Ford Death Watch 26: Of Mice and Men

by Neunelf
ford death watch 26 of mice and men

Henry Ford knew a thing or two about motivation. “Enthusiasm is the yeast that makes your hopes shine to the stars,” Crazy Henry opined. “The grip of your hand, the irresistible surge of will and energy to execute your ideas.” Yes, well, Blue Oval morale is at an all time low. After watching Billy’s Boyz lose over $24k per second, faith in The Glass House gang is fading. Faced with a failing grade on an interim report and a Way Fordward that needs to be Fixed Or Repaired Daily, Mulally’s masses are about as enthusiastic as Dick Cheney’s hunting buddies.

It’s true; not even Mercury’s curvaceous raison d’etre (a.k.a. Jill Wagner) could rally Ford’s troops at a recent USO show. In a survey included with FoMoCo’s recent NorAm report card, less than 45% of the 15k employees polled expressed faith in the new new turnaround plan. Ninety-three hundred respondents simply don’t believe that the vehicles within Ford’s “showroom of the future” have what it takes to pull Toyota’s next victim out of its tailspin.

The survey-sporting internal audit indicates that Dearborn’s darlings are missing their spending targets. Sales are still falling quicker than Mercury in the cold. Save for one Edgey new product, January saw Blue Oval sales submarine expectations by some 10,600 units.

The reason is (again, still) a “greater-than-expected segment shift out of pickups and SUV’s.” Look for a greater-than-expected 6k more units to litter dealer lots by the time Spring rolls around. For those keeping score, at quarter’s end, an additional 1.5 percent of Ford’s market share will have melted away.

The report also predicts that the first three months of ’07 will suck up lots of Big Al’s newly leveraged liquidity. The Blue Oval’s bean counters have been clamoring for 50% cost reductions. This month’s savings barely scratch 25%. What’s more (much more), FoMoCo’s spending will miss the bulls-eye again in March. You don’t need a magic eight-ball to predict that the highly touted “we’ll be fine in 09” is quickly becoming a [crack] pipe dream.

The negative results are clearly a blow for The Man from Boeing. The report reveals Big Al’s first fiscal kick at the can as a swing and a miss. Not to put too fine a point on it, Ford’s North American unit is still failing, despite Mulally’s humbly mutated metrics.

Unbelievably, despite Ford’s failing grades, cataclysmic losses, epic layoffs, plentiful plant closings and uninspiring products, market mavens have yet to abandon Ford. Right about now, Ford shares are up 5.6% from this time last year. In fact, Ford’s share price is at its third highest market value. Wall Street Journal (WSJ) scribe Robert Schwartz doesn’t get the math.

Mr. Schwartz estimates that even if Dearborn’s Darlings can convince the United Auto Workers to convince its members to slough 25% of Ford’s health costs, The Blue Oval will still be $58b in the hole. Factor in family assets like Mazda, the Premier Automotive Group, Ford Credit and Big Al’s mortgaged moolah, and you’ve still got six billion greenbacks in the debit column.

Note: FoMoCo’s MoCo is MIA from this list. And therein lies the problem.

Market mavens currently ascribe the automotive arm a value of $39.5b. That includes the $17b three-year cash burn just to keep Mulally’s motor runnin’. To hit that valuation, the WSJ figures Ford needs a 4% pretax sales margin on $132b in sales. That’s just to maintain the current downward trajectory. A turnaround is going to be Ford Tough.

Based on the success at Nissan, turning this sum bitch around would require an operating margin of nearly 8%. Yeah right. It took Nissan six years and a Ghosn in the machine to get back in black, and Nissan didn’t have two 800-pound gorillas in the room: a bloated dealer network and a vapid product pipeline.

So, basically, Ford’s employees are right to be shit scared. To date, the fact that the corporate coffers are full and the Hecho en Mexico Edge is firing on all cylinders are the only positive pegs for psychological hat hanging. Or… not.

Ford has just announced that they’ll cough up $500 in dealer cash on an entry level Edge. While the top-o’-the-line 18” clad SEL and SEL Plus cross-border crossovers are commanding sticker price, the entry level model is languishing. Unless this stock imbalance comes good, the glut of entry level incentivized SE’s could end up destroying the model’s overall resale values or worse, end up in rental hell.

Henry Ford may have been a vicious anti-Semite and a generally loopy guy, but he knew business basics. “You can’t build a reputation on what you are going to do,” Hank famously pronounced. Unless and until Ford can live up to its promises, Henry Ford's corporate legacy is doomed.

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2 of 61 comments
  • Airglow Airglow on Feb 21, 2007
    Frank Williams: February 20th, 2007 at 1:25 pm Pete: Does anyone have the data? Is the Edge selling well or is it too early to judge? So far Ford has sold about 7,700 Edges. In contrast, Toyota sold 10K Highlanders and almost 12K RAV4s in January alone. I realize it's near the end of its run, but based on the number of 07 Highlander's I've seen in "Rental Car Hell", I’d guess Toyota is making way more Highlander's than it can sell at retail. The current Highlander is so bland; I'm surprised you don't fall into a coma instantly when you step inside one.
  • on Feb 28, 2007

    To answer your question Cavendel. . . "who would buy a focus right now?" The answer is: More people than buy ANY other car PERIOD. The focus is the best selling "car" in the WORLD since it's introduction in 2000. If that doesn't impress you well, frankly, you're not impressionable. Sure, they don't have every feature. . .they're not supposed to. They are supposed to be affordable. Now, compare them to the imports, honda and toyota are much more expensive and have even LESS in the interior and under the body. Nothing feels like a Focus, and the sales prove it.

  • Ollicat I have a Spyder. The belt will last for many years or 60,000-80,000 miles. Not really a worry.
  • Redapple2 Cadillac and racing. Boy those 2 go together dont they? What a joke. Up there with opening a coffee shop in NYC. EvilGM be clowning. Again.
  • Jbltg Rear bench seat does not match the front buckets. What's up?
  • Theflyersfan The two Louisville truck plants are still operating, but not sure for how much longer. I have a couple of friends who work at a manufacturing company in town that makes cooling systems for the trucks built here. And they are on pins and needles wondering if or when they get the call to not go back to work because there are no trucks being made. That's what drives me up the wall with these strikes. The auto workers still get a minimum amount of pay even while striking, but the massive support staff that builds components, staffs temp workers, runs the logistics, etc, ends up with nothing except the bare hope that the state's crippled unemployment system can help them keep afloat. In a city where shipping (UPS central hub and they almost went on strike on August 1) and heavy manufacturing (GE Appliance Park and the Ford plants) keeps tens of thousands of people employed, plus the support companies, any prolonged shutdown is a total disaster for the city as well. UAW members - you're not getting a 38% raise right away. That just doesn't happen. Start a little lower and end this. And then you can fight the good fight against the corner office staff who make millions for being in meetings all day.
  • Dusterdude The "fire them all" is looking a little less unreasonable the longer the union sticks to the totally ridiculous demands ( or maybe the members should fire theit leadership ! )