Last Friday, Ford announced its largest production cuts in over two decades. The bold (not to say unavoidable) move comes in the face of evaporating truck sales; even large discounts on the formerly formidable F150 and Explorer can't move the metal faster than it's being built. With a debt rating that’s sleeping with the fishes, with the company’s “Way Forward” recovery plan in triage, with another disastrous quarter only days away, Ford is looking increasingly, irredeemably desperate.
The cutbacks are large in both scope and scale. Ford’s rolling production blackouts will hit ten assembly plants in total. The Blue Oval Boys will reduce output by some 21% for this year’s final financial quarter, shrinking total vehicle production to just over three million vehicles for the year (roughly nine percent behind ‘05 totals). Ford truck plants will fare the worst, losing 404k units from previous annual output targets.
That's not good. Last year, Ford’s F-Series pickup trucks accounted for nearly a third of the company’s 3.2m US sales total (or more than seven times Volvo's American sales). For the first time in three years, the F-Series will not reach its sales target— not even the revised 900k mark recently put forth by embattled CEO Mark Fields. With over 270k units depreciating on dealer lots, America’s best selling truck will bear the brunt of at least half of the cuts.
No matter how you look at it, coming-up short is gonna hurt. Ford’s Michigan Truck factory was once one of the world’s most profitable production facilities; through the late 90’s, it generated some $10b in annual revenue. While Ford doesn’t divulge production costs or profit margins for its individual vehicles, analysts indicate that each F-series pickup delivered $13k in profit. The evaporating truck market has put Ford’s cash cow on the barbie, and there aren’t any newborns ready to lactate greenbacks on their behalf.
Falling revenues are only half the problem. J.P. Morgan analyst Himanshu Patel figures Ford’s decision to downsize production will cost the company $1.4b this year, and around $2.7b in 2007. The main reason: Ford’s current contract with the United Auto Workers (UAW). Idled union workers will receive a Supplemental Unemployment Benefits (SUB) package. After an initial period of partial government support, Ford will have to pay them 95% of their normal take home pay for a 40-hour work week, for not working. Union members with at least ten years’ service will still receive full employer-paid health insurance.
Looking ahead, the UAW contract also stipulates that no union worker can be laid off for more than 48 weeks due to a decline in sales or production. While it’s doubtful that production would halt for that long, the 48 weeks is cumulative for the entire four year agreement. Short term, expanding their blue collar buyout program is the only way for Ford to staunch their “death by a thousand cuts” labor cost wounds.
Unconfirmed reports indicate that Ford will put buyout offers on the table to all their hourly workers in the next week. UAW V.P. Bob King has already stated that he could convince his brothers to stay home– for the right price. But none of this will solve Ford’s cash crunch. Only an immediate series of blockbuster new products and a new, more favorable union contract can do that— neither of which is likely.
Again, there's no immediate relief on the product front. Sales of fuel-sipping B-segment cars are up 43 percent and growing. In most urban markets, Honda, Nissan and Toyota dealers can’t keep up with demand for their Fit, Versa and Yaris, which are selling at full retail or, wait for it, better. Despite finally admitting the seriousness of this market, Ford has yet to announce a B-segment buster.
Meanwhile, Ford’s desperation is there for all to see. Yesterday’s announcement that FoMoCo would follow GM’s lead and offer up to 72 months of zero percent financing to anyone with a pulse is a clear-cut indication that Ford is willing to do anything to stay in business— including cheapening the brand and mortgaging their future. Ford isn’t even trying hard to hide the fact that they’ve thrown open their doors to sub-prime borrowers. "If you were on the margin for being approved for a loan,” Ford flackmeister Jim Cain said. “You are more likely to get a loan today than you were a week ago."
The question is, is Ford more likely to avoid Chapter 11 than it was a week ago? Ford's market share is still declining rapidly– from last year's 25.7% to this year's 18.1%. The company would like you to believe that the production cuts reflect a new, new realism and demonstrate management’s courage to make difficult decisions. Which may be true. But the old maxim “You can’t cut your way to prosperity” is just as true for Ford as it is for GM and DCX. Ford is still poised for breakup, merger or bankruptcy.
With the Focus as a 20th century holdover, how can Ford expect to compete? It’s Ford’s complacency and cynicism that has created this problem, thinking that one small car fills the niche.
I remember being initially shocked when LA Area Honda dealers were adding on a $1500 markup to Fits a few months back, even the non-Sport base models. In the bay area, the mark up was (reportedly) as high as $5,000
Then I drove one.
I still hate the idea of markups, but with no competition whatsoever, the Honda dealers were not totally out of line. It’s a free-market afterall.
A few days ago, Fod nixed the proposed Yamaha V8 for their new flageship MKS; opting instead to use the 3.5 V6.
Just today, Ford announced that it was considering going private.
Bold moves, indeed.
If you believe that Ford will survive by any means other than bankruptcy, there is a tremendous financial opportunity here. Long term Ford bonds are selling at a discount so they yield 9-10%(for example 2028 6.62% series at 72 and 2031 7.45% global secs at 76).
You can sit back and make 9-10% on your money and the only risk is complete bankruptcy which is not probable in the near term.
These death watch articles make for depressing reading. I keep trying to figure out how Ford could get out of its tailspin, but it will be tough slogging indeed.
Off topic, but since Jonny brought up how dealers are marking up the Fit, I thought I would run the TCO – Total Cost of Ownership – numbers for Hondas on Edmunds. Interestingly, the Fit costs $32,451 for 5 years, the Civic $32,045 and the Accord $33,940. Meaning that before being marked up, the Fit already costs a buyer more than a Civic and only $25/month less than Accord.
It seems to me that people are rushing to these B segment econoboxes a bit too fast. Once they realize the savings aren’t all that real, will they get sick of the econobox ride? I bet it gets to be a long commute on a short wheelbase after a while.
So, if your credit score is about the same as your cholesterol level, you can still get a 72-month, 0% interest loan through Ford Motor Credit? Sweet! But I still owe $10,000 on the loan for my 1992 Tempo. Do you think I can roll that into my new loan? I can? Even though I’m out of a job? AWESOME!
I imagine Ol’ Henry invading Billy Boy’s nightmares each night, taking his heir behind the barn and whooping him for not giving the people what they want at a price that makes sense. Then I feel better.
C’mon folks, this isn’t brain surgery. When did we last pay a buck-something for gas? A couple of years ago? The 2.5 have had at least two years of ramp-up time. Where’s your fuel-efficient small car product line?
Ford’s Bold Answer: “We’ve got a dusty Focus.”
Maybe in business, as in life, we get just what we deserve.
I think part of the problem is due to how long it takes to design new products and bring them to market.
I believe it’s still at least 3 years, or a rushed 2 years in some cases.
Flexible manufacturing facilities can help alleviate sudden, short lived, market changes, but those flex-facilities can’t do nuthin’ when it takes years to develop a new product.
Is there a way to design a vehicle faster? And I’m not talking about re-skinning an old dog.
It certainly is a scary time to be a Ford insider, but holy s**t, the UAW is kicking the big 2.5’s collective asses. 95% of your pay for not working? WTF? I can’t believe an exec signed up to that.
The problems at FORD are similar to GMs as a low life hourly worker at GM I
see this way 3 areas need to be dealt with in this order1st dump half the dealers and half the brands then dump half the bloated management
Last but not least [and this hurts to say]deal with the unions.
As a senior employee it gets you down to see hundreds of jobs go out the door every month,at the same time the layers and layers of the bloated white collar work force never get touched.
Its also painfull when you convince your non GM friend to buy a CHEV only to have him screwed around by a lousy dealer.to the point that he trades it in on a HONDA,where he was treated like royality.
I hope that FORD and GM can pull out of this but its gonna take a lot more than production cuts and buyouts
However long it might take to redesign a vehicle, it doesn’t answer the fact that Ford already has a new Focus in Europe.
>>Off topic, but since Jonny brought up how dealers are marking up the Fit, I thought I would run the TCO – Total Cost of Ownership – numbers for Hondas on Edmunds. Interestingly, the Fit costs $32,451 for 5 years, the Civic $32,045 and the Accord $33,940. Meaning that before being marked up, the Fit already costs a buyer more than a Civic and only $25/month less than Accord.
VERY interesting. But given how long some people keep their cars, I’d be interested in seeing what the ten year costs are.
In the Bay Area, with its huge markups on Fits, I wonder how much of the demand comes from people who want a smaller car for the convenience, and who are not afraid to drive them now in the era of side and head airbags, and the decline of SUVs. I do most of my driving in the ‘burbs, but if I lived in Boston proper, I’d consider trading the Accord for a Fit. Or a Mini Cooper if they had a decent engine.
logan, it’s not that ford (and gm) take too long to develope new models. hell, it it takes an extra year that’s not the end of the world. IT’s that they don’t do it for 8 or ten long years. Look at the stuff at ford: thats from the 90’s, focus, lincoln town car, mercury marquis and it’s ford brother. It’s not that they don’t have the time, it’s that they never got started until it’s years out and the competition is on their second re-design. You can’t support as many models as ford/mercury with a re-design budget that let’s your competitors lap the track on you. Either redo the stuff every four or five years or push it off the cliff.
I’ve heard that $10 billion/year figure before from that particular factory – talk about short-term thinking! Ford should be doing much better now for all that dough, instead it’s just more of the same groupthink, the most truck-dependent of the Detroit 3, and a merely okay lineup of cars, some of which are getting production whacked along with the trucks.
Supposedly some executives said years ago they weren’t going with the C1 Focus, that they would just continue to update the current model – that’s just one example of where the ax needed to swing.
Who else deserves a Deathwatch? VW?
It’s interesting. It’s clear the dealer mark-ups on the Honda Fit have pushed the price of that vehicle beyond what it is worth – and I think it’s a very good vehicle. I see an opportunity for Ford here – at least in the short-term.
While the U.S. Focus is a bit dated and no longer a strong competitor to the newly revised Honda Civic, I can see Ford making a case that for the same 15K (or more) the Fit is currently commanding can buy you a very well-equipped Focus. The EPA says the Fit gets 38 mpg on the highway (same as the Civic). The Focus gets something like 35 mpg.
Ford has a number of decent vehicles in its line up. Some have been flawed in recent years – but most have been emminently fixable. But when the sales stall, Ford usually axes a model instead of developing and improving it – and/or changing its marketing strategy for the product in question.
While Ford’s current U.S. product line is, with only an exception or two, rather uninspiring, I have reasonable confidence that’ll get turned around within three years. The part that concerns me is that Ford seems to have fogotten how to market and sell cars.
The New York Times ran an article at least five years ago about the Michigan Truck Plant. At the time the plant ran 24 hours a day with three shifts and produced the previous generation Ford Expedition and Lincoln Navigator. This one plant was responsible for 66% of Ford’s profits. Thirty-three months output from this plant would pay for Ford’s acquisition of Volvo. I remember reading in the trade news that Ford was cutting back to only two shifts because of declining demand and telling my wife that Ford was in trouble. Any company that relied so heavily on a single plant and product would be bound for big trouble.
As a former San Francisco resident, I can attest to the desireability of teeny cars.
1,000,000 cars in San Francisco, 300,000 parking spaces.
Part of a hidden city tax is the around $250 residents pay every month in tickets for parking on the sidewalk. Get home after 6:00 pm and there is simply no where to park.
Plus, gas is always at least $0.50 more per gallon than the rest of the state as there is one gas station for ever 150,000 residents.
It’s 95% pay TOTAL after you claim unemployment. Ford does not pay all of the 95%… At least that’s how it is in Michigan.
An interesting sidebar to the Ford Deathwatch meme: A fascinating insight into the history of inefficiency at FoMoCo is revealed in the documentary “The Fog of War“. McNamara, a Ford exec in the late 50s, describes how they had no methodology for firing people, so they would go into their office at night and chop up their furniture. When the fired guy showed up to an office of splinters, they knew they had been axed. That is the least of the bizarro world scenarios described. It is a very short bit of a long documentary, but very insightful into the dysfunction of Ford. Worth a view for that alone.
As for San Francisco, if you choose to live there you get what you deserve.
There are no excuses left for Ford:
DCX makes the 300; Ford: Crown Vic
GM/Saturn for god sakes makes a decent roadster; Ford: uh….
Great B cars from Japan; Ford: Tired Focus.
My dad worked most of his adult life as a Ford exec and this is certain: labor and management are totally adversarial and hate each other’s guts. The Union will see the company go down before giving back benefits.
and will richard please tell us where to buy the bonds he mentions, and also explain what the hell “global secs” is? i like the way it sounds.
I live in SF. Fits fit the city. Moreover, driving a *Ford* in this town is not socially acceptable, except as a city-owned fleet car, or a dubbed-out Mustang GT in the Fillmore. B-segment Hondas, Scions, or Nissans lend the driver an air of practicality, not the cheapness that a Focus, Cobalt, or, God forbid, Neon would be sure to bestow upon their driver. MINIs are a dime a dozen in my neighborhood, and for good reason: they fit in parking spots where your Accord (or Focus) won’t. Small cars make a lot of sense here, but this city is not much like your average American suburb, where Ford still sells most of its products. I wonder, given Ford’s sunken status, if they would even be able to sell many B-segment cars here… But in the end it doesn’t even matter, since they don’t have a car to sell – until 2009. Nice work, Bill.
Now Playing “Ford’tanic”
Women,children and union officials dressed like women please exit first.
Ryan makes a good point. While it may take years to create a new vehicle from the ground up, surely it would take less time (and money) to modify a Euro-spec (or World-spec) car to meet US crash and emissions standards.
I was in SF twice. You think I would have learned the first time…
I know I’ll probably get flamed for this, but I don’t see how it’s labor’s fault that Ford hasn’t had a car people want since the Explorer in the early 90s. If the UAW was calling the shots on what cars get built, then it would be fair enough. It’s like saying Enron wouldn’t have been bankrupt if they hadn’t had to pay all of those damn secretaries.
Ford could have done any number of things, including taking the lead on hybrids before Toyota did instead of their “me too” Escape. Or…something. I’m not paid to think up their ideas for them.
I’m sure you could tell me fifty things that the union did that were outrageous, and I can see that a lot of their benefits are whacky, but at the end of the day, those are the guys out of work for someone else’s mistake.
None of that would be relevant if Ford’s higher ups did their job right.
I bought a Hyundai after the head gasket went in my sable at 77K and the transmission started to go at 96K. The 10 Year 100K warranty would have covered both repairs on a Hyundai. making people pay more for a warranty that is free at hyundai is ridiculous. Refusing to admit the heads were torqued down wrong and the transmission was improperly designed for 9 years straight is hubris at it’s finest. Apparently others like me decided to skip the ford dealership in the last two years and it shows.
My father drove Fords for 52 years and he now drives a Hyundai. I drove Fords no matter what but the next car for me is japanese or korean. I really don’t give a $hit if Ford and GM go down, the other companies will take their place within 2 years.
When did
Found
On
Road
Dead
start?
Anyway, the story I heard on the Focus was that North America didn’t get the new Euro Focus because Ford lost a lot of money on all the recalls the Focus suffered from. They opted to reskin the car and retain most of the factory tooling to try and make some money.
If GM (US largest company) and Ford “go down” no one will have enough money to buy ANY car. Large sections of the US economy are linkaged directly to domestic auto manufacturers and there demise will affect you in ways that you can’t possibly imagine. Even Toyota admits it cannot afford to loose GM. Be careful what you wish for.
Aside from the Euro-Focus, why can’t Ford also import the Ka and Fiesta, two very successful subcompacts that are sold in Europe and South America?
I’ve read that Ford sez the Euro-Focus is too expensive to import (why?), but isn’t having zero market share in a quickly growing market segment just as big of a loser?
stormj, you are correct that it is FoMoCo executives who are to blame for deciding what gets built. However, it is the UAW’s fault for the exhorbitantly high health care, pension and hourly wages Ford must pay (and subsequently pass on to the consumer) in order to employ the workers.
How many other jobs do you know where the company subsidizes government unemployment up to 95% of the pay? How many other jobs do you know where laid off senior workers are still covered by the companies health care (fully paid for by the company)?
Ford can’t make the same profit margin (or any profit) on the smaller cars BECAUSE of the UAW, which is why they don’t make them. They eschewed the small car market in favor of the (then) highly profitable truck and SUV market.
gearhead455:
August 24th, 2006 at 2:26 pm
“It’s 95% pay TOTAL after you claim unemployment. Ford does not pay all of the 95%… At least that’s how it is in Michigan. ”
This is correct, Ford has to supplement the government funded unemployment policy (usually 1/3) to reach the 95% mark. Employer is on the hook though if there are any delays or errors in filing.
quote gearhead: Even Toyota admits it cannot afford to loose GM.
It is true there is an odd relationship there that includes design sharing (Vibe / Matrix) and production sharing. How many people know that you could buy a Toyota Cavalier in Japan for a few years? JDM Tite Yo!
Sharing tech between brands like Mazda and Volvo and Ford’s own cars (at least in Europe) is the right thing to do.
Unfortunately for Toyota, they took the sharing a little too far. The Matrix has a very cheap, plastic feel too it, something I would only expect from the Big 2.5. It’s styling is nice and functional, but I could not get over how ‘cheap’ the car felt.
OK, I understand the American’s won’t spend for a small car attitude at Ford. But come on, it’s obivous that the amrket has changed and a new small car dynamic is happening. So where’s the Ford Escort rebadged Mazda3 as an answer to the B Segment hole in the line up. This is not rocket sience people, slam a blue oval and a Escort sticker on the thing and start shipping. The Mazda3 is already engineered for North America, so what good is controlling Mazda if it can’t help you out in a pinch. The “leadership” at the Blue oval are clueless.
We’d all like to blame the UAW, but once again the blame rests squarely with GM and Ford. Since the Japanese began building American manufacturing facilities in the 70s how many new plants have Ford and GM built in Michigan and other forced union states while their competitors built new plants in right-to-work states? Their corporate responsibility to their shareholders is to compete and remain profitable. They have failed by choosing to coddle the unions rather than compete on level ground.
They are also at fault for giving in to the unreasonable demands of the unions. The attritition those contracts have taken on both companies has been far more expensive than any short-term damage a strike might have done. GM and Ford have failed to stand up to the unions and demand reasonable terms and they are now paying the price for letting the UAW walk all over them.
If I were in management at Ford I’d announce to all of the right-to-work states that I was looking to build some new factories and oh can I please have some massive tax breaks? I’d build new buildings and truck the tooling and equipment lock, stock, and barrel to the Southeast. This could be accomplished in the time remaining in Ford’s current UAW contract, and when the contract expires, good riddance.
The UAW contract has an exclusivity clause – if Ford attempted to build a new plant that did not use union labor, that would break the contract, and Ford would lose the legal proceedings.
The fact is the unions will take the company down rather than accept reality- they are used to very lucrative compensation, which is why so many of them have never worked anyplace else – they make more than they could doing something else.
Ford is screwed. Take a look at this list of vehicle offerings:
http://auto.consumerguide.com/Search/index.cfm/type/new/make/1602/name/Ford/
They have nothing.
For those of you that blame the union for the high cost of health care and pensions, please keep in mind that Ford (and GM, and DCX) management signed those contracts as well.
It’s like having your kids threatening to cry if you do not give them ice cream for breakfast. Either you tell them no and listen to the crying, or you end up with fat, lazy kids.
My take on the UAW is simple. It was the union execs job to ask for the moon and the sky, it was the ford execs to say no. There would have been strikes but it has become a pay me now or later scenario. Ford & GM kicked the can down the road and now the road has ended. Heres where the high labor costs and rigid work rules cost ford. Every time they have to spend either more man hours or dollars on labor than their non union competitors, they have that much less to spend on material, engineering, new plants etc. For every year a toyota or honda can skate by under the union radar (the uaw has lost in every single organizing drive at a foreign owned auto company.) they have extra money to put into the product (and yes some more into their pockets, thus they are profitable) The union situation only works if this were europe, everyone has the union no exceptions., no two tier wage and benefit packages. I am not saying which is right, just the facts. The foreign auto companies have to take the uaw or the native ones have to cut it loose. The road is ending in the next couple of years.
Ford is in a position to break the union. If the union does not accept Ford could go C-11. Either way they will lose there jobs… so their balls are in a vice that is slowly tightening no matter what.
GM just made the union flinch, next is Ford than Chrysler.
I wonder what is going to happen to the “GM Death Watch” when GM reports a modest profit next quarter. My prediction is that you will not here a damn thing about it, or it will be spun negative on TTAC. Perhaps “GM Life Watch” is in order.
Ford’s serious troubles may very well help GM recover from their large financial losses and market share. At the very least it may give them some breathing room to figure out what to do.
Gearhead 455-
Don’t hold your breath , you won’t ever hear any backpedaling from the GM bashers. What they really need to do is take an economics course, maybe then they’ll realize that companies like GM don’t simply go under. There’s too much to lose for everybody, especially for the Republicans. Do you think the next GOP candidate wants that hanging over his head? The bashers also need to stop judging GM from their experience at Avis, don’t they realize those cars get the mother loving @#$% beat out of them? The fact that they are so durable is a testament to GM reliability.
Oh, one more thing, will somebody please explain to me where this notion of cheap interiors in GM versus Toyota, Honda, etal comes from? Sorry, that point is totally lost on me, I mean every car made nowadays has a primarily plastic interior.
Ford & GM UAW? – You are going the way of the Dodo Bird
Now that Ford has joined GM and announced its next buyout plan for workers the UAW locals are again in reaction mode wondering what to do now.
http://qualityg.blogspot.com/2006/08/ford-gm-uaw-you-are-going-way-of-dodo.html
Since they need to break up the union anyways, why not break the contract now and fire everyone, and rehire those who are willing to negotiate.
Then you can lean down your work force at the same time, kill 2 birds in one stone.
LOL! I know, someone on here blames GM because the Toyota matrix/ Pontiac Vibe has a cheep looking interior. Ummm What? I know first hand that GM had little to no input on the engineering of the Pontiac Vibe or Toyota Matrix. Sorry to shatter your aluminum foil hat wearing GM conspiracy theory… That’s all Toyota baby, and it’s built just like the rest of them.
I wish more people would look through the fog of your own perception for once.
montess, do you not have reading comprehension skills? No one is saying that GM or Ford are going anywhere. Every single time you chirp that GM is not going any place, you prove that you are not comprehending anything anyone is saying. Chapter 11 does not mean that they close the doors and disappear off the face of the planet. It simply means that they have finally spent more money than they make, the coffers are dry, and unless we file Chapter 11 we’ll have to close the doors.
You clearly need the economics course. Tell me, how does a company expect to stay in business if its annual costs continually exceed its annual revenue? Do that and you’ll get a Nobel prize in economics. You need to at least break even to stay in business. GM has been posting huge losses, losses in market share, and declining sales. They are predicting a good third quarter, but only by buying out workers and cutting costs.
By the way, GM went to Bush, hat in hand, and asked about a bailout. Bush told them to pound sand.
gearhead, GM will only turn a profit in the coming quarters due to cost cutting, not increases in market share or increases in sales. They are still too truck and SUV dependent. Last quarter their US operations sales dropped 17 percent. I am not making excuses, but until they start clawing their way back into the market share, any profit will be short term gains.
I’ll say it again, I want American manufacturers to survive. Competition breeds innovation. I like the F150. I think it is a fantastic vehicle. I love the 300C, Charger and Magnum, though they did chince on some of the interior components. The new Corvette is getting rave reviews (primarily because it was conceived, designed and built by men with a passion unlike the rest of GM). Ford’s European division makes some damn fine cars (European Focus for one).
Are any of us wishing for their departure? Not I, but then again I am not willing to buy their average crap either.
“Since they need to break up the union anyways, why not break the contract now and fire everyone, and rehire those who are willing to negotiate.
Then you can lean down your work force at the same time, kill 2 birds in one stone.”
Because there would be a huge class action lawsuit. The only way they would be protected is by C-11 and it would be WAY WAY WAY (did I say way?) cheaper to buy out the workforce to break ties with Ford.
Will Ford survive? That question was asked in the early 1980s when Ford was building oversquare old folks cars. Then came the Taurus and saved their bacon. Is there a Taurus-like savior car on the horizon? Unfortunately, no. Ford is going to have to cut development time, jettison aged platforms like the Ford Crown Vic (with underpinnings that date to the late 1970s) and a car that seems new in comparison, the aging Focus. Nobody wants SUVs and huge pickups that take $100 on a good day to fill. Doesn’t look good for Ford.
Market share this, market share that… STOP IT! Did you know that GM builds more than 2 times the amount of vehicles now than when they had more than 50% of the market share in the 1960’s?
Just because GM is cutting cost and production #’s does not mean it will not make money. It’s all about the appropriate production rate with a profit generating low overhead.
They said the same BS in the 70’s 80’s and 90’s. Now we all hear it again…
Ford and GM are going nowhere. You can write “Death Watches” until your blue in the face and it just will not come true.
Comparing Hyundai to any other automaker is like comparing apples to oranges. Hyundai is an extremely large company that does not depend on automotive profitability to survive or flourish.
They are in fact “buying the market” with product that is improving yearly.
Once they have become a mark associated with quality and reliability, watch the price go up.
The company appears to have adopted the business philosophy of Henry Ford. Become a dominate factor in transportation. Rail, Shipping, and now automobiles.
While I don’t actively disagree with the Death Watches, they are a bit tiresome. It’s like reading about murder or something all the or something depressing in the paper.
Give us some positive stuff too! Doesn’t have to be on the 2.5.
—–I think part of the problem is due to how long it takes to design new products and bring them to market.
I believe it’s still at least 3 years, or a rushed 2 years in some cases.
Flexible manufacturing facilities can help alleviate sudden, short lived, market changes, but those flex-facilities can’t do nuthin’ when it takes years to develop a new product.
Is there a way to design a vehicle faster? And I’m not talking about re-skinning an old dog.—–
Ford has a number of decent vehicles in England and Europe. Development probably isn’t needed.
—–It certainly is a scary time to be a Ford insider, but holy s**t, the UAW is kicking the big 2.5’s collective asses. 95% of your pay for not working? WTF? I can’t believe an exec signed up to that. —–
The execs that signed those are long gone. Sipping a pina colada offshore some island.
Anyway this auto meltdown is only the opening act for the main event. That happens when those inflation adjusted, very generous public service employee pension obligations really start to kick in.
htn
Having done time at Ford’s PDC a few years ago I will say this. Ford’s problems are cultural in that it is fundamentally risk averse, and untrusting of anyone (management, engineers, the UAW, suppilers, you name it). These two cultural factors lead to such an extreme amount of human and capital waste throughout the whole organization it is disgusting. Unfortunately, the cultural issues aren’t likely to go away anytime soon as they’ve been bred into the company over the last 100yrs. So, in the meantime it will stumble along the road to irrelevance in an increasingly competetive marketspace.
Oh, and the Mada3 is not a B segment vehicle. For that you’d be looking at something more like a Ka or Demio.
Re: They said the same BS in the 70’s 80’s and 90’s. Now we all hear it again…
Here’s what I recall hearing in the 70’s and 80’s:
“Those tiny 4-cylinder Japanese cars are No Good!!! Afterall, they build them so compactly, and the walls are so Thin…that you can’t Rebuild them like a good American V-8!”
My oh MY how times have changed! Nobody ever dreamped in their wildest dream that you would never NEED to rebuild those little 4-cylinder engines…and in fact, the little bastards would run 200K miles no problem!
And by the way, where was Ford’s marketshare in the 70’s, ….
…80’s
…and 90’s?
Do you see a trend here folks? I sure as hell do.
I also to this day hear: “Well, there wasnt’ as much competition in those days”…to which I think to myself, “Damn straight!!!…and their products definitely showed that very truth!”
Today, in 2006, in the most fiercly competitive market, their (GM’s and Ford’s) true colors come shining through.
I’m sorry Ford, I don’t like your products, and GM…I’m sorry for you too! I didn’t like seeing Ronnie Reagan succumb to Alzehimers one bit, and well…I don’t relish the American automakers downfall (ok, maybe a little…I’ve been burned financially by you both, so don’t blame me). But as Americans, we uphold certain “Truths”, and one of them is:
The best product wins!
End of story, end of game (for some that is).
My question to both Ford and GM: Do you have any game left in you? Or instead, are you just another sack of excuses?
I don’t know how anyone makes money on cars in the US.
Here are some rough comparisons of hatchback prices –
(prices are for actual models though I didn’t compare trime levels)
Mazda3 UK Price £ 15750 $equivalent 29791 US list $ 19165
Civic 16850 31871 21100
Corolla 14020 26518 17880
Focus 13545 25620 16485
Is that why it’s called the land of the free?
The back and forth commentary is great and compelled me to register and get involved in these spirited discussions. Kudos to all for voicing your opinions.
I have to side with the Death Watch folks and their intentions. These articles are not intended to bury the Big 2.5 but show the errors of their ways and their lack of long term thinking. Their recovery plans are evidence of such. The current management teams at GM and Ford have no clue what it will take to return to stable profitability and recover marketshare. Most article proponents long for GM and Ford to magically right their ships and take the market by storm with innovative, attractive and reliable products throughout their lineups.
Everyone loves to make analogies so I’ll throw one out there as advice to GM and Ford. If you’re backed up on your goal line and the score is close, take the safety and play for field possession.
mikey: “As a senior employee it gets you down to see hundreds of jobs go out the door every month,at the same time the layers and layers of the bloated white collar work force never get touched”
mikey, for you, and others that don’t think that the management of the big2.5 is paying the price for their business failures over the past several years, please be aware that at GM, since 2002, salaried headcount has been reduced by 40%. Since salaried employees contracts are month-to-month, management had a lot of discretion in how they handled that. So, it’s mostly (but not entirely) been done with buyouts and earlys, and slowly over the years, so it doesn’t get a lot of press. But make no mistake, in the offices, GM is a MUCH smaller company than it was at the beginning of the decade.
FYI, Bloomberg is reporting that Jac Nasser is leading an attempt to buyot Jaguar and Land Rover.
Is ‘Jac the Knife’ back?
ktm-
you said “montess, do you not have reading comprehension skills? No one is saying that GM or Ford are going anywhere. Every single time you chirp that GM is not going any place, you prove that you are not comprehending anything anyone is saying. Chapter 11 does not mean that they close the doors and disappear off the face of the planet”
Great, so you agree that GM is not going under. Now we can continue reprogramming you after you’ve been brainwashed by the TTAC GM Bashers. You’re next step is to accept that GM is still the world’s largest automaker. Next we’ll help you realize that even highly profitable companies try to minimize their reported profits because the higher their reported earnings are, the more they pay Uncle Sam. The point is that during bad times GM’s real losses are never as bad as they report and during better periods their real profits are always higher. Maybe you should talk to an accountant or better yet start your own car company and then you’ll see what I’m talking about.
You know, all the consperacy theories need to stop.
After Enron and Tyco I doubt much “book-cooking” is going down anymore. GM is loosing money, that’s a fact and it is not hidden. Are GM and Ford close to having NO money? No absolutely not, actually it’s quite opposite. There is plenty of time to turn things around and “Death” is by no means as imminent as TTAC likes to suggest.
If anything, the past is an example of perseverance for domestic producers.
Just maybe the phrase “death watch” isn’t appropriate here. There are if you read all the blogs reasons both ways why ford and gm won’t go out of business. I believe they both have some future in the car business. The better term should be “irrelevency watch”, these two companies which until this year controlled over one half of the us auto business will probably not do this everyagain. As they keep down sizing and getting passed by the Asians, first toyota, then honda etc., it won’t be a function are they still there? It will be who cares? We will all be reading the reviews of the “exciting car makers” each year as they slug it out for american supremacy. Ford & gm will be some kind of niche players reduced to following the lead of the others.
So … if I borrow money from Ford, and they go tits up, do I have to pay off the loan??
Maybe those Fords are looking better all the time!
Seriously though, if those F150’s at sticker price make $13,000 profit, maybe they should just lower the sticker price by about $12,500. F150’s ought to cost the same as a Nissan Sentra.
I don’t know how anyone makes money on cars in the US.
tyoung, I travel to he UK on work, and so I know it’s a pretty good generalization that stuff there cost 75 – 80% more than in the US. (Things are typically priced in the same number of pounds there, as they are in dollars here. Very helpful, that.). I also know that sadly Brits don’t make 80% more money. My Brit co-workers bring empty suitcases when they visit the US offices in order to fill them up.
So the question isn’t how anyone makes money on cars here in the US — it’s how can you afford ANYTHING there in the UK??
I think a possible solution for the big 2.5 is to stop building cars
If the factories were sold to suppliers such as Magna or Faurecia, who could scrap all the union contracts and hire new employees then GM and Ford could focus on design and engineering better vehicles and just contract out the production.
This would obviously by a nightmare to implement and see massive job losses, but at this point thinking outside the box may be the only option.
Ford’s problem stems from two fundamental issues:
1 A follow GM strategy that has led Ford into many ditches in the past and the current issue (one of many) on being too weighted in trucks. This reminds me of how Montgomery Wards followed Sears for years when along came Wall-Mart (Toyota) and put Ward’s out of business.
2 The Ford family 40% stock vote. Ask anyone on Wall Street and they will tell you that Ford is not really a publicly traded company since the voting is controlled by the family. Over the years, Bill’s statements about environment, family heritage and the like has sent a strong signal to Wall Street that Bill is not aligned with the common shareholder which is only about returns on investment. This why the stock has gone up recently despite all the bad news based on Bill’s hints lately of exploring partnerships, hiring an M&A expert and diminishing family voting power.
Have you voted yet?
“How did Ford get itself into this mess?”
http://www.msnbc.msn.com/id/14504128/
JoeC,
Yes, you can be damned sure Americans have “voted”. They vote each and every day with their hard-earned dollars.
The verdict is out: Toyota sold more cars than Ford last month!
Toyota incredible stride this past decade in North America is a direct result of thousands of collective “votes”. If you have any doubts, ask Billy Ford.
:)
Maybe in the other blog, “state of the union” is the answer to my question of continuation of ford and gm. There seems to be a critical mass factor to these discussions, when a company has finally exhausted all of it’s resources and the market share is still decreasing to a point where they are no longer a major player, these large dinasour companies simply vanish. I cited Bethlehem steel as a 125 year old company that didn’t make it into this millenium. Some of their old plants(under new management) and other efficient competiors are making all of the steel that America needs. In fact, there was not a day of shortages in steel in the US. By the time Bethlehem dissolved, their market share once second in the nation was so small that others just absorbed the business. Could this happen with ford and GM? Once they toghether make less than 25% of all cars in the US, will it matter if they survive? The one constant in this industrial metamorphasis is that the unions vanich when these industries lose the old players.
Ford just fell way behind, and doesn’t seem to be able to bridge the gap in the 00’s. The fit and finish of ford cars is kinda rough around the edges. Yeah I have driven them and owned them, but compaired to german cars they just don’t do it. I am not a fan of GM either but I have to say the cars just run and run, without major incidents, but there are no frills cars. If ford was smart they would just come out with that concept car they had in the auto shows a while back the Model U , give you a free ipod, make it a nice hybrid and underprice honda.
Just wanted to resurrect this thread as a venue to discuss Bill Ford’s resignation as CEO this afternoon.
Should I be buying Ford stock?
It might be a plus that Mr. Ford is stepping aside. What are the odds that an heir to Henry Ford is also the most qualified person to run such a company? Although he’s been “working” at Ford since he was 22 years old, is that good or bad? What about broader exposure?
Then there’s his replacement, Mr. Mulally. He’s also worked at the same place, Boeing, since he was a young man in 1969. Is Boeing, who splits the aircraft business with only one major rival, or does work for the government, a good training ground for an intensely competitive industry?
Maybe this “One life, one job.” concept is the key to success. After all, GM’s Rick Wagoner started at GM right out of grad school.