Ford Death Watch 27: Staking the Raises
February’s sales figures are in. Ford continues to sing the blues. While FoMoCo’s spinmeisters invite us to savor the consistency of their domestic market share and clock their lessening fleet business, The Blue Oval’s retail sales are still slumping. The situation hovers somewhere between serious and six feet under. What’s worse, the domestic automaker’s execs seem bound and determined to shoot themselves in the feet, repeatedly. First, the numbers…
Ford has maintained a 13% U.S. market share average since June 2006. Meanwhile, Dearborn’s dealers moved just over 211k vehicles in the previous four weeks. That’s some 33k less than a year ago. While Ford’s PR flacks blame this [steady] decline on lower fleet sales, the sector accounts for less than half of February’s foibles.
Checking the dealer lots, some 603k FoMoCo vehicular orphans are still left looking for homes. Clearly, The Blue Oval Boyz need motor-city March madness to start now. Unfortunately, even if March sales come in and go out like a lion, Ford’s revenues will still be quiet as a lamb.
As the crossover twins (Edge, MKX) and Mexican troika (Fusion, Milan, MKZ) continue to lead the way Fordward, the gravy-train known as F-Series is spinning its wheels. F-Series sales are down twelve percentage points. Worse still, production of Ford’s most profitable of profitables, the diesel-powered F-Series Super Duty pickup, hit a bump in the road due to “supplier issues.”
Back in January, Mulally’s legal beagles filed a lawsuit against Navistar International Corp. for warranty claims. The engine maker threatened to cut supplies quicker than locks at the Spears’ household. The threat was realized Monday, when Navistar halted production of Dearborn’s 6.4-liter diesel, claiming short payments by the Glass House Gang.
Despite a court order putting those oil-burners back on the front burner (and forcing Ford to pay up), Navistar won’t be bothering their logistics teams any time soon. Getting the glow plugs glowing again will take time. When the lines were halted, Navistar cut back their blue collar workforce and kyboshed some parts orders needed to pound out the PowerStrokes. Even with a backlogged supply at the ready, when Louisville fires back up next week Navistar, Ford and their dealers will all be playing catch-up.
Truth be told, the Super Duty was already late to the party; Ford was scrambling to fill the near 37k diesel-equipped dealer orders when the production lines fell silent. Peter Nesvold of Bear, Stearns & Co. prices a one month lag at $1b in lost revenues. Even if Louisville gets back on track today, sidestepping this supplier drama won’t be enough to dodge some bigger bullets.
The credit raters at Fitch Inc. report that Ford’s former health care woes are back, and they’re bad. The 2005 union health care “concessions” have been outrun by rising costs. Ford’s health care tab now accounts for $490 to $705 per vehicle produced. While that amount will slide slightly next year, Fitch says costs will recommence their rapid escalation in ’09– and beyond!
No question: health care costs will take center stage at this year’s UAW contract talks. Ford (and the other 1.5) will “ask” the United Auto Workers (UAW) to follow the United Steelworkers example and pick up the tab on their retiree health care costs. Ford’s reportedly looking for a 25% reduction in their employees’ medical costs. Also no question: the UAW will tell Ford to go sing.
The Wall Street Journal reports that the UAW has begun accepting changes to its restrictive working practices. But any chance of pay conciliation pretty much disappeared when Ford’s Board of Directors suddenly decided that their $35m CEO and his minions deserved a raise. An SEC filing revealed that they’re bumping up Alan Mulally’s stock options by a cool million.
In a stunning move (considering the brouhaha surrounding Prez Del America’s Mark Field’s weekend Florida commute via company jet), the Board bestowed Big Al with a second set of keys for the corporate plane, so his family and guests can jet set without him.
But wait, there’s more! FoMoCo’s BOD also decided Mulally isn’t the only executive who deserves a little something extra in their pay packet. Mulally’s “one nation under a groove” approach means top ranking team members can now collect up to eight times their annual salary in compensatory bonuses. To balance out the old program, envelopes stuffed with undisclosed amount of cash were delivered to joyful execs.
Speaking of spondoolies, let’s finish this sucker with a quick update on the total tally for Mulally’s turnaround (you know, should the company’s planned return to black stay on track). I make it $11.18b. That’s up $2b since the last time we looked.
As thousands of Ford’s white collar workers collect their payouts and leave their “Knowledge Retention Toolkits” behind, as the UAW [rightly] sneers at Ford executives’ greed, the line between tragedy and farce is growing thinner. The final chapter in this sad saga is on its way.
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