First the good news. For the first time in eight long months, George Pipas, Ford's man in the crosshairs Manager of Sales Analysis, could deliver glad tidings to anxious stockholders and stakeholders. September retail and fleet results reveal that sales of Ford’s cars and truck were up when compared against the same month in '05. Although FoMoCo’s sales increases didn’t come anywhere near Toyota’s dramatic advance, the Detroit-based automaker bested cross-town rivals GM and Chrysler by a considerable margin. And the hits keep happening.
Ford’s Explorer explored territory it hasn’t seen since August of last year (up 22%), and the gargantuan Expedition enjoyed more attention too. Demand for the Hecho en Mexico Fusion fueled a sedan sized fiesta at the Blue Oval to the tune of a 5.3% gain. These increases were enough to nudge Dearborn’s market share to 16.5%, more than a half point better than last September. With the cross border crossover poised to make its debut, FoMoCo enters the final quarter on an upturn with old metal moving and new metal buzz.
Now the bad news: Mulally’s much maligned motor company isn’t out of the woods yet. A closer look at the numbers indicates that little has changed. Fleet sales still bolster 26% of the movement. And while 74% retail composition is nothing to sneeze at, the fact that those sales are heavily incentive laden, is. Cash on the hood and no interest loans for anyone with a pulse continue to be the way fordward. October is truck month and as Toby Keith sings the praises of the venerable F-150, White Trash With(out) Money can drive the country star’s favorite whip off dealer lots and still have cash left to go “Get Drunk and Be Somebody”.
Inventory currently sits at around 650k units, and the fall season means model year closeouts. To make room for next year’s lot litter, 0% financing is being offered on all non truck vehicles, save Mustang and Fusion. While this will no doubt relieve dealer lots, it does little to help Ford, and will only cripple the profitable Ford Motor Credit unit. To have any chance of survival FoMoCo must deliver on its promise of profitability by the end of the decade. To do that, a “product lead turnaround” is going to need a healthy dose of cash flow. No matter how much metal is moved, virtual loss leaders are not the answer.
A study conducted by Harbour-Felax Group found that incentives and fleet sale discounts cost motor city manufactures an average of 11% in much needed profit. Japanese competition was able to generate an average of $24,289 per car, while homegrown products only put $21,597 back into the pot. Diluted profits translate directly into lost product development. In order to engineer and design market grabbing people movers, Dearborn must turn its knife to sticker play and maintain price points.
That’s not all though. Not only does Ford make less on each vehicle they produce, they also spend more doing so. It’s no secret that FoMoCo faces incredible cost resistance to profitable production. Health care woes and the union straightjacket ensure that every lost work day results in a $70 per vehicle cost increase. Tack on another $70 each for the extra 16 minutes of break time that every blue collar gets during a shift. Assuming the best case/least likely scenario of perfect attendance by unionized workers, and steady annual sales of 3.1m vehicles, last year’s work breaks alone cost FoMoCo $217m. The money was literally pissed away.
Compared to Toyota, The Blue Oval coughs up an average of $2,165 more per vehicle produced. Health care advantages, decreased warranty costs, cheaper labour and better use of flex manufacturing ensure that the megalomaniacal Japanese automaker has an immense $6.7b annual cost advantage over its competition in Dearborn. Note: Ford’s production capacity won’t reach 100% until 2008. Add to that the aforementioned 11% revenue lost from fleet sales and incentives and it becomes clear how difficult a job Alan Mulally has ahead of him.
Unfortunately, The Way Fordward 3.0 will fail. The cuts were too little too late. Despite the attempt to balance a projected 14% market share with right sizing production cuts, most analysts agree that Ford has a 0% chance of achieving profitability on three million annual units. Going Fordward, a product-led turnaround will require enormous amounts of cold hard cash. Given the current state of affairs and the fact that buyout packages will drain the corporate coffers throughout the first three quarters of next year, rising costs will eat the development cash, and take much of Ford’s hope with it.
In short, year-on-year post-Katrina and fire sale comparison aside, the mistakes of the past will continue to haunt FoMoCo for years to come. The truth is in the numbers, and as we know, numbers don’t lie.
Okay, the Iosis thing looks like another bland crossover to me, but what’s with the huge wheels and high suspension? Is Ford trying to make this a “factory Donk?”
and the tiny windows? do people no longer need to see to drive? they should make a windowless concept cuv. they can call it “the force”.
Agree about the tiny window trend (fad?). Also evident on the new Camaro, Challenger and started perhaps by the 300C?
In any event, most folks are lousy enough drivers without having windows they can’t see out of. A wrecker’s delight.
It’s not clear to me exactly what white collar Ford workers in Dearborn do, exactly. They don’t engineer cars — the last new American car platform that Ford engineered was the 1995 Taurus. They do engineer a full size truck platform, and they do update the Escape, Explorer and Expedition.
My thinking is that you figure out how many people you need to keep the SUVs relevant, how many you need to restyle cars platforms designed by Mazda, Volvo and Ford/Europe, and how many you need to keep the F150 top of market.
Everyone else can go home.
I work at Ford. I drive a Ford. It doesn’t get any worse than that.
It’s not clear to me exactly what white collar Ford workers in Dearborn do, exactly. They don’t engineer cars — the last new American car platform that Ford engineered was the 1995 Taurus.
+1 on that. How much work did it take to put new parts on the Crown Vic’s ladder frame, cost cut a Volvo S80 and put a Taurus motor in it, and Americanize the Mazda 6?
ps: it was the all new 1996 Taurus :-)
Gawd, I sure hope that’s a photochop that never sees the light of day. Fuuuuugly.
Ford (and GM) forgot what their business is, who they customers are and how to keep your competition in check.
It’s not rocket science.
– make sure your product is just as good as your competition in most aspect but one. That one aspect should blow the competition away. Give a reason for people to *want* your product. Not merely “it does not suck as much as before” or “it’s almost as good as a Camry but it’s cheaper”
– focus on keeping up. Promote creativity and flexibility.
– get rid of bureaucracy: trim the fat.
Unfortunately, Ford (and GM)’s problems are the result of a very long incubation. It will take alot of time (or hell, some chap 11) before things turn around. I don’t believe one man at the top can do it (in the case of Ford) nor that Wagoneer is doing any good for GM.
But that’s not the point. They’re running out of time. New products are far on the horizon – how long do we have to wait for the Edge, camaro, aura, hybrid vue. How long did we have to wait for lackluster products like the 500?
Not looking good.
tms1999:
Good point. The ramp-up time from drawing-board to production is much too long. While it is costly (not to mention annoying to consumers) to have models change styling every year, too long between restyles or new vehicle launches can have much the same effect. If it takes you 5 years to design and launch a vehicle, and that vehicle turns out to be a lame duck, it will be another five years before you could reasonably have a replacement that might (and just as easily might not) be better. At that point, it’s more albatross than duck.
Long product cycles mean that you are need a home-run every time you release a new vehicle. A warning-track fly-ball (or a weak ground-out) means you get to spend the next four or five years losing ground to your competitors.
These “positive” numbers say more about Ford’s total implosion in Sept ’05 that about any real current success. It would be hard for Sept 06 not to show improvement from Sept 05 (remember Katrina?).
Here’s more numbers. Sept-05 Ford’s sequential monthly sales fell 21% verses the rest of the industry falling 8%. And that was following Ford’s August 05, when sales ALSO fell 21% from that July.
Ford’s Sept-05 sales were 14% less than its average month in 2005. Rest of industry was only down 4% from average.
Point is, Ford had what they call very “favorable comparisons” for last month — and will have even more so in Oct and Nov. So Ford can probably report at least three months of “growing” sales based on year-to-year comparisons, even though they may be still in full death spiral.
Prediction: All fine and dandy until December’s cold shower is reported. You read it here first.
That Iosis looks like Chester Cheetah.
Crack: fleet sales
Meth: 0% financing
Not one, but two expensive habits that have to be broken, in the meantime stealing things from the family (loaning @ 0% while borrowing @ 8%), not bothering to eat (building new platforms), selling the family jewels (AM, Jag), etc.
Alas, like most habitual drug users, Ford also will end up in front of a judge. (There, I hammered that analogy into the ground.)
Meanwhile, the only reasons for which I might come within a dozen miles of a Ford showroom, the Mondeo and Focus RS, will continue to be Europe only. But I am a Euro-wimp, and Ford has shown no interest in my tastes ever, so why start now?
You are attacking workers’ 16 minute breaks?
Farago… come on.
I’ll tell you what’s wrong with the Ford Five Hundred. The V6 that’s in it. A big car like that needs a big motor. Put at least the 5.4 mod motor in it. Preferably bigger. Make it an absolute rocket.
Turbo or Super Charged Focus? Rear wheel drive? Same for the Fusion.
Ford will go out of business and still never realize that 150 hp thrills or excites no one.
That little 4.6 wasn’t enough for the previous model Mustang. It’s sure not enough for this tank. Aim to remove 1,000+ lbs from it(aluminum Stang?), and put in at least the 5.4. More is always welcome. How and why would a 5.4 or any other configuration cost more then a 4.6 considering the design of that motor? What was the point of that style motor then?
V8 Ranger?
Come on Ford. What happened to the excitement?
Jonny,
The breaks aren’t the problem here, its the costs associated with them. When 16 minutes adds up to $70.00 bottom line on every product, trouble’s a brewin’.
If I were in the market for a new car (and I’m not as i just got my last car paid for) the Mustang and the Milan would be on my list of affordable/domestic cars.
Farago had an editorial a few weeks ago where he advised building “weird” stuff.
I think they could generate foot traffic without rebates by just injecting some ‘bold moves’ novelty. Like every 2 months they introduce not a brand spankin’ new new car, but an interesting, revised model.
They should offer the ‘stretch’ Crown Vic on a 120″ wheelbase – they already make the car for the New York taxi market – should be easy. How about some expanded trim options like the “California special” Mustangs they used to make?
Ford needs to offer interesting vehicles. They’ve played it safe for far too long. The Euro Focus should be here now. With a diesel option. The Ford 500 would be selling like crazy if they’d made it fun to look at. The Ford 427 was a great concept that no one had the balls to pull the trigger on. Then along comes the Chrysler 300, showing all at Ford what a dumbass decision that was.
Ford needs to embrace what it used to be. The Mustang is a step in the right direction. The F-150 stays true to its roots.
When Ford slowly killed the Taurus, it destroyed a brand and its own image. You can witness the same slow death (that inevitably results in a name change) in Chrysler’s current minivans.
why not just install cathetors and collostomy bags into everyone on the line, no need to ever leave, hell, just add the drip IV and you’ve got it nailed!!!
Wait…. That’s the WHITE collar workforce that I’m describing (TOO DAMN OLD!)
ROFL
Matthew, I appreciate your holding the Not So Big 2.5’s feet to the fire, but the anti-worker schtick can jump the shark at times. Out of all the of things you could complain about you go after 16-minute breaks?
Have you ever worked on an assembly line? Or as a writer/editor have you ever had any repetitive-motion problems requiring some down time?
Sure, the labor-management compact needs to be negotiated, but in doing so you can’t avoid one basic fact of life: Poorly treated workers do not tend to build great cars.
Steven T:
I did work on an assembly line, and as I pointed out above, the problem is not with having a workforce that takes breaks. Believe me.
The problem is that after pumping out cars for over a century, after spending millions on automation, production lines should be efficient to the point that these costs are at a minimum.
Toyota production lines employ (relatively) happy workers, producing some of the greatest (although stylishly impaired)cars on our roads today.
How can a person not love this site! Whoa.
White Trash With(out) money! I love it. It’d be real funny if Americans didn’t borrow $200B in home equity loans last year and our gov’t didn’t finance our debt through the communist Chinese. That’s the only thing that stops it from being a regular riot of a knee slapper. The whole country is basically without money (if their loans came due right now). I wonder if the governor of the Common Wealth stopped using the N-word and just says “black trash” now. Don’t worry, the kids won’t learn that using terms like “white trash” is just plain dumb if they stumble on here, no, they don’t test high enough to show that they get simple concepts anyway.
Some guy several posts above wrote about waiting for the Aura and VUE hybrid. Darn right. It would be more funny if they weren’t actually on the road right now in customer’s hands. But still darn funny. Yes, I noticed the current tense of “wait” for aura and VUE hybrid and past tense “did” have to wait for the 500. Props, props to that. Still funny as all get out. http://www.saturnfans.com/forums/showthread.php?t=85278 http://www.saturnfans.com/forums/showthread.php?t=86454
Someone stated above: It would be hard for Sept 06 not to show improvement from Sept 05 (remember Katrina?).
-Snap brother, snap. I agree. Most arrows are *up* for last month from that of the previous year: http://www.autoblog.com/2006/10/03/by-the-numbers-september-2006 I say, real numbers, spiel numbers.
That is why I love, love this site. People are so much more on top of things here than on other sites.
Basically they are pushing iron by offering very low prices. So they are losing money, which obviously isn’t a sustainable plan.
With their pension and health obligations they would actually have to be beating Toyota in manufacturing costs to draw even on price. Toyota’s huge cash flow also now gives them room to take chances, increase research, weather downturns etc..
This article adds absolutely nothing, I’m afraid. All it does is take some good news from a domestic — sales are up, car sales are up, i.e., overdependence on trucks is down, and market share is up — and uses facts and opinions we’ve all seen here a dozen times to try and spin the news as a failure. Then the haters pile on. Yawn.
Oh . . . and what exactly is Way Forward 3.0? Maybe 2.0 (I personally like Roman numerals better . . . II) but how do you get 3.0? I admit, though . . . it does sound worse. So I suppose that’s ‘good’ from the perspective here.
And one other thing . . . I’ll bet you dollars to donuts that if the pic at the top was labelled as a Honda concept, the posters here would be falling over each other lavishing praise on it.
My prescription for Ford:
1. Root out the bureaucracy: This is more than a “cost threat,” because this dynamic industry punishes brands that cannot respond fast to new things (hybrids, etc.)
2. Build stylish cars and trucks and Toyota/Honda customers will come (it doesn’t cost more to design cars that people like looking at!)
3. Reinvest in automation on the factory floor to at least match the competition. People ARE No. 1; Ford just doesn’t need so many of them if Ford is to compete.
Ford sold 26,000 tauruses in September all to fleets. That’s why there’s a bump in cars sales. The taurus has been officially discontinued. It should be back to buisness as normal in October.
Heres how long I think ford (and gm) have to wait to turn their business around, three to five years. The eight hundred pound gorilla in the attic is that even with chic new models the buyer of a ford has to say, at trade in what will my residual be vis avis a toyota? If I will lose thousands at the end of my drive, was the American car a value? Clearly,until fords and other American cars can command the high resale values of the foreign brands, a turnaround cannot be assured. This is the hidden risk that auto buyers know but ford and gm dare not bring up. As for all those taruses sold to the fleets, it’s just one more reason that particular product has especially poor resale value. An off fleet taurus used is a good value daily driver for many, but it makes no profit for ford. Buying a new one when they were at the end of their retail run would have been suicidal for the retail buyer.
Sajeev,
“How much work did it take to put new parts on the Crown Vic’s ladder frame, cost cut a Volvo S80 and put a Taurus motor in it, and Americanize the Mazda 6?”
It takes 1 engineer, 1/8th a purchasing rep, 7 finance reps, 27 project managers, 10 engineering and program managers, 4 chief engineers, 4 directors, and 4 VPs.
I think what Ford may need to do is something really radical, such as build a car like the GM EV1 (electric car) or a high performance car with an internal combustion engine radical as the old SOHC V8 was, back in the 1960s. The Futura station wagon is definitely something they should make a “go” of. They need to quit making so many Explorers and Mountaineers; and perhaps drop the Expedition, entirely.
If any dealers complain – likely they would, given the profit margin on SUVs – they need to be reminded that they are car dealers first, truck dealers second – or even third.