As bad as Ford’s third quarter results (version 1.0) were for Dearborn’s darlings, the future doesn’t look much better. Ford’s Chief Financial Officer Don Leclair has publicly admitted that he expects the automaker’s fourth quarter to look like the one that crushed the Arizona Cardinals in week six: a complete and utter disaster. What’s more, Leclair has also acknowledged that Ford’s production cuts crush any hopes of financial rebound for at least the first half of 2008– no matter how their cross-border crossover fares in the marketplace. So, is it time to panic?
Ford PR flack Becky Sanch certainly jangled a few nerves when she agreed with a Detroit Free Press analysis that estimates FoMoCo’s year end losses could snowball to a staggering $12.5b. (For those of you keeping score, that’s another $5.3b in the hole.) Market mavens blame about $1.6b on normal operating losses for the Christmas season. Ford also let slip that somewhere between $1.5b and $2.5b more in “special pretax items” would show up on ‘06’s financial statement. Bruce Clark, a senior VP with Moody’s Investors Service, figures FoMoCo’s cash cushion will lose some significant padding in the coming 12 months. The fact is Ford will continue to lose liquidity even after that.
Meanwhile, matching production to waning demand is job one. Ford’s across-the-board manufacturing cuts are designed to lead to 100% production efficiency (assuming Ford’s market share stabilizes at 13 to 14%). Short term, the reduced output should place less strain on Ford’s bloated dealer network, which is busy starving to death. Mike Jackson, CEO of AutoNation, points out that Ford's unsold inventory estimates include fleet sales. Jackson reckons Ford dealers are sitting on 105 days worth of unsold units– not the 75 that’s been reported. That’s a Hell of a lot of metal that needs moving.
While the production cuts will help dealers “catch-up” with falling demand, without a drastic reduction of the 4400 national Ford dealer network, improvements will be… fleeting. Rumor has it that Ford’s looking to fork-out $300k cash incentives to stores willing to cut their losses and die. Even if true, a mass exodus is hardly likely; $300k wouldn’t even cover most Ford dealers' Reynolds and Reynolds software contract. Several dealers indicate privately that it would take about $2m to $4m in further “special pre-tax” cash financing to get them to fold up their Ford tent and go home.
Analysts estimate that only 600 dealers can be bought out and closed down at the proposed rate. If so, Ford’s “new” market position means that the remaining Ford floggers will only move around 670 units each. That’s not what you’d call good news. To compete effectively with the vastly more efficient foreign-owned competition, to restore some of the lost luster to dealer profits, at least 1400 Ford dealerships need to get the axe. With just three thousand stores, each lot could conceivably push close to 1000 units out the door.
Again, it’s not likely that Ford will surrender the big bucks needed to make such a deep (and long overdue) cut to its dealer network. They may not have to. Given current estimates of about 616 units sold per dealer in ’06– “excess” dealerships may disappear through “natural attrition.” Without sufficient throughput, dealers lack the advertising dollars needed to lure the punters. And with less profit per unit to motivate sales staff, their ability to move the metal erodes. In increasing numbers, dealers are finding their margins bumping up against their overheads, until they take in less money than they spend and there’s no point carrying on.
While the dealer cancer spreads, freshly-minted Ford CEO Alan Mulally told the DTN that his employer needs to cut its costs: "It's all about competitiveness," he said. "You can't compete with a $3,400 disadvantage." Translation: Ford can’t afford its United Auto Workers (UAW) agreements. Mulally optimistically predicted that the UAW would see sense in their ’07 contract talks because A) it’s “Detroit’s defining moment” and B) if they don’t, by golly, he’ll take Ford’s case straight to the workers. Hi, I’m Alan. I made $35m this year and fly around in a Gulfstream. Here’s why you should work for less money, less benefits and a smaller pension.
If that wasn’t enough to rattle the bear cages on Wall Street, Mulally acknowledged that the Ford mothership faces a do-or-die cash crunch. "We have got to turn around North America and be profitable by 2009," Mulally said. "Because if not, you just keep losing cash and pretty soon you run out." Notice the change from “we” to “you.” It’s a classic example of disassociation; Mulally literally can’t face the possibility of a Ford bankruptcy. OK, now you can panic.
No panic, just resignation of the inevitable.
It’s kind of a race between General Messup and Dorf Motors that neither wants to win.
Who gets to Chapter 11 first?
Or, will it be Chapter 7 as in bye-bye forever?
Ford needs to sell off 51% of Volvo so that if it does take a swan-dive, the Swedish company has some small chance of survival, a la Mazda (only part-owned by Ford).
Too many dealers + Too few good products = Cut-throat inter-competition
No one has talked about other tricks Ford might have up their sleeves. Does anyone think Nissan/Renault might not come knocking?
If anything, Ford has options before Bankruptcy.
If things don’t improve enough by 2009, Ford will have no choice but to raise billions by divesting assets such as Ford Credit, Volvo, Mazda, and Jag/Aston/Land Rover together (as they make a much more attractive package if bundled) and hold out hope that someone buys.
For 2007, sales of the Edge, Fusion, Mustang, Escape, and F-150 have to stay strong to keep them afloat.
For 2008, the facelifted Focus, facelifted Five Hundred/Freestyle, facelifted Escape and new production Fairlane and Lincoln MKS will have to be hits. If all of this happens, I believe they may prevail…
Mullally was quoted in the Detroit News as wanting to follow the Toyota model of global product development and manufacturing:
http://www.detnews.com/apps/pbcs.dll/article?AID=/20061111/AUTO01/611110404&SearchID=73262846845223
Unfortunately, they may not have time for that. GM’s been trying to do that since the mid-90’s, and it’s fiendisly difficult to get right, because no one wants to admit that someone else can do it better than you (and if you only do it one way, all but one will have to change) Part of the reason the Toyota system works so well, is that they don’t know any other way. Ford (and GM) have several different engineering and development systems under their roof. GM is making progress, but doesn’t have anything on the road yet that would demonstrate the capability.
If Ford wants to execute the move to “Toyota-style” business, they will have to find a faster way to get there.
Steve-O: If my grandmother had wheels, she's be a trolly car. Captain T: We'll be tackling the issue of production– but good– in tomorrow's posts.
I guess attrition is starting to take its toll. Two local Ford dealerships recently closed within a month or so of each other. They were well established family owned businesses.
Here is the link to the article:
http://www.northjersey.com/page.php?qstr=eXJpcnk3ZjcxN2Y3dnFlZUVFeXkyJmZnYmVsN2Y3dnFlZUVFeXk3MDE3NTY4
Mullally’s approach (BA as his example):
Move F hq from Dearborn to Dallas. Move parts supply completely offshore. Try to reduce competition to only one other supplier. Oh crap, that last one is going to be a bitch. Cars, planes, widgets, I thought it was all the same. NB: Isn’t Mullally a Lexus driver? See previous review. Are we supposed to feel good about that?
Don’t write off Ford or GM yet.Between them they hold 39% of the market.Thats a lot of vehicles Glenn A.
As far as the dealers go it will be the strong that survive.As Matt.N. points out market forces will drive them out of buisness.Bank on this Ford and GM will still be here long after we are gone.
We’re dead, alright. We’re just not broke. And you know the surest way to go broke? Keep getting an increasing share of a shrinking market.
Ford and GM own an ignorant market. Premium SUV’s, bargain-basement crapmobiles, pickup trucks and badge-engineered clones. You can only sell this stuff for so long before your more efficient competition kills you off. There’s no way for them to survive doing what they’re doing – the only reason why domestic cars are so cheap is because of the huge coffers they’ve accumulated over the years. You just can’t be making cheapest products with expensive labor for any sustained period of time.
A friend is a retired Ford dealer principal. He says that in good economic times he sold and serviced new cars. If the economy went south he sold and serviced used cars, and parts for DIY repairs. Fords require lots of parts and repairs. Business survival was rarely in doubt!
Didn’t Iococca work for $1 per year salary plus stock when he was doing the 1980s version of the Chrysler turn-around?
Where are the CEO Leaders of today who are willing to play the game All In, and in so doing rally the troups to the cause.
One of the big problems with US companies today is that the leaders constantly preach the need for sacrifice; as in the ritual sacrifice of others.
CEO=Priest
Everyone Else=Sacraficial Lamb
These high paid MBA SOBs are running US manufacturing into the ground and banking millions like third world despots.
“Don’t write off Ford or GM yet.Between them they hold 39% of the market.”
They don’t HOLD any of the market. Car and truck buying decisions are made every day in the ultimate democratic process. Individual buyers vote with their dollars every day of the year. There is no market share which is pre-ordained for any supplier. Yesterday’s sales are not an indicator of tomorrow’s sales. No car company HOLDS any part of the market. Share must be earned the hard way each and every day.
Every time in the past the 2.5 have royally ticked off a customer and moved them into the Never Again Club they lost the customer’s business forever … and often that of the customer’s family, co-workers and friends. The accumulated ill-will is at this point almost imposible to overcome.
Now that the 2.5 are at war with their suppliers and unions they are killing off the last vestiges of loyal customers. Do you really think that the laid off Delphi worker is going to feel compelled to buy a GM product next time around like they and their parents did for years?
There is alot posted here saying the obvious. Well then lets stick with that and what can be more so then MONEY. How much does Ford have? alot. how much can it sell to get more? alot.
This is like the a guy who has come to his first months of debt where more is going out then in and then all the people that know him start screamming that his life is over. Yet his home is paid for and he has just finished retraining in something that is in demand.
The CD3 were Fords “last chance” last year. They sell well and have just captured top marks for quality, beating out the Honda Accord and the holy grail of the mid-size sedan the Toyota Camry. The Edge is generating hype like no other Ford has since the introduction of the Taurus in the 80’s. Mazda and Volvo have been selling well for years now. Fleet sales have been limited so as not to erode residuals.
All this says to me Ford is doing all the right things and now it is coming to a head. Either you agree or not right, and most here don’t. Well ok that’s fine but at least come up with something better then its all over because thier losing money.
2008 Toyota Tundra.
Ugh.
1.6 billion, 1.5 billion, 5.3 billion…add that up and pretty soon you’re talking about real money, here.
Other than a V8 Mustang, I can’t imagine anything in a Ford store I’d miss if it went away forever…
Sales YTD:
Camry: 374,717
Taurus: 168,746
Fusion: 120,994
Five Hundred: 74,092
As it’s built in Mexico, Fusion and clones should be making a decent profit for Ford. Milan and MKZ add just about 30k each. Now, they just have to build and sell more of them, although how that will offset lost truck sales remains to be seen.
One thing I think we can aknowledge is that Mullally probably represents Ford’s last hope. He’s clearly on the ball, knows what the problems are, realizes how much BS needs to go, and isn’t afraid of publicly saying the company was flying blind. I don’t think he’s too little, but he may be too late.
It is interesting how he is dissociating himself from Ford (something I hadn’t noticed until it was just pointed out). Clearly he’s not a Ford guy, he drives a Lexus and makes no apologies about it. It’s what the company needs though, we’ve all held back too many punches to the face to fans who plead “Ford needs Lincoln/Mercury/Jaguar” or any ridiculous “retro” model.
In my mind, Mullally knows what he’s up against and knows what needs to be done (just like a lot of people actually). He’s just not sure it can actually be pulled off because of the huge momentum going in the opposite direction. I’m sure he intends to bail if can’t get proper cooperation (from middle management, the board, the UAW, dealers, suppliers), he’s not stupid enough to stay at the helm of a sinking ship when he’s done no harm.
Mullally is worth the 35 Mil he’s going to get, I’m not convinced Ford will capitalize on him anymore than a state of the art exercise machine that sits in the basement unused.
Hey Alan, nice of you to sign on as Kablamo. Now you could be Alfred Dunlop, rape and pillage the staff to get costs down, and then leave before the fact that you invested nothing for the future becomes obvious. Maybe the brilliant Pepsi executive whose vision was so great that Jobs had to come back to save his company. Pardon me, but I have a hard time believing an airplane executive (whose sole contact with unions were of the company owned variety) with no experience in the automobile business is going to save Ford. Nice to know Alan has already got his escape chute packed and ready if he “can’t get proper cooperation (from middle management, the board, the UAW, dealers, suppliers)”. If I was Ford I would want a guy who is willing to bet on the company, not be guaranteed $35m. sitting in accounts at Goldman. And for the thousands who work at Ford, Gawd I hope I am wrong.
The funny thing is that even if you kill off some dealers, there are always more. The local Ford/Chrysler/Volvo superstore just went out of business (something to the effect of the owner stole $20 million plus from FoMoCo and left town).
http://www.pressofatlanticcity.com/news/local/capemay/story/6920379p-6783220c.html
<a href="http://www.pressofatlanticcity.com/news/local/capemay/story/6920379p-6783220c.html"
Four other Ford dealers immediately jumped in buying assets and customer lists. For this area (South Jersey – AC), 1 Toyota, 1 Nissan, & 2 Honda dealerships cover the same territory as 6 (well, now 5) Ford stores, 6 Chevy stores, and 5 (well now 4) Chrysler stores, not counting ancillary brands (Lincoln, Pontiac, Hummer etc.). Having just been involved in the purchase of Mom’s new Fusion (which is a very nice car btw), I can attest to the rows upon rows of Exps (Explorer, Expedition, Escape, Freestyle, used Excursions) sitting on the Ford dealer’s lots. By my count, there were 7 Exps for every Fusion/Focus/Mustang on the lot (with not even a guest appearance from 500), plus F150’s and Rangers as far as the eye could see. Part of the reason I went with a Fusion is that I could haggle and get the dealerships to undercut each other on price; the local Toyota dealership’s response to my low offers on Camry was to go elsewhere and leave them alone.
Great pricing on FoMoCo products for me, probably horrible for FoMoCo (and GM and DCX). I presume this situtation exists wherever ‘foreign’ cars are popular (which seems to be everywhere but Texass truck country and the upper Midwest).
So, if one of the Big 2.5 goes bellyup, how bloody will the fight be between dealerships angling for a ToMoCo/Nissan/Honda franchise?
With GM and Ford suffering, what to do about Saab Automobile and Volvo Cars?
Volvo should be bought by DCAG. MB and Volvo has somewhat similar brands. More focused on luxury than road handling. Volvo should (and is) be positioned between MB and Chrysler in price, as the almost premium car it is today.
Saab should be bought by BMW. BMW and Saab has similar brands. Focus is on road handling first, luxury second. They both share a history in aviation. Saab should be positioned below BMW (as it allready is, as close to premium), and become what Rover never was. A 9-2 could be made with the minin as basis. The 9-3 based on the 3-series or 1-series. 9-5 based on the 3-series or the 5-series.
I belive this ownership and closeness geographically and culturally would be bullseye. BMW in particular has proven to be very good (-Rover) to buy and bloom companies.
The merger of Volvo and Saab was suggested many years ago, but nowadays the result would be a too small firm.
With Volvo underpinnings, there is almost no way Ford can sell Volvo. This would be similar to Ford finally losing the BMW influence on the Land Rovers. Being passed to another buyer may damage the Volvo brand in the public’s eyes.
As mentioned before, the best purchaser of Saab would be Subaru. That would be a great combination.
K.
I trust after their Rover group misadventure (MINI excluded), BMW don’t even think for a millisecond about buying either Swedish venture.
I look forward to the day when some “brands” go away and simply become interesting historical articles in wikepedia.
CliffG, although I’m flattered you’d confound me as the CEO of an international company, I can definitely say I’m just an ordinary person.
I was ready to rebutte your points, but upon re-reading what was said, I can only conclude that you are jealous of someone making 35Mil a year, and afraid of change. You already seem to know what is going to happen, and how you feel about it.
I’d rather see Ford employing half as many people in the US as today and be in sound financial shape than employing none. That doesn’t seem to be your mindset (or the UAW’s), which seems to think there’s lots of cookies left in the jar, or that they will go down with the company if they have to.
I don’t work for Ford and my job doesn’t depend on them in any way. I also don’t know anyone close to me that works for them, although I do have acquaintances. Seems to me like a 50% chance of keeping a job is better than a zero percent chance, but that’s just me. If you have someone better than Mullally in mind, why don’t you pitch the idea, or better yet drop Billy F an email?
Easy there guys. Let’s not make this personal.
kasumi:
With Volvo underpinnings, there is almost no way Ford can sell Volvo. This would be similar to Ford finally losing the BMW influence on the Land Rovers. Being passed to another buyer may damage the Volvo brand in the public’s eyes.
As mentioned before, the best purchaser of Saab would be Subaru. That would be a great combination.
There is allways a transition period – phasing out the Ford stuff phasing in MB RWD-platforms. The general buyer doesn’t know who owns what. And since MB has a stronger brand than Ford, it would be considered a gain.
Subaru and Saab WOULD be a great match, if it wasn’t for the Subaru boxer engines, and geography. Munich/Stuggart to Gothenburg/Trollhättan is a days drive. Gothenburg/Trollhättan to Japan is a days flight. That’s important in a cars world.
Also, given the cultural differences that exist, Sweden and Germany is close, Japan is a different continent alltogether.
pete:
November 13th, 2006 at 6:51 pm
I trust after their Rover group misadventure (MINI excluded), BMW don’t even think for a millisecond about buying either Swedish venture.
They have a proven success with Land Rover, Mini and Rolls-Royce. Why couldn’t it be done again with Saab?
It’s not about finding a perfect match, it’s about taste, great products, economies of scale and survival.
My problem with Alan and Ford is Alan has nothing at risk. He has no experience in dealing with the problems that Ford has. He gets to deal with a cantankerous union, an indifferent Federal government, product lead times that need to be in the 3-5 year range, relentless numerous competitors, and a uncontrollable sales force (dealers) that has no interest in being laid off. I don’t question the fact that he was a brilliant airplane mfg. executive. But so what?
They have a proven success with Land Rover, Mini and Rolls-Royce. Why couldn’t it be done again with Saab?
It’s not about finding a perfect match, it’s about taste, great products, economies of scale and survival.
Last time I looked BMW were a for-profit outfit. I don’t think charitable donations to Saab would be a great idea besides the fact that it competes with 1-series and perhaps entry level 3-series to some extent. Why would BMW want that?
PS – you may have guessed – I don’t like Saabs.
Either Ford or GM is going away. This will be great news for the survivor which will undoubtedly see sales increase by a significant amount.
I’ll give 3 to 2 odds Ford will fold first.
How many times have I mentioned that those who know nothing about history, are bound to repeat it?
Packard needed a leader, hired in James Nance from HOTPOINT. Didn’t work.
Seen any new Packards lately?
Despite having doubts about their ability to execute as well as having enought time/money, Mullally’s vision, as described in the Detroit News interviewwas right on: Ford globally is six or more companies with little coordination; it needs to be a single company with truly global products lke Toyota (that’s what he meant by being more like T.). If you look at Ford’s Euro products, like the S-Max, that just won Car of the Year there, Euro Focus, Mondeo, etc; its insane that Ford has still been developing N.American products in isolation. Yes, hang on to the critical pickups, but the car/CUV lineup needs to be integrated globally, which in a worse case scenario (no cooperation from UAW/strike) could then also be imported from lower cost countries. That is somewhat similar to what Alan did at Boeing: create a world -wide web of suppliers/producers. But the hyper-competitive environment in the car industry, and Fords dwindling cash reserves makes pulling this off this obvious strategy iffy.
Ford and gm have a combined 39% of the market, was quoted above. Yes, and they once had 70% between them. They make no money with 39% are definetly heading lower, perhaps 30% with what for profits? Their dealer network has problably made no money in the twenty first century, and being weakened can invest little in plant and personnel. The too many dealers problem ,(gm’s also) means no one makes any money because volume is split between too many players. (obviously laid out when they(ford) did 25% of the market) mercury has been a weak sister for years and lincoln allowed to lose half of it’s volume (after briefly dominating the US luxury market). If Mullaly wins, he is the superman of all times, if he loses he was the wrong man for the job. Ford can survive as a light truck builder in the US but cars, I don’t think so. If they could import the cars build the trucks here, maybe. But the clock is running and the foreigners are eating their lunch and will not give back hard won business easily. Remember who now has the unlimited war chest to develop, promote, and advertise new cars, not Ford.
Cliff G – Pardon me, but I have a hard time believing an airplane executive (whose sole contact with unions were of the company owned variety) with no experience in the automobile business is going to save Ford.
Cliff, that “A” in UAW stands for “Automotive and Aerospace”.
Mullady and Gettelfinger are well acquainted with each other.
Glenn, I don’t think that hiring someone from outside of the industry is bad per se. In theory, outsiders can bring in fresh ideas. At any rate, the individual matters less than the chemistry of the management team, e.g., industry newby Henry Kaiser killed his fledgling company largely because he did not give adequate credence to the advice of auto veteran Joseph Frazer.
If Nance had more automotive experience he might have made fewer mistakes (e.g., in trying to produce bodies in-house in 1955). However, Packard died primarily because Nance had GM envy — he tried to run a very small company like a very big one. No wonder Nance ran out of cash so quickly.
This may be somewhat applicable to GM and Ford’s current situation. Neither can afford to burn through as much cash as they once were able to. Can they downsize quickly enough while maintaining a viable product range and a positive p.r. image? I dunno, but I bet we’ll be seeing the corporate propaganda campaigns becoming more intense in the next year or so.
Listen, Gentlemen:
I am bloody good and will save this company. Just look at how well the Mustang has done, not to mention the GT, which I single-handedly thought up. Wait ’til you see the new Navigator on the road, if you haven’t already – it’s a real stunner. And that Fairlane – I dreamed of that driving around the Hamptons for years.
Cheers…off to cricket.
SAAB (and GM) have since long ago had a global purchasing strategy, so hypothetically, if there’s Subaru or any European company who take over SAAB doesn’t matter. And Subaru needs a production plant in some of the former east block EU countries anyway. And I don’t think Subaru will hold on to the oddball boxer engines forever, they are in desperate need for a good diesel (as is SAAB with their too small borrowed Fiat thing). So Subaru-SAAB could be a thought if GM wants cash, but both need a high volume market hit which none of them have today. The alternative is premium priced luxury cars, which none of them have today either.
A merger between MB/BMW and Volvo/SAAB is extremely unlikely, because of old antagonism, but also because SAAB is already in practice merged (and market positioned) with Opel and Volvo with Ford (which most Swedes regard as a German company, we almost never see an American-built Ford over here). We don’t even look at our Volvos and SAABs and see luxury cars. MB, BMW, Jaguar and maybe some Audi are luxury cars.
In the eighties, Toyota in Japan had most of their suppliers in the same industrial region as their main assembly plant. Not so in America? I believe this is part of the Toyota success story: large subassemblies with one big QC-stamp is literally lifted into the cars by the suppliers – just in time.
Saab should be bought by BMW.
BMW will never buy Saab. I agree that the 2 aren’t close competitors but that doesn’t matter. BMW is not going to badge engineer its products. They would be diluting their most important value which is their brand value. Of course, BMW makes great cars, but without that blue-white badge on them they could not sell them at the 1000s of Dollars premium they’re are selling them for now.
The other options would be either selling lower quality BMWs as Saabs, like Mercedes is doing with Chrysler, but that clearly doesn’t work, or engineering Saabs as seperate products themselves. The latter they tried with Rover (the 75) and Land Rover (different ball game) and although they made some great products, they couldn’t make them profitable.
Moreover, after the Rover messup, BMW has clearly stated it will focus on the BMW brand itself (not counting Mini and RR). A view weeks ago they firmly dismissed speculation that they were to take over Aston Martin (actually that would have been a move that seems very natural to me).
BMW is very succesful on its own and I don’t see how the investment of buying Saab could match their current return on investment (3rd best after Porsche and ToMoCo).
There aren’t many CEOs on Mulally’s level in the Western world who know as much about the Toyota production line as he and his team do … The criticism about him being an aircraft executive who knows nothing about cars is wide off the target. Ford and GM are struggling with the fact that they can’t make the cars fast enough and good enough — that he knows quite a bit about.
So far, I’ve heard only three rational plans for Ford:
1. Global product integration. Why develop cars for NA and Europe in vacuums? Bring the Focus/S-Max now.
2. Eliminate dealers. Ford’s dealer base is about 30-40% too large. When you have 3 or 5 or 15 Ford easlers racing to the bottom to move product, everyone loses.
3) Kill/Sell unprofitable brands. Jaguar, Mercury, Aston Martin, Land Rover. Keep: Ford, Lincoln, Volvo, and Mazda.
And I’ll add a fourth:
Right now, Ford sells the Expedition/Exp XL, Explorer, Escape, Freestyle, Edge, and soon the Fairlane SUV/Crossovers. Add in the various Mercurys (Mariner, whatever Mercury’s Explorer is), and Lincolns (Aviator, Navigator). I get 11 vehicles. I have have missed a couple. They’ve spread themselves too thin and they can’t possibly be profitable across the board.
Alan has to have the guts to kill unprofitable vehicles and brands. Ford cannot afford the hubris of Jaguar.
I am pretty sure I read that Ford was going to have to hold the Dec. 22 paychecks until Dec. 29 – now that’s a serious sign of a cash crunch.
Oh, and they're not 'holding December 22 paychecks until December 29th'. They're giving out December 29th paychecks on December 29th. Ford distributes paychecks on the 15th and the last day of the month. As a convenience to employees, in the past they had always distributed the year-end checks prior to the holiday shutdown, i.e., the last day before Christmas break. They've very simply stopped that convenience and are instead giving the checks on the last 'normal' business day of the month. Big freaking deal . . . not bad considering other companies I've seen mail their checks out on the 30th/31st, regardless.
Speaking on the dealer topic….
I don’t know much about the dealer network and all, but I do understand the concept and why Ford is in trouble by having too many dealers.
I live in the Indianapolis area, and the only thing you need to do to see that Ford is in trouble is go to their lots. Within the past week I have visited 5 or 6 different Ford dealers in the area.
At one dealer I counted 46 Ford Mustangs on the lot. Unsold. At the same lot, 34 F-150 trucks. That doesn’t count the 250s or 350s or other trucks. Just F-150s. Unsold. And Five Hundreds and Fusions in every color or trim level you could want. At another dealer, there were barely any cars on the lot because they could hardly make room for the 43 unsold F-150s. Additionally, the Lincoln/Mercury dealer down the road was struggling to make room for all their cars. There were similar stories at the other four dealers. I visit a couple of these dealers pretty often, just to see how much unsold inventory they still have. It’s about the same every time.
Unsold inventory is killer.
The midwest used to be primarily domestic buyers. That’s changing it seems.
wow – i cant believe J Mays is posting on here – very cool! –
Welcome Sir! –
As others have said and Mually himself, Ford needs to become one company sharing platforms. Why is there a Mazda 3, Volvo C30 but no C1 Focus here in the US? Mercury and Lincoln would be fine if their product had all new sheetmetal and different interiors. The platform can be the same it just needs to look and feel different.
As far as dealers go why does Ford have to do anything in regards to buyouts? Does Ford pay dealers something? If there isn’t enough business then the dealers will close on their own or go for other franchises. Change from Ford/L/M to Mazda/Volvo.
In my area it’s still a little country but there are a ton of houses in the 600k-1000k range going up. Is there a single BMW, Volvo, or Audi dealer in the area? No just the average Chevy, Ford, Dodge, Toyota etc. dealers. If one car is not selling look into getting a franchise of one that will sell.
The 2007 UAW talks are going to be interesting.
As far as dealers go why does Ford have to do anything in regards to buyouts? Does Ford pay dealers something? If there isn’t enough business then the dealers will close on their own or go for other franchises. Change from Ford/L/M to Mazda/Volvo.
Ford (and Ford dealers) wish it were that easy. The dealer franchise system requires heavy (millions) ongoing investment in facilities, training, tools, and computer systems.
Many Ford dealers made such investments during the Ford Blue Oval certification frenzy in the nineties. Building a new facility, or remodelling an existing facility, to meet Fords architectural design standards was typically measured in seven figures. And if you’ve noticed, Ford stores look different than Volvo stores look different than Toyota stores…
So, lucky you, you’re a Ford dealer. And you have a five million dollar facility that looks like a Ford dealer. And you have six million dollars in inventory that isn’t moving. And you have a half million in Ford parts sitting on the shelves. And payroll, and utilities, and property tax, and a $20K/mo computer contract, and…..
And your dealer agreement (that you signed) won’t allow you to add, say, a Honda franchise to your facility (nor would Honda allow you).
So what do you do?
The inventory will eventually go away, but probably at a loss. That $40,000 Expedition costs you $400 each month in floorplan interest (probably through Ford Credit). Let it sit for 4 months and it just ate its own profit potential.
And when Ford calls you and asks you to take more, you WANT to say no. But you want hot selling Fusions. Guess what, you won’t get any unless you take another three Expeditions. See the swirling flushing motion yet?
Of course you could sell, but for pennies on the dollar. Or you could fold and lose much more.
Or you could try to get a different franchise, but if there is already a Volvo dealer in town, why would they allow another? And if you were closer than, say, twenty miles away their dealer agreement forbids another Volvo dealer in their ‘territory’
So maybe you get lucky and ‘win’ a Honda franchise and kiss Ford goodbye. Get ready to invest another seven figures to remodel your facility to Honda standards, buy Honda signage, train your employees, buy specialized tools, a different computer system, and millions in inventories.
Lucky you
Why would Ford fork over money for dealers to leave. Based on TTAC’s picture of Ford it’s just a matter of a couple of more issues of the FDW until dealers go broke. If that’s the case, just let them die and you accomplish the goal without spending a dime. And yet, why isn’t that going to happen?
kaisen:
You sound like many franchise owners I have dealt with over the years. They pound their chests with remorse about their lot in life, but then take their private helicoptor to their jet to a brief vaca in Paris. Quelle domage.
They are usually multi million dollar diversified business ventures, with fingers in everything, perhaps excluding Honda…
Tho I am not saying that all is wonderfull in domestic franchise land, and these multi millionaires would not be happier with more pillows on the yacht, I am sure that I do NOT feel sorry for them. Its been a good ride. The Explorer is dead. Wheree is the new king?
But wouldn’t it be worth it to Ford to offer dealers a more realistic buyout now so as to address the overflow network?
Even if it cost Ford $5 to $6 billion dollars over three years, at least they’d be addressing the problem and setting the potential of future profitability. Dealer buyouts could be targeted to high concentration areas of dealer proliferation first.
The short answer is no.