the Premier Automotive Group, Ford Credit and Big Al’s mortgaged moolah, and you’ve still got six billion greenbacks in the debit column.

Note: FoMoCo’s MoCo is MIA from this list. And therein lies the problem.

Market mavens currently ascribe the automotive arm a value of $39.5b. That includes the $17b three-year cash burn just to keep Mulally’s motor runnin’. To hit that valuation, the WSJ figures Ford needs a 4% pretax sales margin on $132b in sales. That’s just to maintain the current downward trajectory. A turnaround is going to be Ford Tough.

Based on the success at Nissan, turning this sum bitch around would require an operating margin of nearly 8%. Yeah right. It took Nissan six years and a Ghosn in the machine to get back in black, and Nissan didn’t have two 800-pound gorillas in the room: a bloated dealer network and a vapid product pipeline.

So, basically, Ford’s employees are right to be shit scared. To date, the fact that the corporate coffers are full and the Hecho en Mexico Edge is firing on all cylinders are the only positive pegs for psychological hat hanging. Or… not.

Ford has just announced that they’ll cough up $500 in dealer cash on an entry level Edge. While the top-o’-the-line 18” clad SEL and SEL Plus cross-border crossovers are commanding sticker price, the entry level model is languishing. Unless this stock imbalance comes good, the glut of entry level incentivized SE’s could end up destroying the model’s overall resale values or worse, end up in rental hell.

Henry Ford may have been a vicious anti-Semite and a generally loopy guy, but he knew business basics. “You can’t build a reputation on what you are going to do,” Hank famously pronounced. Unless and until Ford can live up to its promises, Henry Ford's corporate legacy is doomed.