Ford Death Watch 2: The Way Fordward

ford death watch 2 the way fordward

Last month, Toyota sold more vehicles in North America than Ford. Understandably, The Blue Oval Boys have refrained from public hand-wringing over their displacement in the US sale charts. But there is no underestimating the development’s damage to Ford’s corporate psyche. Newbie CEO Mark Fields was already deep into crisis management. Now, suddenly, it’s obvious that Ford’s turnaround cannot rely on pushing (deeply discounted) products and hoping and waiting for a Hail Mary pass. A brand new plan is set to be hatched at the end of the third quarter. The way forward is now in fast forward.

Like GM, Ford is downsizing to match market share. According to Harbour Consulting, Ford used 79% of its production capacity in 2005 (FYI: Toyota’s plants ran at 106%). Originally, Ford planned to close fourteen plants (including seven vehicle manufacturing facilities) and “cut” (a.k.a. buy out) 30k union jobs within six years. The new plan: lop a couple of years off the timeline. Speaking to industry analysts yesterday, Ford manufacturing chief David Szczupak promised that FoMoCo will use 100% of its production capacity by 2008.

The clock is ticking. Although Ford has a $23b cash hoard (Health Care fund included), the company needs $16b to keep the assembly lines rolling until the next product cycle. No wonder Ford is thinking outside the Oval. The sale of parts bin diva Jaguar and reliability krypton Land Rover is reportedly only a buyer away from happening. [As Mazda and Volvo account for some 75% of Ford’s current value and provide mission critical product integration, their sale is highly unlikely.] Ford Motor Credit and bailed-out parts supplier Visteon may also be in play.

With so many cards on the table, Ford has followed GM’s lead and turned to a high profile consultant for advice: Kenneth Leet. In 2003, President Bush asked the 18-year Goldman Sachs vet to be his undersecretary for domestic finances. That gig didn’t pan out. But when Billy Ford called Leet for similar guidance, Leet showed why bullshit walks (exact contract unknown). The mergers and acquisitions guru is reported to be on the prowl for alliance(s) with other automakers.

Nissan is the most likely target. Despite the initial rise in stock prices prompted by a possible partnership with GM, a Ford – Nissan alliance makes more sense. (Not much, but more.) Although the UAW would rather accept the bubonic plague than see Carlos Ghosn prowling Ford’s HQ, his arrival on the scene would certainly shake up the joint, and give Blue Oval’s Brass insight into Le Cost Cutter’s management style. Renault and Nissan would gain access to Ford’s distribution networks.

Yes, well, the Ford family holds 40% of FoMoCo’s voting rights. With such an oligarchy at the tiller, any outsider seeking a merger or alliance would be extremely wary. The set-up has triggered some fanciful talk. Rumors have the Ford family purchasing 1.9b shares needed to take the company private. For roughly $13b, Ford could find the way forward without the hassles of the SEC, the press or interim profit reports. While FoMoCo stock may appear cheap at the moment, it’s highly unlikely that the Fords would want to raid their personal portfolios for such an enomrous gamble. What does that tell you?

Well, listen to this from today’s Detroit News: "The market for subcompact autos in the United States could reach 600,000 units annually by the end of the decade, according to Mark Fields, president of Ford Motor Co.'s Americas group. But he says Ford will not enter this growing domestic segment until it has something different to offer consumers." At the very moment Toyota’ small cars are eating up the US market, at the very moment Ford should be rushing a killer B-segment car to market, Fields is publicly declaring a “wait and see” approach.

This from the same man who admitted that America’s bold move to more fuel-efficient vehicles is not a passing fad. "I'd rather be proactive than wish things would go back to where they were,” Fields told analysts and reporters. “Because I don't think they will.” Don’t look for much fuel conscious proactivity over the next six months. Yes, nine new Ford vehicles are set to hit the market in that time frame. But we’re talking about a Mustang variant (based on the Hertz edition GT-H), a four wheel drive Fusion and Milan (same car, different wrapper), an F-150 with greater towing capacity, the Edge crossover, a refreshed Ford Expedition (thirsty) and Expedition EL (extra thirsty).

It’s two steps way forward, one step way back. Although Fields remains publicly committed to putting Ford back in the black by 2008, it’s hard to imagine how he could achieve the goal. Ford will announce its accelerated restructuring plan by the end of the next month— at the same time its third quarter results hit the street.

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  • Chanman Chanman on Aug 14, 2006

    off on a tangent Is Chrysler pulls a Caddy - new Durang-based SUV for Chrysler. Lots of new interior bits, but the shape of the vehicle, the lines from the hood back, all scream "Durango!" Also some more pictures of the new Sebring and Pacifica.

  • Qualityg Qualityg on Aug 14, 2006

    I’m tired of Ford & GM financial bean counters/MBA pontificators who want to drain organizations of innovation, creativity and passion. Condense it all to the bottom line, in the box, or better yet, “paint by the numbers and don’t go outside the lines.” Boundaries cause employees to stop working, and worse yet, worry about what each other is doing as opposed to concentrating on what matters most to the customer! Too much gym fighting, step outside and fight the real battle.

  • THX1136 According to the cost for catalytic converter 'repair' is between $945 and $2475. They claim the converter cost itself can be up to $2250. Figuring $880 a unit doesn't seem too far out of line if the carbrain info is accurate. Wonder if gas theft is still going strong on the west coast also?
  • KOKing I'm not sure what to make of the small commercial van market in the US. There are a fair number of Transit Connects and ProMasterCitys, but Nissan/Chevy dumped the NV200 even though they seemed to sell well (though I guess Nissan decided to get out of the commercial space entirely), and I don't think Stellrysler ever bothered C/V-ing the Pacifica.
  • SCE to AUX "a future in which V8-powered muscle cars duke it out with EVs for track superiority"That's been happening for years on drag strips, and now EVs are listed in the top Nurburgring lap times.I find EV racing very boring to watch, and the lack of sound kills the experience. I can't imagine ever watching a 500-mile EV race such as Daytona or Indy, even if the tech or the rules allow such a race to happen.As for owning an electric muscle car, they already exist... but I've never owned a muscle car, don't want one, and can't afford one anyway. For me, it's a moot question.
  • MaintenanceCosts I don't and realistically won't drive on track, but I think the performance characteristics of EV powertrains are just plain superior on the street. You get quicker response, finer control over the throttle, no possibility of being out of the powerband and needing a time-consuming shift, more capability in the speed range where you actually drive, and less brake heat. The only "problem" (and there are many situations where it's a plus, not a problem) is the lack of noise.
  • JMII After tracking two cars (a 350Z and a C7) I can't imagine tracking an EV because so much of your "feeling" of driving comes from sound. That said you might be able to detect grip levels better as tire sounds could be heard easier without the roar of the engine and exhaust. However I change gears based mostly on sound so even an automatic (like a C8) that would be a disappointment on track. Hearing an engine roar is too important to the overall experience: so tracking an EV? No thanks!I've driven an electric go-kart around a track as my only point of reference and its weird. It sort of works because a kart is so small and doesn't require shifting plus you still hear the "engine" whirring behind you. The sensation is like driving cordless drill, so there is some sense of torque being applied. You adapt pretty quickly but it just seems so wrong. With a standard ICE car, even a fast one, RPMs raise and fall with each shift so there is time to process the wonderful sounds and they give you a great sense of the mechanical engine bits working to propel you.I feel track toys will always be ICE powered, similar to how people still enjoy sailing or horseback riding as "sports" despite both forms of transportation being replaced by superior technology. I assume niche companies will continue to build and maintain ICE vehicles. In the future you'll have to take your grand-kids to the local track to explain that cars were once glorious, smoke spewing, noisy things. The smells and the sounds are unique to racing so they need to stay that way. Often a car goes by while your in the pits and you can identify it by sound alone... I would hate to lose that.