Ford Death Watch 7: Jump Down Turnaround

Another day, another turnaround plan. For those of you keeping score, Ford’s “Way Forward 2.0” is actually the third version in four years. In terms of strategy, the new, new plan holds few surprises; FoMoCo is simply super sizing their right-sizing program. On the credit side of the ledger… nothing much. New models still won’t hit the streets anytime soon. But the Street has hit Ford. On “Blue Friday,” Ford’s stock shed nearly 12% or $2b of its value. Investors and pundits alike are finally waking up to the fact that America’s number three automaker is in triage, with the crash cart standing by.

The latest round of surgery brings new meaning to the word “invasive.” The United Auto Workers (UAW) rank and file face the deepest cuts: all of union leader Bob King’s 75k plus brothers and sisters will be optioned. Ford hopes that between twenty-five and thirty thousand punch card people will accept one of eight offerings— involving various combinations of lump sum payouts, tuition breaks and health insurance. Employees have until November 27 to sign-up and sign out. All takers must be out the door by September.

The cuts reflect an increase in plant closings and “idlings,” from 14 to 16. The company has identified nine plants it’ll axe in 2008: Atlanta Assembly (Ford Taurus, 2028 workers), Batavia Transmission (1445 workers), Essex Engine Plant (695 workers), Maumee Stamping Plant (680 workers), Norfolk Assembly (F-150, 2433 workers), St. Louis Assembly (Explorer, Aviator, Mountaineer, 1445 workers), Twin Cities Assembly (Ranger, B-Series, 1866 workers), Windsor Casting (522 workers) and Wixom Assembly (Lincoln Town Car, 1259 workers). Sensitive to upcoming elections, Ford refuses to name the five other plants set for closure.

At the same time, fourteen thousand white collar Glass House inhabitants are due for defenestration. Ford figures all the cuts will save the company $5b annually. For now, the buyouts will burn through roughly $7b– in ‘07 alone. At the end of this, Ford reckons it will produce 3.6m units. That would slice FoMoCo’s share of the domestic auto industry pie to somewhere between 14 and 15 percent. Even at this new sub-Toyota size, even with lowered overheads, Ford will still have to score some major new product homeruns to meet their new goal: profitability by ‘09.

That’s going to be tough. The lost market share has gone to the competition. Despite announcing that 70% of Ford, Lincoln and Mercury “products by volume” will soon be new or upgraded, other than the cross boarder crossovers already on their way, Ford’s product pipeline looks decidedly dry. More Mustang variants, re-dubbed F-150’s, a V6 Lincoln flagship and a full-size people-carrying CUV are the only short term prospects. Two of these erstwhile saviors are niche vehicles and another contributes to the shrinking market that led to this debacle. The boxy (bold?) people mover will have its work cut out for it; Honda and DCX’s refreshed minivans are just around the corner.

Despite assurances that Ford will finish the year with $20b in the hopper, roughly half of those funds go to daily operating expenses. Just like GM, cash crunch time is coming. Blue Friday’s revelation that the formerly flush company is eliminating its stock dividend, saving $400m, indicates that liquidity has become a worry. Although Ford insists that none of the members of the Premium Automotive Group are up for sale, they are. Although the company claims it won’t sell a stake in Ford Motor Credit Co., it will. Bailed out parts supplier Visteon is also being cut loose. And FoMoCo will try to off-load 23 pieces of real estate it acquired last year.

It’s no wonder Billy's Boyz are still in surgery. Their previous doctoring was either too little, too late or too little too late. With the UAW’s inflexibility over at Chrysler and contract negotiations starting next year, it will be a long time before the patient will be stabilized– never mind cured. But the really scary part is that Billy Ford is still large and in charge, leading the Way Fordward. CEO Alan Mulally, who started collecting his gigantic paycheck last week, took a back seat during the press briefings. Mulally's contribution: "They are really trying to look through clear glasses and deal with our industry's reality." Oy they.

There is but one bright spark of hope in all this. Ford has decided not to kill the venerable, well-loved Lincoln Town Car. Could it be that someone in the increasingly-less-vast Ford Empire realized that if so many good products hadn’t been left to whither on the vine (Town Car, Focus, Taurus), if there had been some genuine fordward thinking, FoMoCo wouldn’t be desperately chasing lost market share in crowded segments? It may be a piercing glimpse into the obvious, but when you’re chasing anything, you’re always playing catch-up.