Will Ford go bankrupt? I doubt it. Not while the “bad” automakers that suckled on the federal teat go on and on and on and on. A FoMoCo C11 would expose the government’s Detroit bailout for what it was/is: unfair, ineffective, ill-conceived and unsustainable. Politically, Ford’s failure is not an option. If push comes to shove, Uncle Sam will send Ford more Department of Energy loans, some juicy subsidies and generous tax breaks; anything and everything up to and including cash money. This despite—I mean because of the fact that Ford is guilty of the same sin that sank GM and Chrysler: taking in less money than they spent. Political calculations aside, is it even possible that Dearborn’s darlings will be forced—forced I tell you—to prostrate themselves in front of federal taskmasters? Once again, to answer that question, feel the burn.

Twenty-four billion dollars is not a lot of money. Not in the car biz. When GM was heading towards bankruptcy, stockholder activist and momentary GM Board member Jerry York warned that General Motors needed a $10 billion “pad” for cash flow. You know; to keep the non-proverbial lights on. Subtract that amount from Ford’s current $24 billion cash pile, and that leaves “just” $14 billion.

By all accounts, ex-Boeing exec and current FoMoCo CEO Alan Mulally has done as much as humanly possible to dowse Ford’s cash burn. Incentives are down. Market share is up. Factories have been trimmed. The workforce downsized. Even so, during the first half of this year, Mulally’s minions spent $4.7 billion. Double that and you’re looking at a $9.4 billion annual burn rate. That would leave Ford with $4.6 billion. Or, another half year at the current, vastly reduced rate; in 2008, FoMoCo said goodbye to $21.3 billion.

While you’re running all those numbers, lauding Ford’s $25 million CEO (first year) and wondering if Ford can avoid paying the piper through investor confidence (i.e. Other People’s Money) or much-promised profits, don’t forget that the American automaker doesn’t enjoy the advantages of bankruptcy. Unlike their cross-town rivals, Ford’s buried under a $35 billion debt mountain. Worse, the money’s due in 2013. At the end of its pre-nationalization life, GM was paying a billion bucks a month in interest. Without—and perhaps with—a fresh cash infusion, Ford can’t afford that kind of vig.

Need I say more? How about this: Mulally predicted a turnaround in the U.S. new car market at the end of this year, despite obvious indeed incontrovertible evidence that the U.S. economy was no rising tide. [Note to armchair analysts: rising unemployment and a moribund housing market are not good for new car sales.] And now Big Al’s predicting that self-same sales lift for the beginning of next year.

Well he would say that, wouldn’t he? What else can he say? Lower costs and rising market share be damned. Ford simply cannot sustain itself in a U.S. car market that hovers around nine million sales per year. In other words, there’s a big ass clash between Ford’s positive spin and the grinding reality of an ongoing recession. And who should be shining their light on this irony but the United Auto Workers (UAW) . . .

Ford wants investors to think that all’s well with The Glass House Gang. At the same time, it wants the UAW to sign a contract that lowers its costs and outlaws strikes (no less). As The Free Press puts it, the story that Ford is returning to profitability is “complicating efforts to convince Ford’s 41,000 UAW-represented workers to vote in favor of a modified labor contract.”

Complicated is just a word. Despite the fact that UAW President Ron Gettelfinger is “selling” Ford’s looming debt to secure the workers’ approval, and rearranging the voting order to save the most recalcitrant U.S. plant (Dearborn) for last, the union rank and file aren’t buying it. Ford’s Kansas City plant rejected the new contract and others (two out of the five that have voted). If the contract gets shot down, Ford’s “good news” media story will start to unravel.

The press will blame the UAW (which is only half right). The union will do what it always does: go back, knock some  heads together, pretend that it’s made substantial changes, claim victory, re-do the vote and get the result it desires. And . . . we’re back! Again. Still. Soon.

Never mind. And at the end of the proverbial English day, Ford’s survival all comes down to product. The Blue Oval Boyz have a number of promising vehicles on the horizon: the new Fiesta and, uh, a few other things.  And therein lies the tale. Ford’s branding is still in shambles; its identity as not-GM/not-Chrysler will only take it so far. The products may (or may) not be class-competitive, but the Blue Oval’s a bunch of branding gypsies, moving from message to message to message, never settling on a single coherent message (from the Department of Redundancy Department).

In fact, a Chrysler and GM C7 is about the best possible thing that can happen to Ford. But Motown’s tramps will not face their reckoning before Congressional midterms, or, perhaps, ever. (The whimper vs. bang thing.) No matter how you look at it, by the time GM or Chrysler leave the field of battle, Ford’s debt will be due. In other words, the real dead cat bounce will come too late.

And so, with the best intentions and will in the world, get ready to bail out Ford. They simply can’t compete with America’s nationalized automaker and its Italian twin-under-the-skin in a down market. Not because their rivals are so good. Ford’s problem: GM and Chrysler have been propped-up with your tax money, keeping Dearborn’s darlings from enjoying the fruits of their foresight. The Motown bailout queens are oxygen thieves. Make no mistake: Ford is still gasping for breath.

Speaking of barnyards, someone forgot to tell Ford watchers not to count their chickens until they hatch. The MSM is ready, willing and able to pronounce the Blue Oval Boyz’ turnaround plan for the ailing American automaker as good as done, and skip the “it worked!” part of CEO Big Al Mulally’s canonization. The Detroit News is down with this fait accompli meme. “As one fund manager who controls a sizable chunk of Ford’s stock and bonds put it: ‘The biggest threat to Ford’s future is that Mulally steps off the curb tomorrow and gets hit by a bus.’ Such sentiments, blunt as they may be, are a testament to the progress Ford has made since Mulally took over as CEO in September of 2006. He predicts the company should settle into profitability by late 2011.” So that’s it, then, save “Mulally is no stranger to success” and “He’s been an agent of change” and “For many Ford employees, he has rock-star status” and I think they ought to think it out again.

Not to go all Nixonian on you, but it looks like I’ll have Big Al to kick around for a while:

Ford Motor Co. CEO Alan Mulally says he has no intention of retiring before restoring the Dearborn automaker to sustained profitability.

Mulally turns 64 next month, and Ford executives have typically retired by age 65. If he followed that policy, the chief architect of Ford’s turnaround plan would leave before reaching his long-stated goal of returning Ford to full-year profitability. But Mulally told the Detroit News he intends to stay.

“As long as I’m contributing, I’m honored to serve Ford,” he said last week. “But I’m one person on a fabulous team.”

OMG! Did he say fabulous? Has he SEEN Mark Fields’ mullet? Anyway, am I the only one who sees the irony in this bit of DetN hagiography?

Some of the credit for these accomplishments belongs to other Ford executives.

Former Chief Financial Officer Don Leclair and then-CEO Bill Ford began assembling the financing plan before Mulally was hired, and much of the cost reductions that have trimmed billions from Ford’s North American operations were the results of Fields’ “Way Forward” plan or part of an accelerated effort that he and Leclair had already drafted.

But Mulally has done something that no other Ford executive in history has been able to: taken a sledgehammer to Ford’s infamously careerist corporate culture, which too often put individual advancement ahead of the company’s long-term success.

Ford insiders are free to email me (farago@ttac.com) backing-up the contention that the Glass House Gang’s days of competing fiefdoms have gone the way of English titles. (Oh wait . . .) My contacts tell me that everyone’s saying a lot, but they’re not doing anything. Remember our post about Ford’s ridiculous number of seat track assemblies? The tempus have not fugit. Parts commonality may exist worldwide for a few key products, but it’s not happening across brands or models.

Truth be told, Ford’s turnaround is a LONG way from finished. Volvo. Lincoln. Mercury. All dead brands walking. The Ford brand is no stranger to amorphousness, with plenty of overlapping products that don’t sell in enough quantity at enough of a margin to earn enough money for Ford to become profitable.

Of course, there’s always the next big thing. But if the new C-Max, Edge, Explorer, Fiesta and Focus tank like the Flex, old Taurus and Taurus X, the company’s slide is sure to continue. Even if Ford convinces more investors to come on board, the company still has too many models and dealers and not enough brand. They’re still losing money.

The clock is ticking. As BusinessWeek‘s David Kiley points out, “During its quick trip through bankruptcy court, GM shed $40 billion in debt. That’s roughly the amount Ford could have on its books in just two years.”

Ford is banking on a climbing share price and its brand momentum to bail it out. But if that doesn’t happen, Ford could have less money than its crosstown rival to spend on new vehicles and marketing in a few years. “We’re really focused on the balance sheet right now, and the liquidity we need to make it through [the recession],” says Ford CEO Alan Mulally. “We are watching closely but haven’t seen evidence yet that we are being disadvantaged.”

Disadvantaged relative to whom? Chrysler and GM? What about Honda, Toyota, Hyundai, Volkswagen et al.? Not to put too fine a point on it, TTAC’s Ford Death Watch continues.

Oh, and I repeat: $5.9 billion worth of Department of Energy retooling loans says Ford is not “the only American automaker to eschew a federal bailout.” If you think the loans were created to improve fuel efficiency, I’ve got some New GM stock I’ll sell you cheap. It’s not available yet, but hey, why wait ?

By all accounts, the refreshed Ford Taurus is an excellent car. Easy-to-drive, economical, well-built, comfortable, capacious and handsome. As a sign of its pre-launch success, the vehicle’s critics are focusing on its sticker price. As a firm believer that something is worth exactly what someone will pay for it, it remains to be seen if Ford’s priced the refreshed Taurus out of the market. Meanwhile and in any case, Taurus Gen 6 won’t “save” Ford like the 1986 model. The 2010 Taurus may be a singular automobile, but it is not a signature automobile. To survive in today’s crowded, shrunken, hyper-competitive new car market, Ford needs vehicles that clearly differentiate the brand from the competition; and marketing to match. Ford recognizes the problem but fails to rectify it.

“Drive the Ford Difference.” Well, exactly. But what is the Ford difference? Even as The Blue Oval Boyz spend millions promoting their latest brand slogan, they continue to struggle with its meaning. The tag line’s tortuous evolution indicates their inveterate indecision. Lest we forget, “Drive the Ford Difference” has just replaced “Drive One,” which replaced a farrago of consumer exhortations: “Drive Quality,” “Drive Safe,” “Drive Green,” “Drive Smart.” Ford’s gone from pick a slogan, to an anti-slogan, to guess the slogan. The Glass House Gang is in real danger of descending into inscrutable, Coke-like zen koans (i.e., Ford is).

This is Ford CEO Alan Mulally’s Achilles heel, and you can see the protruding arrow. In terms of manufacturing process, Big Al has cleaned house: eliminating much of the corporate behemoth’s sloth, waste, fraud, duplication, bureaucracy, indecision, intransigence, etc. The $25 million man (first year) has also been lucky enough to prove that it’s better to be lucky than smart. The company’s rep is riding high on its decision to shun the federal bailout buffet—ignoring the fact that it only did so to protect to Ford family control and recently tapped a $5.9 billion, no-interest, taxpayer-provided “retooling loan.” More to the point, Big Al has done nothing to save the Ford brand.

Automotive branding—deciding what vehicles to build, how to build them and how to sell them—requires what George Bush famously called “the vision thing.” Mulally’s administration suffers from a failure to synthesize. In other words, truck buyers know the F-150 is built Ford tough (complete with its own logo). But how do you link that selling point with the 2010 Ford Fusion Hybrid’s claim that it’s “the most fuel-efficient midsize sedan in America®”?

Or the Mustang head vs. heart, heart wins campaign? And how does that jive with the Dirty Jobs guy’s claim that the Fusion beats the Toyota Camry and Honda Accord for quality? Meanwhile, the poor (but excellent) Ford Explorer is reduced to promoting roll-over protection while the Edge urges you to “drive past gas stations faster.”

Note: it doesn’t matter if any of these selling points are true. They’re just too damn many of them. The Ford brand stands for everything and nothing at the same time.

No surprise there. Big Al inherited a failing automaker rife with warring fiefdoms: corporate enclaves defined by country, brand, product, specialty and, of course, personal loyalty. Ford’s undeniable product excellence is not the result of a overarching corporate effort in any one direction; it’s the offshoot of individual pockets of excellence working to equally admirable but largely uncoordinated ends.

No question: Mulally has moved the entire organization towards a less inchoate structure; one where employees understand that they must reconcile personal ambition with what they have to do for the “greater good.” Unfortunately, efficiency is not a rallying cry upon which great organizations—or brands—are built.

Sure, Toyota gets maximum props (from Big Al as well) for its lean manufacturing system. But it’s product reliability that defines the Toyota brand for both its workers and consumers. Blessed with an overarching brand promise, ToMoCo is free to fuck up and recover. The FJ Cruiser may be a misbegotten platypus of an off-roader, but it didn’t ding the public’s understanding of the Toyota brand.

Bereft of focused, coherent and compelling branding, Ford has an almost infinite number of ways to fail. And few ways to recover. The Flex? What was that all about? How about, say, any Lincoln product? The Lincoln brand? Volvo? Mercury?

Quality, safety, fuel efficiency, technology, luxury, value. Must. Choose. One. Once that’s done, Ford has to build cars that embody that brand promise better than anyone else in the market—regardless of the cost. As I said when I drove the execrable, warmed-over Focus, Ford can’t afford to make money. Not when their brand is in such dire jeopardy. They should cut their portfolio to the bone, choose a shtick and use it to beat everyone in the entire company. And then sell the beJesus out of it. Relentlessly. Endlessly.

While its Detroit rivals unravel with publicly-funded gusto, Ford continues to enjoy nearly unanimous praise from the media and industry commentators. And why not? Free from the public funding, bankruptcy, dealer slashing and attendant bad publicity plaguing its competitors, Ford is clearly the healthiest of America’s automakers. But it’s impossible to forget that Ford’s buoyancy is but one of the final boons of the pre-collapse credit markets. Mortgaged to the hilt, Ford finds itself facing new CAFE and emissions standards without a certain deep-pocketed uncle standing by to pay its way into the new, green automotive paradigm. As a result, Ford seems to be trading long-term opportunities for short-term survival.

It’s no coincidence that, in the lead up to their bailout bonanza, Chrysler and GM embarked on ambitious (to put it kindly) alt-energy vehicle programs. The more we learn about newly-proposed CAFE/emissions standards, the more Chrysler’s ENVI vapor and GM’s Volt moonshot seem like winning propositions. Yes, really. Gaping loopholes in the proposed legislation point to a credit-trading scheme that seems to have been designed to create a Potemkin auto industry.

Bankable, tradable carbon/efficiency credits (and, especially, so-called “super credits”) create massive government incentives for Detroit’s automakers to build electric and alt-fuel vehicles regardless of their viability in the free market. Since these credits offset (and in the case of super credits, multiply) the efficiency ratings of an OEM’s fleet, tomorrow’s mass-market offerings must be subsidized by EVs with inflated mpg ratings.

Chrysler and GM are perfectly positioned to capitalize on the auto industry’s political New Deal. As the projects of an independent automaker, the ENVI and Volt projects amount to shocking hubris; as dependents of the state however, these “advanced technology” projects are the only incentive for ongoing government subsidies. With the public investment in GM and Chrysler expected to crest $100 billion and with nothing promising a short-term reversal of fortune for these firms, the government has no choice but to continue to invest in the politically-expedient in hopes that it someday becomes financially viable.

Assuming electric vehicles will someday become a workable business model, this puts Ford at a massive disadvantage. By carefully and strategically spending its $23 billion privately-funded do-over fund (acquired in early 2007), Ford has survived without resorting to a government bailout. And though this helps the media in glossing over the uncomfortable details on the way to crowning Ford the winner of “Survivor: Detroit,” it doesn’t change the underlying reality: Ford doesn’t have the capacity to position itself for the post-bailout market.

The curse-blessing of Ford’s survival is perfectly illustrated in the contrast between the media coverage and the reality of Ford’s Focus EV program. Ford has wisely kept its PR field day rolling by announcing that its Michigan Truck Plant will be the new home of the Focus, including future EV and hybrid versions. Dazzled by the vision of electric cars replacing reviled Explorers and Expeditions in a Michigan factory, the media has dutifully repeated and amplified Ford’s message of transformative change.

In reality though, the “Ford-ness” of the Focus EV is highly suspect. Rather than develop an electric car of its own, Ford is licensing a vehicle built by supplier giant Magna with a Focus shell on top. In fact, Magna showed up in Dearborn with a Focus EV prototype based on its modular EV platform, the mila ev.

Ford spins the cost-savings and “innovation” of the supplier-led development as a positive, but the move speaks only of desperation. Ford is mortgaging its future (again) by outsourcing its EV development because the project does nothing to improve Dearborn’s in-house capabilities. Furthermore, it’s outsourcing on the cheap. Ford did not insist on an exclusive contract for Magna’s technology in order to avoid paying for the platform’s entire development.

This means that not only has the Focus EV failed to prepare Ford for the electric future, it has also helped finance a platform that other OEMs can now use to compete with the Focus EV. By buying into Magna’s “any OEM, any car” platform, Ford dooms its Focus EV to competition with identical (save for the body shell) vehicles at even the hint of success. Think cross-OEM brand engineering.

Ultimately, Ford had no choice but to develop an EV on the cheap. Although it enjoys short-term sales prospects that its rivals can only dream of, it’s highly unlikely that Ford will see profits soon enough to spend any more on long-term development. Its limited (if honorably come-by) cash pile is already forcing Ford to punt on EV development, while its cross-town competitors are gearing up to spend billions of taxpayer dollars developing future vehicles with little apparent concern for their short-term oblivion. Recent automotive history (aka the Prius) proves the value of developing long-term capabilities. Ford could well be winning the battle but losing the war.

Perusing the February 23rd issue of AutoBiWeek brought to mind Frank Sinatra’s final concert series. My thought at the time: can someone just shoot this guy? One of the greatest singers of all time couldn’t hit a note with a blunderbuss. In AutoBiWeek’s case, we can skip the paean to their heyday (for obvious reasons) and highlight WeatherTech’s two-page spread on the inside cover. It’s only a matter of time . . . . Meanwhile, Ford’s ponied-up to advertise their pony car. As Chrysler and GM embark on their “You Paid for It” farewell tour, one wonders if the ad for Ford’s greatest hit remix signals a dramatic return to form, or the end of the end.

“DEFIES TIME. AND MOST EVERYTHING ELSE.” You can almost hear the scree of marker on whiteboard, as the agency and marketing guys compete to see how many levels of meaning they can ascribe to a vague, mundane come-on.

Defies time! Eternal appeal! Defies time! Like the old bastards who still want to buy a Mustang. Defies time! Like the time it takes to accelerate from zero to sixty! Defies time! Like “Why is Ford still making this thing?”

Yes, there is that. The Mustang is still a two-plus-torture coupe; a toy at a time when nobody’s got a plug nickel for toys.

Don’t get me wrong: I adore the current-gen GT despite the fact that the interior’s made of recycled toothbrush handles and the on-the-limit handling makes me shout (at the appropriate moment) Live! From the rear axle! It’s the end of my life!

Never mind. The Mustang is as iconic as a coke bottle and the V8′s eargasmic. Only . . . you can hardly find a Coke bottle anymore and the GT is a niche within a niche.

To its credit, Ford knows the entry-level Mustang’s back is up against the wall. Hence the “AND MOST EVERYTHING ELSE” part of the headline.

You can almost feel the embattled resolve. The 2010 Mustang defies federal fleet-wide fuel economy regulations. Defies anodyne Toyondissan styling. Defies the end of Detroit. Defies the wife, who’s freaked that we might end up on the soup line (and BTW we’re $15K backwards on our current auto loan).

I’ve yet to drive the new base Mustang. But I doubt it will defy my expectations; I’m sure it’s vastly better than the model it replaces. The new EcoBoost (born TwinForce) V6 should provide some driving pleasure where, previously, there wasn’t any. And . . . that’s about it.

The Mustang’s exterior modifications are strictly forum fodder, the interior still looks so cheap it Hertz (even though it probably isn’t) and Ford refused to bite the Bullitt and put an independent rear axle out back. Oops! I guess someone forgot to defy the beancounters.

But the real problem with the new Mustang (the killer app in the literal sense) is the marketing.

“COMPLETELY CHANGED,” the body copy shouts, in its own small-font-size sort of way. “INSIDE AND OUT. BUT THE FEELING IN THE SAME AS EVER.” Translation: IT SUCKED BEFORE BUT WE CAN’T SAY THAT BUT ANYWAY YOU LOVE THE WHOLE MUSTANG THING, RIGHT?

The Mustang’s “Same as it Ever Was” magazine ad is just one example of The Blue Oval Boys’ po-faced approach to marketing. Appealing to muscle-minded Mustang motorists with a message of eternal life is all very well and good in a preaching-to-the-choir kinda way. But Ford needs to win new converts via a major “come to Crazy Henry” moment, saving souls with a charismatic product born of bad ass branding.

Yes, The Blue Oval Boys finally whittled down their four tag lines. They’ve gone from “Drive Smart, Drive Safe, Drive Green, Drive One” to “Drive One.” Which is, without doubt, the worst possible choice (out of four less-than-inspiring options). Drive One is bland, unimaginative, insipid and entirely forgettable.

Ford may be completely changed inside and out, but the feeling amongst consumers remains the same: meh. Or, to put it in a corporate context, the company’s branding sucks. No, it’s worse than that. Ford doesn’t have any branding.

And that’s a shame because Ford makes some terrific products. The Explorer is a tremendous vehicle allowed to die without a fight. The Freestyle—sorry, “Taurus X”—was another potential winner that flew so far under the radar it crashed into an anthill. The F-150 is one hell of a truck whose virtues have never been properly tied to other Ford products. The Fusion handles like a dream . . . that no one’s ever had.

Mark my words (Fields): Ford will die unless it distills and disseminates a coherent brand message. F. Scott Fitzgerald famously opined, “There are no second acts in American life.” Read in context the line means that most Americans skip directly from act one to act three. Ford had better get a move on, or, one way or another, it will be forced to leave the stage,

Ford sits on the “Edge” of disaster. Despite the assurances from its CEO and chief cheerleader to the contrary, Alan Mulally knows that the day of reckoning could soon appear at his doorstep. Without an increase in sales volume, and soon, there will be no way to stop the cash burn. We’re not going to malign anything Mr. Mulally has done so far. In fact, he’s done more right than any other head honcho from Detroit in decades. But it’s time to pull out all the stops and break with tradition of never wishing ill on a competitor. It’s time for Chrysler to die.

Mulally needs to publicly state the obvious: Ford’s survival depends on Chrysler elimination. There’s no other way. Chrysler needs to go away immediately, not sustained in some semblance of suspended animation with token grants of government assistance. Now is not the time to be shy about this startling reality. Alan Mulally has to speak up now. He might also want to mention that Chrysler’s death will give GM a chance at salvation. Perhaps he can get to Rick Wagoner to show some of spine in support of this action, as well.

Let’s review.

Ford has managed to stabilize its market share around 15 percent of the U.S. market. The slide towards ignominy has stopped in its tracks. The only problem: the entire market has shrunk to about 10.5m units. This gives Ford maybe a 1.6m unit per year throughput– if the annual sales rate continues. If sales go lower, well, good things won’t happen. 

Last year, Ford sold 1.9m units, and 2.4m units in 2007. So in just two years (2007 to 2009), Ford will lose about 800k units in sales, roughly three assembly plants’ worth of production.

In the last quarter of 2008, Ford burned cash at the rate of $2.3b per month from automotive operations globally. Europe, Asia-Pacific and Volvo had negative operating income during the quarter, with future losses likely. We’ll assume that there won’t be positive cash generation in the near term there. But the bulk of the burn comes from North America and again, we know which way that’s going.

Ford claims that the cash burn will slow. That’s probably true. But it will still be a burn. To bolster its cash, Ford will soon borrow $10.1b from its credit line. Its cash on hand at the start of February will be on the order of $23b. Assuming it slows the burn to $1.5b per month, Ford has only seven more months before it goes cash critical at its minimum operating cash of $10b. That’s sometime in August this year.

There’s one cure. Kill Chrysler now, don’t wait.

Chrysler sold almost 1.5m units last year, of which one million were trucks (includes SUVs and Jeeps). Its recent sales pace puts it on target for only one million units for 2009, while living on the taxpayer dole. Of this, roughly 175k will be Ram pick up trucks, 160k minivans and roughly 200k Jeeps of all flavors. The rest are the hodgepodge of cars, small trucks and SUVs no one really wants anyways.

With Chrysler out of production, at least 800k of non-unique but easily substituted Chrysler vehicles (everything but minivans and Jeep Wranglers) could be sold by Ford and GM. That’s pick up trucks, fleet cars and SUVs. Plus, each of the remaining Detroit 2 could pick up some or all of the minivan and Jeep business.

Keeping with this line of logic, let’s assume Ford splits the future Chrysler business with GM. That’s an additional 500k unit of sales, of which approximately 60 percent or so are trucks (including minivans). That’s some decent profit business. And with Chrysler gone, the merry-go-round of rampant discounting for fleet and retail business led by this weak sister also grinds to near halt. 

Worst case: the transplants pick-up the lion’s share of the “new” business. There’s no evidence to suggest that Oldsmobile’s death transferred sales to the remaining domestically-owned brands. And there’s another problem…

Kissing Chrysler off today would mean that shuttering Chrysler dealers would offer their entire existing inventory at clearance pricing. That’s something like 400k+ units selling at prices levels never seen before seen (save decades ago). And the ChryCo cast-offs will sell. Imagine new Chrysler 300′s at $10k. Heck, whip out a credit card and drive away.

The fire sale will sop-up “excess” demand, most likely from the D2. So there will be short term pain at Ford and GM stores. But it’s a pill worth swallowing.

Under this scenario, in a few months, Chrysler’s inventory will be gone. Ford will then add sales, especially in trucks and fleet sales. Maybe 500k or so. Pricing will improve. The cash burn will be eliminated, as its existing plants product more without adding capacity. That’s the win.

Alan Mulally needs to abandon his pro-Chrysler bailout stance and tell the world that it’s time to kill the once-proud American brand.

Tomorrow, the injury will be audible– and not just in the halls of Congress. Ford’s November sales stats will go splat. Ford analyst George Pipas will seek shelter in metal-moving relativism. Just as Ford proudly trumpets the fact that their cars are nearasdammit as reliable as Toyota’s, Pipas will claim that Ford’s sales drop is nearasdammit as bad (i.e. good) as Toyota’s. Which will be both true and irrelevant.

All things being negative, ToMoCo is still on track to bank $5b in profit this year. Meanwhile, Ford shed $2.6b in Q3, burning through $7.7b of its cash pile. So forget Toyota. General Motors is the more appropriate comparison. And there are only two significant differences between Ford’s plight and that of GM: scope and scale.

GM has eight U.S. brands, six of which need to die. Mazda excepted, Ford sells four brands in the U.S., two of which need to die. GM has around 6550 dealers, 5k of which need to die. Ford has around 4k dealers, 3k of which need to die. Meanwhile, Ford and GM are struggling under the weight of identical labor contracts, desperately trying to shed plants and jobs. In short, as goes GM, so goes Ford.

Commentators— and Ford— like to point out that The Blue Oval Boys are in less danger of running out of cash than GM. Truth be told, the danger’s the same; only the time line varies. Ford’s decision to stock-up on money before the current fiscal meltdown– mortgaging everything up to and including their logo– was either the smartest move the company ever made or the luckiest. Or both. But it doesn’t alter the end result. Unless Ford starts taking in more money than it spends, it’s going to go bankrupt.

As Ford CEO Alan Mullaly bellies-up to the Congressional bailout bar, he’ll parrot GM’s claim that numbers alone don’t tell the story. Right-sizing, on track, bridge loan, bright future, new products, fuel efficiency, world platform, economic downturn, yada yada yada. As the only American automaker with a plausible turnaround tale to tell (which isn’t saying much), Ford will get the money. After all, Congress wants to save SOMEONE in the American auto industry.

Whether or not the feds re-stoke Ford’s coffers and/or help it reduce its overheads, FoMoCo’s comeback is destined for failure, for one reason: branding. Ford doesn’t have any.

Quick: what’s Ford’s slogan? Drive Quality, Drive Green, Drive Safe, Drive Smart or Drive One? Yes. The latter is Ford’s ur-slogan, which says, well, nothing. Given the ailing American automaker’s product overlap, the company’s call to arms might as well be “pick one.” Edge, Flex, Taurus X or Escape?

Make no mistake: this is no small matter. If Ford is to survive, it must come-up with a compelling reason to buy a Ford instead of anything else.

Reliability? Toyota. Resale value? Honda. Price? Hyundai. Stress-free shopping? Saturn. Buy American? Only if you’re thinking continentally. In today’s mixed media world, a car company without tightly-focused branding is like a twenty dollar bill that’s been bleached white in the wash.

Ford’s anodyne anonymity doesn’t end there. Lincoln’s “Reach Higher” slogan– a not-so-subliminal slam at working class buyers– reflects the luxury brand’s lack of a coherent product or marketing plan. And if that’s not enough to convince you that Ford doesn’t “get it,” Lincoln’s farrago of MK monikers illustrates the point nicely. As do the vehicles themselves: a range of tarted-up Fords whose excellence is there for no one to see.
As for Mercury, other than ogling their comely spokesmodel, what’s the point?

Legislators are not likely to concern themselves with such things. If products are the subject, mpgs are the answer legislators want to hear. If pushed, Mulally will argue that Ford’s 2010 Euro-style products will save both planet and company. Politicians will score some points for the folks back home, cross their fingers and sign the check.

But if the pols really wanted to protect the taxpayer’s money (as if), they’d remember that nobody ever submitted a business plan that ends in bankruptcy. The pols would focus on the fact that Ford’s future depends on its products, and products depend on their branding. Someone would look Mr. Mulally in the eyes and ask a simple question: what, sir, is a Ford?

GM's roadmap: pare structural costs out of its bloated North American installed capacity until they can replace high profit light trucks with… something. To that end, The General's axing people and factories like they're going out of style (which they have), costing the company billions. The overarching problem: GM's market share and revenues are falling faster than the cuts. GM might be able to scrounge additional capital, but that's merely delaying the inevitable.

Chrysler's plan: become a distributor of cars made by others. Someone. Anyone. Aside from the fact that it won't work– branding still counts for everything– the outsourcing effort can't happen soon enough to save the company. Chrysler's product-related income stream is evaporating faster than a Texas rain puddle, and owners Cerberus have no hope (and no intention) of raising (or providing) sufficient capital to transform Chrysler into a viable carmaker, rebadged products or no.

In a nutshell, GM's still in denial, bleeding a slow death (in North America), while Chrysler is running around like a headless chicken, running out of money.    

Meanwhile, Ford's been executing a focused, determined and sensible new new turnaround plan since the arrival of the aluminum-winged savior from Boeing.

Alan Mulally's strategy: transform Ford into a smaller, more nimble company by leveraging its global resources (which are mostly smaller vehicles in Europe) to reduce platforms and costs. Build quality products in North America (as done by Ford Europe today) offering excellent fuel economy and class-competitive value for money.  

It doesn't sound crazy, and it might just work. But there are more than a few hurdles Mulally and his Blue Oval Boys must jump before they can beat their cross-town rivals to the "no C11" finish line.

First, Big Al must break down Ford's bloated bureaucracy and legendary in-fighting. No more individual unit fiefdoms. Intra-national waste and duplication of effort must be ruthlessly eliminated. Consolidation must be pursued without fear or favor.

Big Al's got to look outside Ford for expertise where needed. This he's done, hiring marketing whiz Jim Farley from Lexus and Ken Czubay (U.S. Sales and Marketing Chief) from Southeast Toyota Distributors. The more top-notch outside talent brought on board Ford, the better.

Second, Ford's got to jettison those parts of the company that don't fit to the global strategy. Throwing Jaguar/Land Rover and Aston overboard was the right thing to do. Volvo can't be offed soon enough.

Third, Ford's got to develop a profitable product plan for North America.

Ford's newfound commitment to smaller cars, more efficient engines and better design makes perfect sense. The new Fiesta and Euro Focus are overdue, but they will be welcome. When the company restyles the Taurus and drops the Freestyle, we'll know they're getting their you-know-what together. Turbocharged engines also make sense: more horsepower, better fuel efficiency.  No wacky bets on unproven electric go karts.

Finally, Ford must challenge the entire organization to perform to stated goals. They must energize the engineers, design staff, factory workers and dealers with their plan. And when I say Ford, I mean Alan Mulally.

The importance of leadership in a crisis can never be overstated. GM's got the same old tired financial guy trying to make it look like he's addressing the problem without really solving the crux of the matter. Chrysler's in the hands of the Home Depot despot– a proven cost-cutter who lacks any feel for the customer experience. Only Ford's Mulally has the skills– and credibility– to successfully energize his troops.  Kind of like the way he brought the B-777 to fruition.

Even so, there's no getting around the possibility that Ford may, indeed, run out of time. They may not get the small car products they need to the North American market soon enough. (Not to mention the possibility that those hecho en Mexico products may not be popular enough to generate those now-elusive profits.) The fact that Ford has withdrawn its "return to profitability" deadline is worrying.

But at least Ford has its eyes on the prize. Mulally may not know exactly when the ship will stop taking on water, but he knows Ford's got to get rich or die trying. He's laid out a viable plan, and he's sticking to it. Every Ford employee, supplier, and dealer knows the plan. We know the plan. 

John Lennon observed that "life is what happens when you're making other plans." But genuine progress is only possible when you realize that you must adapt or die.

Early days. Bad days. Light truck cash cows are queued-up at the slaughterhouse. Ford's leasing department is sending seas of rolling metal to auction to sell (or not) at bargain basement prices. FoMoCo Credit took a $294m hit in the second financial quarter, reversing last year's $112m profit. Ford's North American market share is now 14.4 percent, down 1.2 percent. On the revenue side, FoMoCo's North American Q2 results sank to $14.2b, down from last year's $19b take.   

The bottom line: Ford booked a $8.7b loss for Q2. Downsizing accounts for the lion's share of that loss. Since 2005, Ford NA has closed 12 factories and eliminated 51k jobs or 38 percent of its workforce. The American automaker claims it's on track to reduce its annual operating costs by $5b by the end of 2008 (compared with 2005). That's some serious cost-cutting.

And it comes at a serious cost: some $700m per month, and rising. To pay the bills, Ford created a $26b war chest- mortgaging everything up to and including its logo. Equally important, the company gave itself serious reality check, in the form of Alan Mulally. "Adapt or die" may not be tattooed on the FoMoCo CEO's forehead, but it might as well be.

After contemplating the numbers, Mike Jackson praised Mulally's moves Fordward in yesterday's Guardian. The CEO of AutoNation says it's amazing to watch the speed at which Ford has slashed production and begun switching from trucks to cars. "The old Detroit [GM?] would have taken ages to come to terms with this," he opined.

"This" is the need for small, competitive, profitable products in the North American market. It's that last element that's caused Ford's corporate culture conniptions.

Mulally is up against Old Detroit, right there in his own office. During Thursday meetings, the former Boeing exec heard the "can't make money on small cars" mantra so often he [almost literally] hit his execs over the head with a simple stat. Worldwide, large cars account for 15 percent of the market. Small cars account for 60 percent of units sold.   

FoMoCo NA suits' recalcitrance is understandable. The American car market was founded on cheap gas. To suggest that the U.S. market will soon mirror its overseas equivalents requires a paradigm shift in thinking, and a leap of faith. And, again, there is that thorny question of profitability. Decades of failure have taught Motown small cars equal small profits. 

Mulally is counting on replicating Toyota's success. Ford's "global platform" strategy: simplify products and production on a worldwide basis, then leverage the resulting economies of scale to reap massive profits. It's a good plan- if only because Toyota's already made it work. But there are several rocks upon which Mulally's vision may founder.

Toyota's American adventure was hardly an overnight success. In fact, their success still depends on long-term, long-haul thinking. The first fruits of Mulally's global plan– the Euro-designed mass market models– arrive in two year's time. Given Ford's parlous finances, they may have one chance to "get it right:" to adapt (or not) these cars for American tastes. History suggests staving off the beancounters will be a "challenge." And if you doubt the importance of trial and error, have a look at the first generation Toyota Prius.

There's also the question of branding. What is a Ford? It will have to be something that applies across its model range that commands a premium price. Toyota owns reliability. Style, safety, green, fuel economy, gizmos, driving pleasure? Ford's three-pronged "Drive" campaign indicates a bad case of ADD. In that same vein, Ford has too many models. Simply adding European-style vehicles to a bloated product portfolio will not help.

Equally worrying: Mercury. The latest product announcements contain an unspecified role for Jill Wagner's brand. That's not good. Mercury blurs the branding message for both Ford and Lincoln, and stops both brands from seeking sales in the near-luxury middle ground. It may be cheaper to keep Mercury than kill it, it may even deliver profits/volume for Lincoln dealers, but it's the wrong thing to do.

At a recent town hall-style meeting, a Ford worker suggested that making small cars was a money-losing proposition. "Why can't we make money on small cars?" Mr. Mulally demanded. "Do you think Toyota can't make money on small cars?" The question is, can Ford be Toyota?

In May, billionaire Kirk Kerkorian’s Tracinda Corp. tendered an offer to purchase Ford stock at $8.50 per share, back when the American automaker’s stock price hovering around $6.12. Investors offered 1.02 billion of the outstanding 2.24 billion shares. Tracinda increased its stake in FoMoCo from 4.7 to 5.5 percent. This week, Kirk's mob upped their share of FoMoCo to 148m shares, or 6.49 percent of Ford's public stock.

The deal is glass-like, as in half empty or half full. The fact that the nation’s seventh richest man is willing to overpay for Ford paper by 34 percent is a glowing vote of confidence in the company. Tracinda believes Ford will transcend its troubles.

Conversely, owners holding almost half the company’s value wanted to dump and scatter like the cops just showed up. These people didn’t think Ford stock would reach even $8.60 any time soon. And why would they? Ten years ago, the stock traded in the 60s. Exactly whose view is more valid is a matter of perspective. Do you put more credence in the opinion of a couple thousand people or one 91-year-old guy?

It helps to know more about Kirk. An accomplished pilot, Kerkorian made his early money delivering Canadian planes to England using the fastest, most profitable and life-risking route. After WWII, he turned surplus bombers into an enormously successful charter airline. Its core service was Los Angles to Los Vegas. Sin City is where Kerkorian made his banked billions, buying and selling casinos and hotels.

Kerkorian’s interest in America’s automotive world is a familiar story. In 1995, he ambled over to a house of straw. Chrysler fended off the hostile takeover. In 2006, it was the RenCen’s house of wood. Kirk blew into the boardroom with 9.9 percent of GM’s stock, but accomplished nothing. He unloaded it all and huffed away. Departing from the traditional tale, Kerkorian went back to Chrysler in 2007, as Daimler sought to shed the company. He was outbid by Cerberus Capital Management. A year later and he’s standing outside Ford’s house of glass.

So what, precisely, does Tracinda want out of its Ford position? Seven percent of a company is certainly a good chunk, but it’s far from controlling interest. The Ford family retains 40 percent control, no matter who else owns what. Sure, you get influence, but you are not in charge. Even if, according to regulatory filings, Kirk's willing to offer an an "infusion of additional capital."

Perhaps Ford is a good buy. There are angles from which to view Ford stock whereby it’s doesn’t look so limp. Cash and equivalents divide out to more than $11 per share. Property is worth about $16 per share. Eight dollars and fifty cents ain’t bad if you’re going to carve this pig up. Not that slicing and serving are in Ford’s future. The family has become quite attached. Besides, if GM or Chrysler go down, they’ll be other meat on the table.

If Tracinda were simply taking a position in an undervalued stock, why go whole hog for this one? As of June Standard & Poors put FoMoCo in the bottom 40 of their 500 index. Ford’s off 28.9 percent for the year. Soaring gas prices are shifting U.S. consumers' tastes faster than any company can re-tool. Ford is running far bellow capacity at eight of its 15 North American plants. 

On the positive side, Ford is probably better positioned than Chrysler or GM to survive the near future. At the very least, they have some fuel-efficient cars to market, with another on the way. The other two American automakers have sucking chest wounds where their trucks and SUVs used to be. Still, that is an odd way to buy stock: wait to see if two major competitors kick it.

Kerkorian is euphemistically referred to as an “activist stockholder.” During his 18 months as a major GM player, he tried to force a deal with Renault/Nissan. When the board wouldn’t play his game, he sold his ball and left. Again, despite the back room meetings with Big Al and attendant ass-kissing, Kirk can’t realistically expect more power at Ford until the company is so far gone it's probably not worth it. 

All Kirk can really do is depreciate CEO Alan Mulally’s authority, either by suggesting what Mulally was going to do anyway, thus sapping credit, or causing dissention. Put short, he can make a small mess just when it appears Mulally has set the Blue Oval for “pots and pans” and hit start. Half full, half empty, whatever. For Ford’s sake, I’d like to see Kerkorian come clean.

Thanks to his investment “experience” with Chrysler and GM, Kirk’s mob have had a good look at the automakers’ books. They know that GM and Chrysler are doomed. But they also know that the domestic auto industry is too large for all three to sink at once– if only because of brand/national loyalty and popular access to Detroit dealers. In Motown’s game of last man standing, Ford's become the odds-on favorite. That said, it takes a practiced eye to see it.

In April, Ford, Lincoln and Mercury racked-up 189,247 sales. Retail sales (down seven percent) are not falling as fast as fleet sales (down 12 percent), but both are still headed for the outhouse. Zoom in. The refreshed, Volvo-derived Taurus is a flop. Comparing ’08 Taurus to the ’07 Five Hundred, sales were down 21.3 percent last month. Zoom out. Jaguar, Land Rover and Volvo added just 11,480 units. Ford sold Jaguar and Land Rover to Tata Motors; Volvo now accounts for less than 5 percent to Ford's U.S. sales volume.

Yes, the Edge, Fusion trio and revised Focus are still helping to staunch the wounds. But Ford’s share of the U.S. new car market is down 15.1 percent from last year, to 15 percent.  And while there’s an upswing in car sales, none of these vehicles are generating the profit margins Ford needs to survive.

Now that the Explorer is lost (April sales were off by 38.5 percent, down 25 percent year-to-date), that task rests squarely on the F-150 pickup’s shoulders. What are the odds? Forthcoming refresh be damned; April sales of the country’s most popular vehicle fell 21 percent. 

The market is beginning to wake-up to Ford’s cash conflagration. The money they’re burning is all OPM; Ford hocked everything down to the executive china and its famous Blue Oval. Liquidity is now a life or death issue. Although Fitch Ratings has downgraded Ford on that basis, the agency seems to think that Ford will turn the corner and achieve a positive cash flow by 2009.  Unless, of course, more shit hits the fan.

The problem is, of course, product. There’s no doubt that Alan Mulally is kicking ass and taking names behind the scenes. Ford is becoming a smaller, leaner, faster and fitter organization. But Big Al’s done little to reenergize Ford’s branding or products. We still don’t know what a Ford is, Lincoln and Mercury are still gussied-up Fords, and Volvo overlaps everywhere. The new Flex, Fiesta, MKS and Taurus will all do well, but the competition isn’t standing still.

In short, where’s the vision thing? In truth, at the moment, as Kirk Kerkorian knows, Ford doesn’t need it. Assuming Chrysler files this summer– a probability of which Captain Kirk is not unaware– both Ford and GM will get a dead cat bounce. At that point, all Ford has to do is hang tough and not be GM, with eight brands stuffed with 40-plus lackluster products. When GM finally goes down, Ford wins. They’ll have all the time they need to [continue to] get their shit together. 

Meanwhile, Kerkorian can’t lose. Ford’s stock will rise on the news of Chrysler’s fall. The head of Tracinda can sell his shares and walk with a gigantic profit. Even if he doesn’t bail at the new zenith, Kerkorian knows that Mulally’s Ford has the best chance of going the distance. Perhaps with a little strategic intervention…

As it stands, CEO Alan Mulally can ignore Kerkorian (and his minion Jerry York’s) advice. Thanks to the Ford family’s SuperShares, which give them 40 percent control, Mulally’s got “You Can’t Touch This” on his Sync. On the other hand… Ford has a long history of lynching outside CEOs. Donald Petersen turned Ford around in the dark days on the 1980s. Chief Executive Magazine named Donny "CEO of the Year" in 1989. In 1990, he was "retired" for resisting the naming certain family members to powerful board committees.

Short of shooting itself in the Mulally foot, Ford will be Detroit’s last man standing. Long term, there’s a line of gunslingers ready to take on the Blue Oval Boys. By that time, Captain Kirk will have cashed-in his chips, perhaps in more ways than one.

I know: cars don’t build people, people build cars. I have consistently and persistently argued that corporate culture ultimately determines an automaker’s success or failure in the marketplace. A public declaration of respect for your workers is never a bad thing. And there’s nothing inherently wrong (or innovative) with Farley exhorting FoMoCo’s extended family to move the metal; the alleged point of his “Drive One” marketing campaign. The problem is, once again, one of subtext and nuance.

Drive One’s underlying assumption: Ford has won– or at least drawn level– in the battle to build desirable products. Hence the recently launched national ads trumpeting the fact that Ford’s initial build quality is now “as good as Toyota’s.” This may be true, but it’s not particularly motivational. In fact, the statement does more to draw attention to and underline Toyota’s reputation for quality than give potential Ford customers a unique and persuasive reason to switch to The Blue Oval. For this, Ford relies on Microsoft’s SYNC gizmo, whose exclusivity is set to expire.  

Ford’s Drive One campaign is based on the same “chip on our shoulder” attitude that’s bedeviled the domestics’ thinking for the last decade or more: our vehicles don’t suck, people just THINK they suck because they're American products (excluding the Mexican, South Korean, Belgian and Australian thing). But don’t take my word for it. "It's a marketer's dream to be here right now because the reality doesn't match up with perception," John Felice, Ford-brand general marketing manager, told Automotive News. "It's that gap between reality and perception that this whole thing is designed to close."

Unfortunately, Ford dealers are down with that. "It's incredibly frustrating to be a Ford dealer and know we have the best showroom we've had and yet we don't have people coming in to consider us," says Ford-Lincoln-Mercury franchise owner Jeff Robberson. "The need for this campaign was huge." Robberson’s contention that Ford has the best showroom they’ve ever had completely ignores the other guys’ product lineup, and fails to provide a compelling reason for customers to darken his doors.

So here we are again. Rather than concentrating on making their products unassailable, or at least choosing a unique selling point and sticking with it, Ford’s marketing efforts are once again [still] focused on its customer’s supposedly ignorance, perceived bias and, let’s face it, stupidity. If anything, the Ford campaign’s stridency– “Drive One” as opposed to “Have you driven a Ford lately?”– indicates a hardening of the automaker’s indefensible, defensive position.

The “get your ass behind the wheel of one of our cars and then you’ll see why you should buy one” marketing strategy completely ignores important buying considerations: long-term build quality, depreciation (i.e. total cost of ownership), dealer service and, of course, comparative product excellence. Ford made a stab at this crucial component with its rigged Car & Driver pimpatorial comparo, then abandoned it for… this. Which is what? A farrago of ad messages wrapped-up in a command to take a test drive.

The wider, ultimate question remains unanswered: why? Why should anyone test drive a Ford? Even more crucially, what exactly is a Ford?

It doesn’t really matter how Farley’s followers implement the Drive One campaign (human viral marketing is, if nothing else, cheap). It doesn’t even matter if more people take a Ford for a spin in the next month than the previous six. When considering Ford’s chances of survival, the central and damning fact is that [ironically enough] Drive One focuses on four product areas: quality, safety, environmentally friendly initiatives and technology. That’s three too many.

You don’t have to be a professional branding guru to know you shouldn't market a product based on four disparate selling points (at least not without a single unifying concept). But it was my understanding that Jim Farley answers to that job description. Ford poached Farley from that most focused of car companies (Toyota) at tremendous expense, presumably to apply his proven expertise to Ford’s sagging fortunes. And yet it seems as if Farley’s new employer’s lack of focus (both figurative and literal) has infected his thinking.

Not to put too fine a point on it, “Drive One” is the same old shit in a different wrapper.

Taken on its own, the mess should disappear before the end of the news cycle. Taken as a glimpse into Dearborn’s corporate culture, it becomes a clarifying tale. Laymon shows us the primacy of internal politics and the resulting backseat relegation of everything else, including-– I don’t know-– building decent cars and trucks.

Backstabbing, career sabotage and secret alliances are all part of internal power struggles. They almost never profit a company as a whole. Good ideas get axed because they came from form the “wrong” exec. Good people get axed because they hook-up with the wrong team.

Sadly, this isn’t baseless or general speculation. A quick look at Ford’s Shakespearian history sets the stage. Henry the Second fought Harry Bennett, then Lee Iacocca.  Bill Ford struggled with Jac Nasser. And those are just the big public fights. Every day, smaller, darker battles wage. Just this week we’ve seen the Glass House Gang pull the rear wheel-drive (RWD) rug from under Ford of Australia’s proverbial feet, as Dearborn declared that America will handle the new global RWD platform.

In short, the Ford culture has been poisonously political since its inception. If current CEO Alan Mulally could do one thing to turn around the Blue Oval, eliminating these Machiavellian machinations would be it. Laymon’s announcement of a battle for succession both reveals the fact that nothing has changed, and amplifies the inherent discord.

Then there’s a Board of Directors, currently stocked with two members of the Ford family. The board alone has the power to pick Ford’s CEO. The CEO title itself derives from the position’s job number one: executing the directives of the board. Sure, the board takes recommendations from staff and company officers. But they are in charge. Ostensibly.

For Laymon to publicize the list of CEO succession long before Ford’s CEO is slated to leave tells us that Ford’s board is a bunch of bystanders– at least when it comes to their most important responsibility. 

Jabbering away in public about who’s next takes the attention from who’s now. The ‘now’ at Ford, is a pretty important time. Market share and money are fleeing the company like the Jews from Egypt. Mulally was brought on board from Boeing at enormous expense to perform miracles. He’s pointed the way forward and issued some commandments. Now is the time for everyone to line up behind him and get through the desert. It’s NOT the time to wonder who gets the staff when he’s gone.

Not that it’s wrong to have a line of succession. A responsible company has plans for both the untoward-– in case a CEO pegs it-– and the long term. The learning curve at a company like Ford is steep and treacherous. You need executives who can move into place and keep things moving. 

What IS wrong: waving everything around in public. Most of corporate American would do well to be more transparent. But this is one of those rare instances when the Glass House Gang should have kept the curtains closed. Most of the world expects Detroit execs to be clawing and conniving, but no one wants to see it. People want to see hard work, rallying ‘round the chief and honest effort.

People don’t always care what kind of company creates their cars. Porsche made Nazi war machines. BMW used slave labor. GM has closed plants across the country, off-shoring the work. But if there’s one thing Americans love it’s a come-from-behind Cinderella story. A Ford that pulled together and turned itself around would have something more valuable than steel and glass to sell. 

It was once common for someone to refer himself as a Ford man. Such loyalty has not completely gone the way of the fedora. It’s still achievable, as any Mac-evangelists or Harley rider will be happy to tell you, at length, in a language outsiders barely grasp.

No such luck for Ford. In the end, Joe Laymon has shown us that it’s still business as usual in Dearborn. FoMoCo are missing yet another opportunity to change, grow and inspire, not just in terms of design or technology, but as a community. It’s too bad. Who knows how many more chances they can afford to blow.

Not that Joe Laymon cares. The day after the interview broke, he quit Ford and moved to Chevron Corp.

The bulk of the Blue Oval Boyz blues arrived in the fourth quarter. Over the year’s final frame, the automaker posted a net loss of $2.8b, racking-up a $2.7b loss for the year. NorAm came-up $1.6b short, bringing the worldwide sector down $1.1b on the year. Special items took their share of the FoMoCo fortunes ($3.9b YTD). All that red ink leaves FoMoCo’s corporate coffers with $34.6b in begged and borrowed cash and cash equivalents (including VEBA assets).

Some of those bucks will (again) head off for blue collar buyouts. As reported by TTAC, Ford is (again) sweetening the deals and asking all hands on deck to abandon ship. In an effort to “help ensure we are able to deliver our commitments despite the difficult external environment,” Mulally is trimming fat (again) and (again) putting product development on the front burner, serving-up a new Verve and yet another version of Ford’s never-say-die Taurus/Five Hundred/Taurus. 

On the year, excluding special items, the Blue Oval Boyz generated just shy of $174b in revenues, an increase of $13.8b over last year’s total. Doing so while moving 12% less metal, in the current economic climate, indicates that Mulally’s minions might have made good on their promises to stop strapping [as much] cash to the hoods of moribund metal. It also leads one to believe that Ford is keeping its promise to trim low-profit, residual-killing fleet sales; reportedly down 18 percent.

As always, the devil is in the details. While U.S. retailers were able to scale back rebates in the fall, Canadians were cashing in on exchange rate induced bonus bucks. This occurred while the Loonie was soaring at unheard of heights. Therefore, the trend was more costly overall to the bottom line greenbacks. 

Also, a closer inspection of FoMoCo’s fleet reveals that Edge buyers may soon feel snubbed. Yours truly was aghast at the site of Ford’s last next big thing (in full Limited trim) on a rental lot. While sampling some of Ford’s finest wares at an airport near you may help brand awareness, flooding used car lots with ex-renters never yields positive results.

The Blue Oval moved 2.57m units (down 350k) in 2006. Ford floggers attributed more than two thirds of those declining sales to discontinued models.  What kept 3600 dealers (400 less than last year!) afloat: the new cross-border crossovers (Ford Edge and Lincoln MKX) and (believe it or not) the fresh faced Focus. 

Ford’s Edge bested predictions by 30 percent (130k units)– although Ford doesn't say how many of these vehicles ended-up in the aforementioned fleets. The Focus did nine points better after its launch, but it could well be one of the “rising tide lifts all B-segment boats” deals, heading  for a dead car bounce.

Meanwhile, what was once high margin full-size pickup truck paradise, Bloomberg reports that Ford is losing the battle on hallowed ground, in Texas.  According to market research firm R.L. Polk & Co, ToMoCo’s Tundra market share skyrocketed 79 percent in the Lone Star State, while the domestics shrank by five percent. The trend is truly, madly, deeply worrying, especially as Texan Ford dealer Sam Pack reports that Tundra sales “are coming from traditionally Ford buyers."

Heading into ’08, the Glass House Gang figures total U.S. new car sales will continue to slip to around 16 million vehicles, and shrink their piece of the pie right along with it. Ford’s (once again) revised market share target is now set at the “low end of 14 to 15 percent.” This translates into about 2.3m new FoMoCo products hitting America’s highways and byways in the year ahead. In the current and predicted economic climate, based on previous years’ precedence, moving the metal is going to get a lot harder before it doesn’t.

Bottom line: profits aren’t on the horizon. As Dearborn continues to “right size” its operations, its transplanted competitors are already there. No wonder Ford’s stock price is only slightly better than January ninth’s 22-year low. While there’s no question that posting a year-on-year improvement resembling Paraguay’s GDP ($9.9b) is nothing to sneeze at; that the gain still leaves a net loss more than twice the size of Belize’s GDP ($2.7b) is. 

In fact, calling Mercury a “brand” is like calling a sampling of the touch-tone hold music version of Greensleeves a classical music concert. The erstwhile automaker represents nothing to nobody in a fantastically non-descript way. Every vehicle Ford sells as a Mercury is either a drab clone or a dying breed.

Milans are mildly redesigned Fusions that sit on dealer lots for nearly four months. Mariners are half-blinged Escapes sporting fake wood, fake leather and a very large and cheap fake plastic grille. Mountaineers are Explorers who’ve lost contact with base camp (which has given-up and moved further down the slope). The Mercury Sable is so boring and pointless that most full-sized car shoppers don't even know it exists. And the last of the great Panther-platformed sedans, the Grand Marquis (which outsells the Sable), appeals to customers who make Buick buyers feel like spring chickens.

In short, aside from Jill Wagoner’s comely curves, there is nothing compelling about anything Mercury says or does. Of course, Mercury’s non-existence is nothing new. The division hasn't had a competitive product or a compelling raison d’etre for at least 15 years. By the 80’s, Mercury’s model line up was as it is today: a dumping ground for slightly tarted-up Fords.

To wit, when Ford finally took the imports head on with the Taurus (and won), Mercury simply sent in the clones. As time and corporate idiocy went on, the 'non-Ford' Scorpios, XR4Tis, and Cougars flopped with increasingly predictable regularity. (Not to mention the Capri – an Aussie-built shitbox convertible.) Thanks to the “Ford first” culture, scant marketing dollars and limited engineering sources translated into a unique line of one generation wonders that were never improved the next go round. Nothing of any unique value endured in the Mercury division.

For Ford’s not-so-new-anymore CEO, Mercury’s mediocrity is déjà vu all over again. Alan Mulally was keenly aware of the importance of the “branding issue” when he took the reins at Boeing. Mulally knew the aviation Goliath had too many fiefdoms, which translated into too many products, which competed with each other, for no good reason. Big Al worked tirelessly to eliminate pointless redundancy of processes and products. And corrected Boeing’s nosedive.

Mr. Mulally is obviously far less beholden to Ford’s old guard than the gentleman that came before him. He’s been there, done that, killed the extraneous bits. And here’s the truth: when Mulally finally gets around to taking a good hard look at Mercury, Mercury will be toast.

For now, Mercury is merely milquetoast. The company adds zero uniqueness to Ford's product line. Mercury has zero technology, zero differentiation, zero prestige, zero class-leading products and zero long-term priority for the Ford Motor Company. Hundreds of Mercury dealerships, thousands of Ford employees and millions of advertising dollars are wasted trying to counter a counter clockwise death spiral. Every penny that goes into turning a struggling Ford product into an even less competitive Mercury is a penny wasted.

At a time when Ford is struggling to generate a profit anywhere within its North American product portfolio, what value can be had with Mercury? None.

There is but one, obvious solution: kill the brand. While politicians and lobbyists (one and the same) within the Ford fiefdoms will fight for Mercury’s survival– offering Saturn-like visions of imported import fighters– it’s only a matter of time before the death man’s blade swings its inevitable arc. 

Ford is clearly– and rightly– bent on re-focusing its energies on becoming a smaller, faster, better carmaker. Once the corporate cancers known as Jaguar and Land Rover are removed from the body corporate, Mercury is next. I predict that within the next six months Ford will announce the closing of the Mercury division. The consolidation of Lincoln and Mercury dealers is such that the move will not be “another Oldsmobile,” requiring billions in dealer pay-offs.

Most likely Mulally’s minions will announce Mercury’s termination in conjunction with a 'realignment' of the Lincoln division (towards it original luxury roots). Lincoln will once again start building unique vehicles. It will become the anti-Mercury, if you will.

If Ford files for bankruptcy before the man at the top can get Dearborn’s ducks in a row, the end result will be the same for Mercury. It is, and has been, a dead brand walking. It’s time to say goodbye.

No question: FoMoCo’s financial outlook is festively plump compared to last year’s lump of coal. That’s mainly due to the fact that Alan Mulally’s minions have slashed and burned their way through the Blue Oval’s bloated bureaucracy. After paying off the United Auto Workers, they’ve taken an axe to Ford’s chronic overproduction, shuttering plants, eliminating shifts and generally cleaning house.

Bottom line: the Blue Oval’s downsized their cash burn from an estimated $17b per year, down to a measly $12b to $14b per year.

To celebrate this turn of events (i.e. better balance their books and lighten a debt load that makes Paraguay look flush), Ford recently spawned 62m more shares of common stock. And the stock found buyers too, thanks to the ongoing belief that you (and by that I mean Ford) CAN cut your way to prosperity. Why all Ford has to do to turn its ass around is… right-size the company to the point where production meets demand!

Only demand for Ford products shows no signs of recovery. The truth is, Ford’s “product lead” turnaround is still stuck in neutral. Indeed, the Blue Oval Boyz market share continues to erode. Reviewing their latest internal report card, Ford’s number crunchers cringed when even their employer failed to meet its modest market share projections: 13 percent. Currently (through November) Ford reps just 12.4 percent of the North American pie, and the slice is getting smaller by the day.

Not surprisingly, fingers were pointed outside the Glass House, at FBOC (Factors Beyond our Control). The usual suspects were all present and accounted for: the “faster than expected” market shift from SUVs and trucks to small cars and crossovers; the rise in fuel prices and the fall in the economy as a result of the sub-prime mortgage crisis. Absent, of course, was any acknowledgement that, at this point, they should know better.

Ford simply ignored the North American customer. As analysts (and TTAC) have pointed out on numerous occasions, FoMoCo’s mélange of motorized product is truck heavy. Currently, the Ford brand offers customers six car models and nine trucks. Mercury’s ratio is better at 4:3 (cars to trucks). Lincoln, FoMoCo’s luxury marque, is more vulnerable, with only two car platforms and three trucks.

With the demise of the Panther platform (Crown Victoria, Mercury Marquis, Lincoln Town Car), three car models will disappear from the Ford roster, resulting in an even heavier truck-based portfolio. The Ford Focus is FoMoCo’s smallest model, its only American economy car. The 2007 TTAC Ten Worst nominee’s moving slightly more units than the vine-withered model it replaced. The automaker’s next next big thing, the Ford Flex, is just that: another big “thing.”

Bottom line: through November, FoMoCo’s car sales are already down over 24 percent from last year. So even the few Ford passenger cars available aren’t winning over consumers.

Auto analysts Robert Barry (Goldman, Sachs & Co) and Rod Lache (Deutsche Bank Securities Inc.) both reckon Ford’s decade long decline is nowhere near done. Not unlike Toyota, Honda and Nissan, Barry realizes that “demand growth will be greatest for smaller cars” and that without them, Ford’s market share is simply “unsustainable.”

Worse, Barry also contends that Ford’s current production-related savings are fleeting at best.  Because of increasing regulatory demands (i.e. new Corporate Average Fuel Economy standards), Ford will need to spend more on each and every vehicle produced. In his analysis Barry figures the new UAW contract will save Ford about $4b in “structural cost reductions.” The automaker will need that money, and then some, to the tune of $11.9b, just to keep up.

The Detroit News reports that Ford Americas President, Mark Fields expects the 2007 US light vehicle market to hit its lowest mark in about a decade (16.4m units). Fields also expects that number to fall further next year, to around 15.3m units. Figuring 12.5 percent market share, that means Ford will move around 1,912,500 units. 

Of course this all depends on an economy that, the Federal Reserve figures, is poised to continue to weaken. “Modest” Mark said Ford is “planning conservatively.” They’ll “look at things on a month-to-month basis” and “take appropriate actions if things go worse than expected.”

Bottom line: Happy New Year!

Obviously, job guarantees are job one as far as Ford’s UAW members are concerned. Post-Chrysler bloodbath, UAW president Ron Gettelfinger declared that he didn't know the Three-Headed Dog's chew toy would lay off some twelve thousand workers immediately after his members ratified their contract, and mumbled something about recovering lost shifts when “other products” arrive. Whether Big Ron’s lying or not doesn’t matter. If he didn’t know, he should have. If he did, he should have told his members. Meanwhile, Ford’s UAW members can be heard muttering “fool me once…”

Let’s be clear (even if the union isn’t): the new Ford contract does not, can not include iron-clad job guarantees. Post partum, Gettelfinger pointed to a two-page list of specific product and investment commitments to 19 Ford facilities and declared "This is one of our proudest moments right here in our negotiations." The papers in hand were an executive summary; the document the UAW boss will submit to his members for their consideration. Could the actual contract afford Ford the opportunity to do a Chrysler, trim model deadwood and cut shifts/factories? Well, duh.

Any union member laboring under the impression that Ford will keep building its current product line-up at the current pace at its current factories even as it sheds market share, burns cash and heads for Chapter 11 is dictionary delusional. One way or another, everything’s going over the side of this sinking ship: blue collar workers, white collar workers, plants, shift, models, brands, the lot. If Ford agreed to a contract with an iron-clad guarantee to maintain even three-quarters of its UAW workforce, you wouldn’t call that document a contract. You’d call it a suicide note.

UAW Supremo Ron Gettelfinger knows this. But rather than read his members the riot act and send the most vulnerable to the lifeboats (again), he’s chosen to pretend that Ford is on an even keel. In fact, Big Ron's minions have negotiated a seat on Ford’s Manufacturing Operating Committee, the ever-so-successful secret society that makes decisions about Ford’s future products. Like that’s going to help secure anything other than Big Ron’s power within the union.

But wait! There’s less! The contract has other “issues.”

In truth, the automakers’ multi-billion dollar payments into the union-controlled (i.e. lootable) VEBA health care superfund have been the engine of the UAW’s capitulation. GM and Chrysler got something of a discount on the deal (cash in vs. expected members’ health care liabilities). But Ford got a genuine bargain; they’re “contributing” just $13.2b (from God knows where) into the union-run “trust” to cover the Ford UAW members’ estimated $22b liability. In other words, Ford’s paying 60 cents on the dollar.

But union members don’t pay 60 cent dollars down at the doctor’s office. How will the UAW make up the difference between what they’re getting from Ford and what it costs to keep their Ford members healthy? Well, either they’ll invest the VEBA money wisely (as trade unions always do) and increase their members’ nest egg by 40 percent just in time for their old age or… they won’t. In that case, UAW members will face larger co-pays, health care cut backs, restricted doctor choice, etc. Occam’s razor anyone?

To soften this inevitable hit on union members’ health care, as part of the agreement, the Blue Oval Boyz have agreed to spend the money they WOULD HAVE given to the VEBA on modernizing their factories by transforming them into flexible manufacturing facilities (multiple vehicles, one factory). The clear implication: the UAW took a hit for the team to “help” Ford invest in securing UAW jobs.

First, this assumes that flexible manufacturing is the key to FoMoCo’s future. Ford doesn’t even have ONE mega-hot product– never mind multiple variations (and let’s not talk about the company’s miserable history of badge engineering). Second, it assumes Ford has the money. If it does, it belongs to someone else; the company is mortgaged up to its logo. And third, it assumes that Ford’s signed an iron-clad guarantee in this regard. What are the chances?

More to the point, what are the chances the Ford rank and file will ratify this new contract– or at least get close enough to ratification that the UAW can throw the vote? It’s hard to say. But this is not a done deal.

David Kiley grades the new CEO in seven categories: Profit and Loss, Restructuring Savvy, Products, Marketing, Personnel, Culture Change, and The Vision Thing. While Kiley’s overall mark might be correct, he gets most of the individual scores wrong; grading high where Mulally struggles and low where he shines.

The biggest gaff is the A Kiley bestows for Profit and Loss. It’s based on the $750m profit that NYSE:F booked for its second quarter. That same 10-Q report showed that the earnings were buoyed in part by the one-time sale of Aston Martin. Palming-off Auntie Aston netted the struggling automaker $187m in profit, infusing nearly $1b in cash into Ford’s corporate coffers.

Ford’s positive second quarter is hardly evidence of a turnaround. As Kiley sticks a gold star on Mulally’s forehead for P&L brilliance, he acknowledges that Ford expects to record a full year loss for 2007 and 2008 before turning a full year profit (pretty please) in 2009. Selling Aston Martin was an overdue obligation, not an insightful act reflecting CEO enlightenment.

My grade for P&L: B. This assessment is propped-up by benefit of the doubt, since it’s too soon to be ascribing Ford’s [potential] financial performance to anything Big Al initiated during his first 365 days.

Mulally also earns the top mark from BusinessWeek for Products. Does this mean Ford finally has a replacement for the aging, uncompetitive US Focus? Don’t be silly. Kiley writes, “Mulally, of course, hasn’t had time to bring any new products to market… But Mulally has busted through the Ford culture and structure of regional fiefdoms that created waste and duplication throughout its global enterprise, and bedeviled his predecessors.” 

For this he gets an A? Ford’s American product pipeline is bone dry. In ’09, dealers will see a refreshed F-150, a reskinned Ford Fusion and Lincoln MKZ, and the “new” Lincoln MKS and Flex. And that’s it. Aside from renaming and fixing some of the worst bits of a poor-selling Taurus and its badge-engineered bretheren, nothing has changed down at the showroom… lately. Or will… soon. My score for Products: a C-.

It’s easily argued that challenging the automaker’s recalcitrant corporate culture has been Mulally’s greatest impact thus far. Yet BusinessWeek bestows a paltry ‘B+’.

During his tenure, Mulally has attacked the bureaucratic plaque that has slowly strangled the company’s lifeblood. Executive managers have been shaken from their organizational silos. Big Al meets with his executive committee daily and forbids them from hiding behind reams of financial reports. Executive must be fluent with their operational metrics and fiscal results. Most of all, Mr. Mulally has introduced a concept forgotten long ago by the insular silver haired boardroom Town Car jockeys. It’s a term familiar to the rest of the working world: accountability.

His influence has sent tremors of discontent throughout the gilded good ole boy network, delighting the few remaining FoMoCo ideologues who want to get back to the business of making great cars. More needs to be accomplished; I’d like to see some high-profile firings and organizational shakeups. But for a first year effort in the face of systemic opposition, Mulally deserves a resounding A.

Lest I be accused of harboring feelings of ill will toward BusinessWeek, let me point out that I fully agree with their conclusions regarding Mulally’s Restructuring Savvy (B+), Marketing (B), and Personnel (B-).

BW’s final assessment: FoMoCo’s new chief deserves an A for The Vision Thing. Certainly, some hope has been restored within The House of Ford, stemming from the former Boeing exec’s efforts to reform the culture and from its [fleeting] recent financial results. While this hope is fundamental to motivating the organization toward success, we have only seen baby steps towards recovery.

In year one, Mulally’s throw down to the status quo created some genuine organizational momentum. To really rock The Glass House in year two, he must capitalize on the big Mo. He must reach outside the myopic automaker’s in-house talent to recruit execs who aren’t afraid to question everything.

Early indications are that Alan Mulally’s a good thing for Ford. For the sake of Ford’s 283,000 employees, dealers, suppliers and shareholders, let’s hope he’s not too little too late.

[Read the BusinessWeek article here ] 

In Q2, Ford reported a $750m profit– a full billion dollars better than last year's second quarter results. Globally, FoMoCo’s finances ended ahead by $750m. Locally, the automaker’s NorAm unit fell into a $279m hole. While it bested the previous year’s $317m negative number, the improvement reflects drastic domestic cost cutting and company sell offs, not increasing sales. 

In July, Focus and Mustang sales slipped into double digit declines. The transmogrified Taurus did little better than it did as a Five Hundred (down 22%). The hecho en Mexico sedans lost their estrella status (Fusion -31.3%, Milan -36.2% and MKZ -11.5%). The cross-border crossovers found almost 4k less “Dave” like drivers than the month previous. And the F-Series looks set to decline some 200k units by year’s end. Despite incentives and zero percent financing, Ford's U.S. sales are slumping across the board: down 19 percent.

Given that The Big 2.8 are now fighting each other for less than 50 percent of the U.S. market, anyone who thinks Ford is poised for a profitable comeback is certifiably delusional. They just don’t have the goods. This paucity of product is a problem both now and, more worryingly, for the foreseeable future.

According to Merrill Lynch’s annual “Car Wars” study, The Blue Oval Boys are destined to place dead last in projected product replacement rates. Merrill’s analysts reckon Ford’s “Showroom of the Future” will be the oldest lineup in the entire U.S. car biz from 2008 to 2011.

The industry average total lineup replacement refresh rate currently hovers around 67 percent. Dearborn’s developers displace a mere 57 percent of moribund metal. FoMoCo just isn’t spending the money needed to compete in today’s fast-changing, endlessly evolving automotive climate.

As the F-150 proves, Ford knows how to refresh their vehicles. As the upcoming Fairlane demonstrates, they also “get” new models. It’s just that “Ford does not have the financial or managerial resources to keep plowing time and money into all its brands.” 

This piece of wisdom arrives courtesy Jonathan Steinmetz. Morgan Stanley’s automotive analyst is part of the growing consensus that Ford wants needs to sell Jaguar and Land Rover by the time the kiddies head back to school, while Volvo should be under someone else’s supervision by Christmas break. 

A shortlist of bidders has already begun poking and prodding the (un)balance sheets of the British PAG contingent, while Volvo is under “strategic review.” Mulally will try to protect Ford’s mechanical umbilical cord to the Volvo, but these are desperate days. Bottom line: FoMoCo is looking to unload all three beneficiaries of its ill-advised, mismanaged expansionist ambitions for about $16b.

Ford needs the money. Much of the automaker's $37.4b bank balance is already allocated. The Glass House Gang are spending $1.5b per year just to service their astronomical debt. While cheaper than ever before, the Way Fordward turnaround plan will still chip away an estimated $15b to $16b before its fiscal finale. That leaves Ford with just over $20b to keep their motors runnin’. Unfortunately all that and then some may be needed to fund the UAW’s September settlement.

The mavens at Morgan Stanley figure Ford currently carries a $30.9b (and growing) retiree health care burden. One of the key points in the current collective bargaining talks: excise that encumbrance by placing it into a union controlled trust fund (a.k.a. VEBA). It’s a “solution” that won’t come cheap: a one-time $25b cash and stock hit ought to do it. Short term pain for long term gain, no doubt. But any such payout would make things tighter than a duck’s ass in Dearborn.

If and when all these deals drop, if and when seven dissolute brands become four more tightly focused divisions and a UAW health care settlement goes down, FoMoCo could be sitting on as little as $10b at the start of 2008. As GM board member Jerry York pointed out back when The General was scraping the bottom of its barrel, that’s hardly enough money to keep the lights on. Ford would be living a day-to-day, hand-to-mouth existence.

That’s assuming the company generates quarterly results close to the plus side of the general ledger. As Ford CEO Alan Mullaly warned when Q2’s numbers were released, that prospect is highly unlikely. 

Ford is now in the toughest quarter; facing rising commodity prices, a weak housing market, higher borrowing costs and unreliable pump price fluctuations. Refreshed F-150 or no, Ford’s aging lineup will be hard pressed to hang tough, never mind return Ford to its days of thunder. In fact, FoMoCo’s second quarter profits are merely a blip on the life monitor of a terminally ill patient.

The Premier Automotive Group (PAG) was the brainchild of Ford's then-CEO Jacques Nasser. Goaded by former BMW superstar Wolfgang Rietzle, the terrible twosome aimed to take Ford where Lincoln [supposedly] couldn't go: the top tier of the world luxury car market. With PAG, Ford sought to escape the mass market pressure at home and begin turning profits on margins, rather than volume.

Nasser's plan wasn't beyond realization, but its implementation was deeply flawed. Arguably (and certainly in retrospect), Ford overpaid for tired assets. In '89, Jaguar cost Ford $2.5b. In '94, Aston cost… "nothing much." In '99, Ford paid $6.45b for Volvo. And in '00, Land Rover sucked $3.3b from Ford's corporate coffers.

Ford poured unspecified billions into its PAG properties to improve product quality. It also spent tens of millions on Rietzle's pet projects, such as a Berkley Square, London design center and a doomed, prototype PAG "super dealership." A combination of executive profligacy, beancounting and bureaucracy rendered Ford's early investments woefully inefficient and largely ineffective.   

In the last five years or so, Land Rover, Volvo and Aston all managed to claw their way to profitability. (Ford dumped Aston this year for $957m.) Meanwhile, Jaguar kept trying to build luxobarges on the cheap, aiming to create massive profits through hiked prices and radically reduced development costs. The result was– is an unmitigated disaster.

Jaguar lost Ford money from the git-go, and went downhill from there. In '06, Jaguar lost FoMoCo $715m, easily absorbing the profits generated by Volvo and Land Rover and plunging PAG into a $328m sea of red ink. A leaked internal memo indicates Jaguar will lose $550m in ‘07 and $300m in ‘08. Or more.

In the past, car firms were bought and owned by other car firms or industrial conglomerates whose core business had synergies with the car business. Chrysler's macabre financial results would have been a giant red flag to possible investors. Today, the game has changed.

When Dieter Zetsche put Chrysler in the discount bin, many openly wondered if there would be any takers. Having posted a $1.5b loss in fiscal ‘06, competing in the world's most competitive market against non-union shops, the company wasn't exactly a future growth superstar.

That said, Chrysler has been profitable as recently as ‘03. Truth be told, a $1.5b loss for Chrysler represented 2.1 percent of its gross revenue. It may look abysmal in absolute terms, especially for a shareholder, but at the macro business level, Chrysler's loss was small. No car firms stepped up, but private equity did.

Conversely, Jaguar's loss alone accounts for 8.4 percent of PAG's 2006 gross revenue– and that's including PAG's profits from Volvo and Aston Martin (before it was sold). Though it's an admittedly crude calculation, the figure illustrates the extent of Jaguar's plight.

With these kinds of numbers, no car firm is likely to buy Jaguar. So, in come Cerberus and Blackstone again, to announce their interest.

It's easy to see the potential "synergy:" Jaguar atop Chrysler as a luxury brand, Land Rover atop Jeep as a luxury SUV. Private equity, though, isn't interested in running a car business. It's interested in return on investment. Any offer for Jag and Landie will consist of pennies on the dollar.

According to Automotive News, Cerberus' latest "come to the table" offer for Jaguar and Land Rover is around 5.5b Euros ($7.3b). That's a pittance for a company like Ford, which currently carries $139.4b in debt. The cash would barely allow Ford to service their debt for a year, let alone pay it down.

Bidders may insist that Ford bundle po-faced Jag and Landie with higher-flying Volvo. While separating Volvo's platforms from Ford's products would be problematic, it's not an insurmountable challenge. And the final disposition of Ford's upmarket divisions could pave the way for a resurgence at Ford's original "premium" brand: Lincoln- if they have enough cash to fund it.

Even if Volvo escapes this round of selling, when the next financial period ends and The Blue Oval needs to feed its ongoing cash conflagration to make it through the next quarter, it's going to be awfully tempting to unload the quirky Swede. Will that be enough? To quote Oliver Hardy in Sons of the Desert, "That's all there is. There isn't anymore. Is there Stanley?" No, Ollie, there isn't.

A great many car people groaned when Ford grabbed the cat’s tail back in ‘89. Presciently enough, they worried that the American automaker wouldn’t “understand” and “respect” the Jaguar brand. Ten years later, they groaned again when Ford purchased Britain’s provider of “Chelsea Tractors” (Land Rover). BMW, OK, maybe. But Ford?

Analysts considered both purchases losers. Even if the brands could be brought up to snuff, they’d cost too much money to repair. When Volvo and Aston Martin joined the Premium Automotive Group (PAG), critics were more optimistic about those marques’ chances. In the end, both armchair analysts and the professional soothsayers were proved correct.

Last year, Ford lost $12.7b. The Blue Oval doesn’t break out PAG’s numbers, but insiders suggest the European brands lost $2.32b of that total. Volvo broke even last year and Land Rover climbed into the black. Aston Martin has moved on, leaving the cat holding the bag.

Despite protestations of corporate loyalty, Alan Mulally’s mob instructed Goldman Sachs and Morgan Stanley to launch “Project Swift” (a perfect codename for anyone wondering about Ford’s desperation level). The money men are set to handle the sale of Jaguar and Land Rover– though that may not be the best word to describe the divestiture. 

Land Rover is on track to sell about 195k vehicles this year, bringing in about $9b. After looking at the costs of doing business, Merrill Lynch and Co. told the Wall Street Journal they think the outfit is worth about $2.7b. Ford paid $3b for Landy ten years ago. Factor in inflation and, well, that’s sad. But it’s better than Jaguar's progress (or lack thereof).

Ford bought Jaguar for $2.6b (approximately $4b in today’s dollars). In the last three years, they’ve lost an addition $2.9b. Ford’s in the hole $600m so far this year. That puts Jaguar’s value in the negative numbers. While that’s not unusual in the car business– DaimlerChrysler had to dangle a plenty juicy deal to get Cerberus to bite-– it’s not good either.

Citigroup analysts reckon Jaguar and Land Rover could fetch $8b. As the marques share parts and production facilities, splitting them up could drastically reduce that number. Others don’t put the number that high in the first place.

This is where Volvo comes in. Although Ford has stated the Swedish brand is staying, when inside sources are questioned they tend to whistle and look the other way. Volvo is considered viable. To ensure all three PAG brands find a good home, Ford may have to throw in its Swedish contingent.

And where might that home be? Speculation is, at the moment, a lot less than rampant.

The aforementioned DaimlerChrysler is not in a buying mood, as they are in the process of selling their suffix. General Motors has been brand hungry since formation, but they’re a little shy this week (year, decade). Toyota traditionally favors natural conception. Renault said it isn't interested, as their cash flow has diminished as of late. Fiat has voiced some interest in future acquisitions, but like The General, their reach presently exceeds their grasp.

As recently as January, BMW AG publicly expressed desire to purchase Volvo. The deal never ripened. Considering the complications-– like the weirdness of BMW taking control of Land Rover seven years after selling it to Ford-– further discussions seem implausible. That said, many in Munich feel the BMW brand is stretched to its limits. Adding another brand, as the company did with MINI, may be the best way to grow the biz.

Ford sold Aston Martin to a consortium of investors including Prodrive’s David Richards and a pair of Kuwaiti companies. This financial formula portends the most likely scenario: Land Rover and Jaguar’s buyers will come from outside the current automotive arena.

Jon Moulton, of the private equity firm Alchemy Partners in London, told Businessweek he was interested in Jaguar and Land Rover “on an emotional level.” (He also thought the price would probably be too high.) Though neither company has made much or any money for the owners in the last 20 years or more, he insists the brands are “alluring.”

Private equity firms like Alchemy and Cerberus are not considered solid stewards for wayward automakers. They shun scrutiny, avoiding the kind of open communications one looks for in a happy family. They can, however, put food on the table. That’s about as good as it’s gonna get.

Mulally is looking at a lot of broken eggs. Ford’s dealer network is obese, its product line lags, UAW negotiations loom, healthcare costs outpace kudzu and the corporate culture is a capitalistic tribute to the Kremlin. But to an engineer, all things are simple. To solve even the most complex problem, just break things down into their smaller components, then repair, reengineer and reassemble. Simply put, simplify! 

That is, after all, how Ford made its bones. Crazy Henry designed simple cars that were easy to operate and maintain. He built them on simple assembly lines, with simple jobs that were easy to master.

Mulally understands how things work (or don't, as the case maybe.) Upon installation, he called for a company-wide audit to find ways to cut costs and complexity. Those auditors are just now sending in their reports.

They’re discovering (surprise!) that Ford wastes an obscene amount of money on unnecessary duplication. For example, The Blue Oval builds its products on no less than 30 engineering platforms. In contrast, Honda has six platforms and Audi has four. Sure, these companies don’t manufacture a vast variety of cars. But they make money and Ford doesn’t.  But wait! There’s [lots] more! No two of the vehicles Ford builds upon these 30 platforms share seat rails, springs, hood hinges and God knows what else.

Last January, Ford announced Sync, a voice-command system for phones and MP3 players. The company will start rolling out the new (soon-to-be-obsolete but that’s another story) technology in the fall– but not on Volvos or Land Rovers. The system is incompatible with Volvo and Land Rover’s existing electronics– even though the Swedish and British marques haven’t really been “foreign” for over a decade. 

Analysts call it Balkanization. Ford has four disparate operating units around the world, each with its own costly management team, research and development staff and production facilities. This wouldn’t be a problem if they shared, which they don’t.

No wonder Mulally recently read his execs the Riot Act: "There's no global company I know of that can succeed with the level of complexity we have at Ford." 

Mulally knows that streamlining production and development is like finding money. Audi was formed on this principle; the Volkswagen Group hangs onto the principle like grim death. By the time this century hits its early teens, Audi’s new modular MLP platform will be the one ring to rule them all. 

Lotus is vending their version of a universal platform: Versatile Vehicle Architecture. While not known for mass-production, Lotus is very adept at selling its services, and they’ve had a fair amount of interest in the technology. And why not? Automotive research and development costs are not receding. It costs about $1b to create a new platform, why not do it once or twice, instead of 30 times?

But even as Mulally the engineer strives to simplify Ford’s design, engineering and production process, once again aiming to replicate Toyota’s methodology (as he did at Boeing), Ford’s entrenched bureaucracy is hard at work, striving to keep things comfortably labyrinthine.

"The managers take refuge in the structure when things get tough,” Allan Gilmour, Ford’s now-retired Chief Financial Officer and Vice Chairman told BusinessWeek. “Rather than innovate or try new ideas that seemed risky."   As the popular management expression says, “Culture eats strategy for lunch.” One wonders if the engineer in charge of Ford gets it. Perhaps so. Mulally has pow-wowed with Gilmour twice since taking the reins. And Mulally ain’t no dope. 

Last September, Mulally’s underlings told him the Focus loses Ford roughly $3k per sale. "Why haven't you figured out a way to make a profit?" he asked (demanded?). The suits explained that Ford needs to sell lots of Foci to maintain its corporate average fuel economy (CAFE) ratings, AND that the car is made in a high-cost UAW factory. "That's not what I asked," he replied.  

There's an old engineer’s adage: you can have something good, on time or under budget. Pick two. Mulally's about to test the theory’s inverse. When you're out of money and, as your competitors jack-up their existing efficiency, out of time, can you still create something good? The answer is painfully simple.

The proposal to terminate the Ford family supervoting shares– by recapitalizing all outstanding stock to one vote per share– won 27.4 percent of the vote (up from 22.9 percent in 2006). While The Mutiny on the Where's the Bounty? failed, clearly, the crew's not fully on board with the Board.  

The biggest backers of the Class B breakup: the California Public Employees’ Retirement System (CPERS).  With $79.6m invested, the institutional plutocrat carries some weight. CPERS spokesman Brad Pacheco told The Detroit News (DTN) that the Ford family’s veto power rendered shareholder meetings “undemocratic.” Pacheco figures reform would inflate shareholder value. The common stock holders aren’t the only voting members thinking this way.

If Pacheco is anxious to generate a little extra cash for his employers, imagine Ford family members’ anxiety. “The family” has watched the value of their collective interest in the all-American automaker descend from $2.25b to $578m in the last seven years. AND they won’t see a dividend payment until 2013 or until Ford pays off its $23.5b loan. Think about it: Ford paid out $130m in dividends in ’99. YOU try living like a multi-millionaire on a couple a mil or less a year.

It’s no wonder that “the Family” got together three weeks ago to listen to two of Wall Street’s hottest M&A (Mergers and Acquisitions) wiz kids: Joseph Perella and Peter Weinberg of Perella Weinberg Partners. The dynastic dealing duo discussed the Family’s megalomaniacal role as shareholders, and whether or not they should consider “losing” some of that control.

Sources close to the meeting (but not the caterers) suggest that Billy Boy’s big sis, Sheila Hamp, and family adviser Bruce Blythe, are hoping for some kind of RJR Nabisco-sized M&A to bolster the Class B’s value and render some respectable remuneration. Meanwhile, FoMoCo Chairman Billy Ford’s stock amongst the cash-flow deprived family continues to sink. 

Camp Hamp’s concerns were echoed by common stock holders at Thursday’s shareholder meeting. In the opening minutes, Billy Jr. was called a “failure and a loser” by a Ford retiree. Whether or not he’s the biggest loser, Billy Boy has the continued support of his cousin (Edsel B. Ford II) and father (William Clay Ford Sr.). Apparently, Elena Ford is ready to scoop up any familial stock sell offs, in an effort to keep it all in the family.

Given the current state of affairs, the family should put those M&A guys on speed dial. Fueled by Ford Sales Analyst George Pipas’ monthly recital of “this was a challenging month” and “it fell short of our expectations,” analysts are still advising their clients to sell Ford stock. They still suspect that the Ford turnaround will be nothing more than a cash intensive whirling dervish that will eventually leave The Blue Oval broken, busted and bankrupt.

April’s perfect storm– a housing funk, lethargic consumer spending and escalating summer gas prices– did nothing to lift the gloom. Even monolith ToMoCo took a hit, posting the smallest month-adjusted gains since August 2004. Back in Motown, Ford faired the worst. The family is facing yet another month where double digit decreases (-17 percent) in retail sales are plaguing their highly leveraged company.

On Friday, Standard and Poor’s (S&P) analysts told UK investors there was little possibility that they’d upgrade Ford’s investment rating– currently five notches below investment grade– anytime soon. Analyst Robert Schulz predicted that a general U.S. economic downturn of just 10 percent could create “severe complications” for the automaker, leading to default.   

In his first appearance in front of the shareholders, CEO Alan Mulally calmly faced the music. With Billy Boy at his side, Big Al attempted to pour oil on troubled waters with a combination of piercing glimpses into the obvious and vague promises. “We are not where we need to be, but we are making very good progress”.

The 79 Ford shareholders gathered at the Hotel du Pont will be forgiven their skepticism. If dropping another thirteen points worth of sales, relying on incentives and being on the Corporate Library’s “pay for failure list” is progress, where do you think Ford is headed?  Ford Family members are starting to figure it out.

As the first ad’s fast-talking protagonists suggest, the Ford Edge is .2 seconds faster to 60mph than a BMW X5. And, as the same wisecracking thirty-somethings conclude in the second ad, internal Ford testing proved that the Edge’s interior is tighter lipped than the Lexus RX350.

True story? Not quite. In an echo of the Ford Fusion ads, where Car and Driver “helped” FoMoCo compare an all wheel-drive Fusion against a front wheel-drive Camry and Accord, The Glass House Gang has stacked the deck in their favor.

Mamet’s [not gay] guys could make their claim because the Ford vs. BMW drag race pitted the Edge SEL AWD– the optional four wheel-drive version– against BMW’s entry level all-wheel-drive 3.0si X5. In fact, the Edge AWD’s .2 second margin of victory is actually something of a coup for Germany; the least powerful X5 has 900 lbs. more SUV to lug and 25 ft.-lbs. less grunt with which to do it. 

As for quietness, listen closely. The ad’s characters say that the Edge is more silent than the Lexus in “a quiet test.” That’s “a” as in one test. While the Ford product has a lower decibel count at highway cruising speeds, the same can not be said about its NVH (Noise, Vibration and Harshness) during acceleration or stop starting around town.

To paraphrase the original P.T. cruiser, you can fool some of the people all of the time but not Art Spinella. The president of CNW Marketing Research argues that the ads will be extremely effective at getting consumers’ attention, but not generating sales. “Nobody goes out and buys a Ford thinking they’re getting a BMW”. Nor should they; which raises another problem.

Anybody remember Lincoln? Hello? Lincoln is supposed to be Dearborn’s Bimmer beater, not the blue-collared Blue Oval. Lincoln’s website lists both the Lexus RX and BMW X5 as the MKX’ direct competitors. Unfortunately, Lincoln’s badge engineered Edge adds extra luxury, a.k.a. weight. Bottom line: the X5 3.0is hits sixty from rest 0.3 seconds faster than the Lincoln. 

According to Barry Engle, GM of Ford Division marketing, they compared the Edge to the X5 because buyers typically trade in bigger buck whips for Ford’s CUV. That’s an encouraging sign for Ford, but disheartening for FoMoCo. Mamet’s marketing mavens seem the have forgotten basic economics. When the corporate mothership is struggling to keep its head above water, the higher profit, lower volume brand is a more appropriate flotation device.

Truth be told, FoMoCo needs to start banking bucks, fast. Yesterday’s first quarter results indicate that Mulally’s minions are getting closer to meeting their metrics, but they’re so far not out of the woods that they’re still deep in them.  

Through March ‘07, the Blue Oval’s bean counters pocketed some $400m in NorAm cost savings– and still posted losses of $614m. Optimistic analysts will cite Ford’s reductions in staff, improved revenues and the successful jettison of PAG pieces (namely Aston Martin) and ACH (Automotive Components Holdings).

Realists will notice North American operations scuttled $172m more than last year and that revenues are already down $1.6b (from $19.8b to $18.2b). And there’s still a multitude of moribund metal littering over 4000 U.S. Ford dealer lots.

The Fusion/Milan/MKZ triplets and cute-ute crossover twins continue to be hot items, but the rest of the metal is actually repelling costumers. Ford can now lay claim to having the oldest fleet in the biz. The Powers at J.D. report that only four percent of Ford owners traded in their old whips for something new from Dearborn. Translation: Ford is still losing almost half of their already shrunken client base. The world’s new number one automaker– and many others– are stealing Ford’s customers. 

Industry analysts predict Ford’s April’s sales to sink again from last year. They expect the Big 2.5 to be hit hardest.  Continued construction slowdowns are eroding truck sales quicker than California’s sedimentary cliffs.

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.