Ford Death Watch 18: Betting the Farm
To combat the commonly held (if accurate) belief that FoMoCo’s product pipeline is drier than a Vermouth-free martini, FoMoCo recently unveiled the “Showroom of the Future.” Ford ushered retirees, clock punchers and white collar grunts into the Cobo Arena for a glimpse at what may (or may not) be the “most important new Ford.” While they weren’t invited to sample Ford’s four-wheeled corporate Kool-Aid, the Detroit News reported that the attendees were suitably impressed. It may not have been enough to take the edge off the Edge’s delayed debut, but it did reveal a bit more about Ford’s immediate prospects.
The headline: Ford will [finally] re-enter the US small car market with a 1.8-liter four-door, four-pot B-segment vehicle. Amongst the sixteen other vehicles on display, notable Hail Mary passes included the not-so-secret Fairlane people mover, an in-yer-face F-150 refresh and an Explorer designed to not explore. Oh yeah, and some [more] pimped-out ponies.
Under product czar Derrick Kuzak, Ford’s new “global system” will ensure that these still wrapped presents make it to market faster than before. While that’s not saying as much as was perhaps intended, the Zephyr-driving twenty-eight year Blue Oval veteran revealed that the accelerated go-go gadget car process relied on CEO Alan Mulally’s global approach. By “eliminating redundancies, complexity and waste” the new system is set to shave eight to 14 months from the current gestation period.
Yes, well, this new system won’t be in place until the end of 2008. So Mark Fields’ year old promise of a bitchin’ B-car will come to fruition under a new US Prez. In fact, the hit of Ford’s secret show won’t grace population-reduced production lines until 2009 or 2010. It seems that learning (from the past or otherwise) is a slow and painful process for Blue Oval brass. With three to four more years of sales, the Japanese (and maybe even homegrown) competition will again have achieved– or, more precisely, cemented– segment dominance.
No surprise there. The Japanese have a long history of finding and then dominating markets their competition can’t see. For example, the transplants invented the CUV because they A) they lacked viable truck frames to create “proper” Gaijin SUV’s and B) Japan’s too damn small for them anyway. By the time the SUV-reliant domestics set their sites on the crossover market, the transplants had built a virtually unassailable lead in the hottest “new” segment.
SUV refugees currently have four dozen mostly Japanese cute-utes to choose from. Many more are on their way. As this segment is hitting its stride, Ford’s current most important new vehicle is the crossover-come-lately (in more ways than one). As before, while FoMoCo worldwide is re-tooling to become one nation under Al’s groove, the market will look to Japan, Korea or even China for the next big thing and leave Ford even closer to the Edge of bankruptcy.
In fact, segment leadership is becoming increasingly important to overall profitability. With slowing growth in the U.S. economy and the pinch of a housing slump being felt in mega-markets like California, automakers seeking a product led turnaround face a distinctly uphill battle. A Michigan based market research firm called IRN figures that 2007 could be the worst year for new car sales in a decade. They predict that roughly 300k less units will leave dealer lots, as the haves have less.
To combat slumping market trends, Ford recently introduced a massive buyout program, which expired Monday night. According to this morning's papers, 35k United Auto Workers (UAW) have decided to take Mr. Bill's money and run. This is excellent news. Trimming half of the company's active UAW workforce will bring FoMoCo's payroll in line with existing demand– provided the workers don't change their mind before the programs kick-in, and Ford's domestic market share doesn't [continue to] sink below their goal of a sub-Toyota 14%.
Of course, that's down from 25%. And the mass exodus is an incontrovertible sign of just how bad things are down in Dearborn. While the departed (including as many as 10k white collar workers) will relieve much of the ongoing pressure on Ford's bottom line, the payouts will add legacy costs and still put a big old minus sign on Ford's corporate ledger– and soon.
To bolster for this mega-hit and pay for the new “global system,” Ford done gone and bet the farm, using anything that was (or wasn’t) nailed down as collateral for $18b in new financing. While the severity of “all-in” asset restructuring indicates just how serious Dearborn’s darlings are about this turnaround, it’s still a huge gamble. Robert Barry of Goldman Sachs reminds us that most of these newly borrowed bucks will be burned by the Way Fordward.
Even with $38b in hand, Mulally’s Global Overhaul may prove to be too costly for a company that’s consistently late to the game. It’s entirely possible that the Ford showroom of the future will be a very empty place indeed.
Rtz on Dec 01, 2006
Ford Edge: Too expensive. At almost $30k or more it's just too much. Now if they were selling these for ~$12k.... What's this vehicle do for me? What's it got and why do I want one? Is it fast? Get good mileage? Have any special features? Is something new about it? Or is it just a restyled, underpowered, 4WD minivan? Can I get a diesel engine? Hybrid? Full blown electric or even hydrogen? A high performance model? Does it get good fuel mileage for next years hurricane season when gas goes back to $3 plus? Does this thing run on E85? What could make an Edge be more fun? Airbag suspension? Supercharged, or turbocharged? Take that Shelby motor and make the Edge rear wheel drive. Cause right now, that Edge just does nothing for me. I get to work and back just fine with what I got and my '80's Stang for ludicrous speed.
Jim H on Dec 01, 2006
Thanks dhathewa...I didn't relay that as clearly as I should have. Geeber...that's is truely what I meant...the car still ran fine at slower speeds. The plastics did start looking quite old...even the brake light covers, etc. looked very aged for a car just 4 years old. Don't get me wrong, I was very glad to have a my first new car...and it got me from A to B pretty well. But comparing it to my aunt and uncles civic dx, my car looked and felt much older and with many more miles than theirs. Seeing that theirs was 6 years old with 101K miles, I was a bit discouraged. :( The blue sparkly paint was awesome though. :) Pretty easy to spot my car in the parking lot.
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