Why would gunslinger/investor Kirk Kerkorian want to buy Ford? After two decades living high off the [gas] hog, Ford’s still suffering the Mother of all Hangovers. The night before the day after, FoMoCo headed down to the Vegas strip and got hitched, polygamy-style (Hertz, Aston-Martin, Jaguar and Volvo). While town father Bill Ford's sobered-up and hired sheriff Mulally– whose drawn-up the divorce papers and cleaned-up the town– it still looks like tornado fodder. And here comes Captain Kirk, all guns blazing, looking to take over the joint. Why now? 

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.

"Ford on a good day is always about the people," declared Jim Farley, group vice president of Ford marketing and communications. Like many of these pre-digested pronouncements, Farley’s seemingly innocuous, feel-good assertion is fraught with unintentional meaning. What does Farley mean by “Ford on a good day?” What’s Ford about on a BAD day? Is Ford bi-polar? Manic depressive? Does it forget to take its meds? And what about the contradiction between “on a good day” and “always?”  And, most damning of all, Ford is NOT about the people. It’s about the product.

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.

Automotive News recently published an interview with Ford's group vice president of human resources. Joe Laymon mentioned the names of six brass hats Ford considers potential successors to their current CEO Alan Mulally. As Mr. Mulally has only been in office for just 18 months, anticipates a long stay and hasn’t seen his 63 birthday, the timing was, at the least, odd. More importantly, Laymon effectively turned a succession plan into a very public episode of Survivor Dearborn.

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.

Alan Mulally began last year as a passenger on a nose-diving Ford Motor Company. Clocking the company’s $12.6b fiscal flummox, FoMoCo’s CEO left no punches unpulled. "We fully recognize our business reality,” Big Al pronounced. “And we’re dealing with it.” Twelve months later, Mulally’s machine’s cut a new deal with the United Auto Workers (UAW), scaled back production and launched some new whips. During today’s announcement, Big Al proudly pronounced the new new turnaround a success. “Each of our automotive operations is improving, and we are encouraged by the progress.” That makes one of us.

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. 

Four vehicles. That’s all you’ll find on Mercury's web site. If you’re as “lucky” as I am, Mercury will respond to your browsing by asking if you want to spend five minutes on a questionnaire. Say what? Asking for five minutes of your customer's time before you even show them your products? That isn’t the smartest thing to do to a spam-weary public. Then again, once you click on the word "No" and return to the actual products, you begin to realize that the entire Mercury product line represents the brand’s not-so-smart existence.

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.

It’s beginning to look a lot like Christmas; at least in Dearborn. Ford has reinstated merit raises for their white collar workers. Bonuses for its blue collared brigade are under consideration. Ford’s global manufacturing guru Joe Heinrichs figures “it’s important to reward people for doing the right thing.” Which is… three straight quarters of besting Wall Street’s paltry projections and slowing the Way Fordward’s cash burn. With the long anticipated sale of Jaguar and Land Rover only days away, it would seem that Mulally’s machine is running smoothly. Yes Virginia, there is a Santa Claus.

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!

So Ford and the United Auto Workers (UAW) have hammered-out a new deal. Our fave sage Daniel Howes over at The Detroit News hailed the tentative agreement with the usual rhetoric: new paradigms, inflection points, fresh thinking, transformation and general bullishness. Yes, well, as over ten thousand Chrysler union workers recently discovered, there’s many a pink slip between the cup and the lip. Make no mistake: there are details bedeviling this Ford agreement. And the union rank and file are heading into the ratification process with their eyes wide open.

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.

The House that Henry Built was close to ruin when Junior Bill fell on his sword to bounce Boeing’s best to The Blue Oval. One year later, BusinessWeek (BW) gives FoMoCo CEO Alan Mulally an A-. And yet the reaper’s blade still hangs over Dearborn. And Mulally still toils to prove that his first year’s effort was worth $133.55 per minute (based on a 60 hour work week). Meanwhile, surveying the lay of the land post-Mulally, we reckon BW’s senior correspondent had more than sweetened tumbâk in his hookah when he penned this report card.

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 ] 

Last week, Ford exceeded Wall Street’s expectations by reporting a profit. A profit! As in, the American automaker took in more money than they spent! Pundits unfamiliar with the fact that Ford carries around so much debt it makes Atlas' planetary burden seem like a small backpack, oblivious to the missing ten foot pole marks on Ford dealers' inventory, hailed the news as a sign that the only Way Fordward is up. You know you need to worry when the CEO himself feels obliged to warn stockholders and camp followers that billion dollar losses lie directly ahead. And indeed they do. 

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.

Desperate times, desperate measures. Ford Motor Company has retained the services of three investment banks to advise it on the sale of Jaguar, Land Rover and, perhaps, Volvo. Flogging the remains of the Premium Automotive Group (post-Aston) will plug a giant hole in the automaker's balance sheet, give FoMoCo a cash injection to sustain short-term operations and fuel its do-or-die turnaround plan. As Oliver Hardy would say, well, here's another nice mess you've gotten me into.

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.