“There is very little in the way of new initiatives/efforts/changes to improve the cost structure or profitability of the company, in our view. Most of the document submitted to the Congress is an outline of the company’s existing ‘Plan’ and actions that either have already been taken or are slated to play out over the next couple of years (especially as it relates to new product development). Ford is now calling for its existing plan to deliver profitability of at or above breakeven by 2011 at both the corporate level and in North America. On a cash flow basis, the plan is to be breakeven or above on a Corporate basis by 2011 (no mention of North American cash flow). Ford’s base case US sales assumption for 2011 is 15.5 million total vehicle sales. Following are some things that we think are lacking in the plan:
1. A more aggressive plan to significantly and quickly shrink the dealer network.
2. Any concrete, further reductions to hourly wages, benefits, work rules – and especially the JOBS bank. Ford said that it is “presently engaged in discussions with the UAW with the objective to further reduce our cost structure and eliminate the remaining labor cost gap that exists between Ford and the transplants.” The company asked the incoming Congress and the Obama Administration to “establish a process to address in a comprehensive way the conditions that inhibit competitiveness of the domestic industry”, including, “creditors, dealers, the UAW, and suppliers.”
3. Any further near term balance sheet restructuring. Because Ford has significant liquidity, the company is in a more flexible position than GM, and therefore is able to submit a plan with less draconian actions to stem the significant cash burn it is experiencing at current volume levels. Indeed, the document submitted to Congress does not seem to acknowledge the profound rate of cash burn that Ford is currently dealing with.”
[thanks to you-know-who-you-are]
4 Comments on “Bailout Watch 232: CS First Boston on FoMoCo Plan: “Not Much Here”...”
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Don’t knock the “prodigy” of domestic auto industry. Ford can last till spring (maybe) the rest are dead by New Years Day.
Ford is in the worst position of all to take on the UAW on labor cost and work rule issues. For the better part of the last 70 years, the UAW has bargained by picking the company least able or willing to endure a serious strike as its target to begin bargaining. Once the weak link is picked off, the pattern goes through the rest of the industry.
GM is the company that needs to take on the UAW issues. The UAW has the most to lose if GM goes, and it understands that this is a real possibiliy. Chrysler is not big enough and has owners with really deep pockets. Ford is in too good of shape and will not be able to drive the bargian that GM could. Of course, the GM board and management doesn’t get it. They want help from the Government, which is the last place to get help vis a vis the UAW.
“Ford’s base case US sales assumption for 2011 is 15.5 million total vehicle sales”
They are far too optimistic and should be planning for no more than 12 million with contingencies for +/- 1 million.
Since I didn’t see John Cleese or Eric Idle, I believe those really are classic Ford commercials (adverts?).