Ford Death Watch 44: Captain Kirk Bets on The Last Man Standing

John Horner
by John Horner
ford death watch 44 captain kirk bets on the last man standing

Why would gunslinger/investor Kirk Kerkorian want to buy Ford? After two decades living high off the [gas] hog, Ford’s still suffering the Mother of all Hangovers. The night before the day after, FoMoCo headed down to the Vegas strip and got hitched, polygamy-style (Hertz, Aston-Martin, Jaguar and Volvo). While town father Bill Ford's sobered-up and hired sheriff Mulally– whose drawn-up the divorce papers and cleaned-up the town– it still looks like tornado fodder. And here comes Captain Kirk, all guns blazing, looking to take over the joint. Why now?

Thanks to his investment “experience” with Chrysler and GM, Kirk’s mob have had a good look at the automakers’ books. They know that GM and Chrysler are doomed. But they also know that the domestic auto industry is too large for all three to sink at once– if only because of brand/national loyalty and popular access to Detroit dealers. In Motown’s game of last man standing, Ford's become the odds-on favorite. That said, it takes a practiced eye to see it.

In April, Ford, Lincoln and Mercury racked-up 189,247 sales. Retail sales (down seven percent) are not falling as fast as fleet sales (down 12 percent), but both are still headed for the outhouse. Zoom in. The refreshed, Volvo-derived Taurus is a flop. Comparing ’08 Taurus to the ’07 Five Hundred, sales were down 21.3 percent last month. Zoom out. Jaguar, Land Rover and Volvo added just 11,480 units. Ford sold Jaguar and Land Rover to Tata Motors; Volvo now accounts for less than 5 percent to Ford's U.S. sales volume.

Yes, the Edge, Fusion trio and revised Focus are still helping to staunch the wounds. But Ford’s share of the U.S. new car market is down 15.1 percent from last year, to 15 percent. And while there’s an upswing in car sales, none of these vehicles are generating the profit margins Ford needs to survive.

Now that the Explorer is lost (April sales were off by 38.5 percent, down 25 percent year-to-date), that task rests squarely on the F-150 pickup’s shoulders. What are the odds? Forthcoming refresh be damned; April sales of the country’s most popular vehicle fell 21 percent.

The market is beginning to wake-up to Ford’s cash conflagration. The money they’re burning is all OPM; Ford hocked everything down to the executive china and its famous Blue Oval. Liquidity is now a life or death issue. Although Fitch Ratings has downgraded Ford on that basis, the agency seems to think that Ford will turn the corner and achieve a positive cash flow by 2009. Unless, of course, more shit hits the fan.

The problem is, of course, product. There’s no doubt that Alan Mulally is kicking ass and taking names behind the scenes. Ford is becoming a smaller, leaner, faster and fitter organization. But Big Al’s done little to reenergize Ford’s branding or products. We still don’t know what a Ford is, Lincoln and Mercury are still gussied-up Fords, and Volvo overlaps everywhere. The new Flex, Fiesta, MKS and Taurus will all do well, but the competition isn’t standing still.

In short, where’s the vision thing? In truth, at the moment, as Kirk Kerkorian knows, Ford doesn’t need it. Assuming Chrysler files this summer– a probability of which Captain Kirk is not unaware– both Ford and GM will get a dead cat bounce. At that point, all Ford has to do is hang tough and not be GM, with eight brands stuffed with 40-plus lackluster products. When GM finally goes down, Ford wins. They’ll have all the time they need to [continue to] get their shit together.

Meanwhile, Kerkorian can’t lose. Ford’s stock will rise on the news of Chrysler’s fall. The head of Tracinda can sell his shares and walk with a gigantic profit. Even if he doesn’t bail at the new zenith, Kerkorian knows that Mulally’s Ford has the best chance of going the distance. Perhaps with a little strategic intervention…

As it stands, CEO Alan Mulally can ignore Kerkorian (and his minion Jerry York’s) advice. Thanks to the Ford family’s SuperShares, which give them 40 percent control, Mulally’s got “You Can’t Touch This” on his Sync. On the other hand… Ford has a long history of lynching outside CEOs. Donald Petersen turned Ford around in the dark days on the 1980s. Chief Executive Magazine named Donny "CEO of the Year" in 1989. In 1990, he was "retired" for resisting the naming certain family members to powerful board committees.

Short of shooting itself in the Mulally foot, Ford will be Detroit’s last man standing. Long term, there’s a line of gunslingers ready to take on the Blue Oval Boys. By that time, Captain Kirk will have cashed-in his chips, perhaps in more ways than one.

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  • Ihatetrees Ihatetrees on May 17, 2008
    menno: And, GM will end up paying the price. Unfortunately, so will thousands of workers and GM dealers (who are after all local businessmen and stand to lose a LOT of money when GM fails). I have some sympathy for GM's rank and file (although they could all use a Econ101 course from the U of Chicago). I have no sympathy for the so-called businessmen known as GM dealers. They've got state laws and legislatures in their pockets - with subsequent legal protections that most small businesses don't have. In UAW country, they have captive customers. There's a reason that NO automaker can roll out a national marketing campaign that says, "Get a New V6 MaliCamCord, Nicely Equipped, For $2x,000". It's probably violates many state franchise laws.
  • Fallout11 Fallout11 on May 22, 2008

    May 22nd followup: Ford slashes production, says it will not return to profitability until at least 2010. From the NY Times....

  • ChristianWimmer Sunak has apparently done this because his political party has lost so much support. Once the brainless masses flock to his political party again the trap will spring shut and bam - the ICE ban will be attempted to get pushed through even quicker.Honestly, Europe right now is a complete CR** HOLE thanks to the EU.Did anyone hear of the EU’s plans to make driving even more unattractive? A French Green Party politician introduced some really perverted ideas under the guise of “Vision Zero” (Zero deaths from driving in the EU) and of course the climate hysteria…1) If you just received your driver’s license you can not drive faster than 90 km/h - basically you’re stuck behind trucks on highways or can’t even overtake them on normal roads.2) If you are 60 years old, your license is only valid for 7 more years. If you are 70 years old, 5 years. If you’re 80 years old, 2 years. You are required to “renew” your license (and pay for it yourself) which will also determine if you are still fit to drive.3) The standard B driver’s license here allows you to drive vehicles up to 3.5 tons in weight. Under this idiotic proposal from that French nutjob, those 3.5 tons will decrease to 1.8 tons meaning that you can’t legally even drive a Tesla Model 3…
  • ToolGuy I blame Canada.
  • Syke This is one of those days when you come up with an article that I just live to comment on. I'm retired from (but still working at three half days a week - retirement was boring) Richmond Honda House, a Honda/Yamaha/Can-Am/Sea Doo dealership. No, I'm not a mechanic. I'm the guy who handles all the recall/warranty claims. Which between the three major brands, and a couple of small Asian brands is enough to keep me busy for about fourteen business hours split across Tuesday thru Thursday. Yes, the Spyders are reliable, but when they do break down they can be a nightmare due to you have to have a laptop plugged into one to do most kinds of service. First hint: You absolutely do not want to do massive aftermarket sound system upgrades to a Spyder. We've had nightmares with them in the past. I swear half our original customers back in the 2008-2010 period bought theirs to turn into a three-wheeled boom box, which would invariably cause voltage fluctuations in the electrical system, thus driving the various black boxes wonky and causing all sorts of problems.Those of you who decry computerization in modern automobiles will find that the Spyder is even more so. I've noticed that the Spyder has gotten a lot better since Bombardier dropped the original V-twin engine (same one that Aprilia used on their 1000's when they first came into the country) in favor of the current triple. Mechanical repairs to the drivetrain have definitely gone down.Used? The more recent models seem to have good reliability. No, not as good as the current Gold Wing, or any generation Gold Wing for that matter, but definitely within acceptable parameters. The older ones, especially the original 2008-2010 models, I'd recommend staying away from. How bad? During the 2008 recession, when motorcycle dealers were desperately hanging on, my office at Honda House was the single best cash flow for the company, totally because of warranty claims and recalls from the original models. Yes, Bombardier has gotten an awful lot better.Oh yeah, the company itself it decent to deal with on a business and support level. From my office, they're my favorite of the three, slightly ahead of Yamaha, and a night and day improvement over Honda. All you have to remember is that you're not dealing with Canadians, you're dealing with Quebecois. Yes, there's a difference, I was married to one for thirteen years.
  • Sgeffe How does this compare to something like the Polaris Slingshot?
  • Lou_BC I just don't like the C - pillar lines. The rear window doesn't flow with the roofline.