Ford Death Watch 30: Executive Compensation

In the first three months of his employment, Ford CEO Alan Mulally earned himself a cool $28.2m. So how’s the high flying ex-Boeing exec doing in his campaign to save the embattled automaker? According to Big Al, “it’s going pretty well." He’s “reduced complexity” (i.e. paid bureaucrats to leave), sent Aston packing, unloaded the first of thirteen surplus-to-requirements Visteon plants and started to make good on cost savings targets. On the income side of the ledger? Not so hot.

Earlier this week, Ford flackmeister George Pipas proudly proclaimed that FoMoCo market share is now, finally, Thank God, stable. His underlings trumpeted “record sales” of The Blue Oval’s mid-size Mexican troika and Canadian crossovers. The Fusion had its strongest month ever; 15,790 units made a run for the border. The Edge is selling at a level deemed “comparable to long-established crossover products,” boasting 37 percent increases in the U.S. and doubling in Canada.

The company now hopes (against hope) that the badge transmogrified Taurus and hot-off-the-press Flex will generate interest in all things “Dave” and jump start the automaker’s entirely theoretical nascent sales recovery. Never mind product overlap. (Ford will have three identically-sized crossovers— Edge, Taurus X and Flex—with identical powertrains.) Feel the buzz.

Meanwhile, it’s flat tires at all four corners. The Glass House Gang has just completed its fifth consecutive month of dismal sales and declining market share.

Given the housing slowdown and sub prime debacle (Big Al: “It’s a concern”), the pinch is being felt damn near industry wide. Ford is faring worst of all. A quick glance at the less shiny numbers indicates that FoMoCo is on pace to move just over 2.5m units this year, roughly 400k less than last year. Nine percent fewer FoMoCo products hit the street in March ’07 than in March ’06. Rounding out the first quarter, 13 percent fewer people have bought a Ford, lately.

The usual sales stalwarts, the Mustang and Explorer, are facing declines of 17 and 26 percent respectively. Most disturbing, Ford’s cash cow has come a cropper. The F-Series pickup has been knocked from its perch as America’s best selling pickup, into the dirt. Year-on-year March sales are down 15.1 percent to 71,481 units. And consider this: the numbers represent the F-Series’ best sales month since August 2006.

Ford’s new ads stress the F-150’s competitive strengths, but it’s not just a matter of keeping traditional Ford customers from opting for Chevy, Dodge and Toyota pickups. It’s a question of getting people to come on down.

CNW Marketing Research reports that automotive showrooms are emptier than Paris Hilton’s panty drawer. Other than Toyota, every major automaker’s dealers are seeing less foot traffic than the year– or month– previous. Ford suffered the most from the footfall freefall. Showroom floor traffic sank 18 percent in January, and then slid roughly 28 percent in February and March. Even a 450 horse F150 sold by the CEO himself won’t cure those kind of numbers.

The Detroit News reports that The Big Boss is pressuring Mark “Movie Star” Fields (El Presidente del Americas) and Cisco Codina (group think vice president for NorAm Marketing, Sales and Service) to initiate a “full court press” to win back the masses. Failure is not an option. There’s been talk of kicking Mark Fields off the corporate jet (saving the company some $5.75m in executive over-compensation) and replacing Cisco Codina with customer service president Daryl Hazel.

Ask the Ford family scions who’ve seen half a billion dollars wiped off their stock value and their dividends disappear. All this corporate turbulence sucks. But it’s nothing compared to the UAW-shaped storm cell that lies dead ahead.

If Mulally can wrest significant concessions from the United Auto Workers this summer, he'll be worth every penny of his $30m salary. The problem is his $30m salary. Quite how Big Al expects the rank and file to take a hit for the team when he’s banking tens of millions of dollars, while his family enjoys free corporate jet travel, is an interesting question. Perhaps not as interesting as “Why can’t the workers have some of those billions you borrowed?” but close.

Yesterday, Mulally warmed-up for the Ford – UAW Detroit Death Match by announcing that The Blue Oval Boys don’t have specific targets for wage and benefit concessions. Nope. They’ve got a non-negotiable "economic envelope for competitiveness." If you could read the back of that envelope it would probably say “we can't pay you now so we'd like to pay you later.”

In truth, Big Al doesn’t have a hope in Hell of convincing Big Ron’s team to offer anything other than window dressing. Without increased sales or decreased labor expenses, Big Al will fail. He may even get fired— provided Ford can afford Mr. Mulally’s $27.5m severance package.