You may have noticed that TTAC hasn’t joined the MSM’s celebration of Ford’s Q1 financial report. While FoMoCo didn’t lose as much money as analysts predicted—“only” dropping $1.4 billion in Q1—danger lurks around every corner. For one thing, the “it wasn’t as bad as everyone expected” rejoicing represents exactly the same logic GM deployed as it slouched towards Bethlehem. Look how well that turned out. For another, as we also pointed out during GM’s Long March to C11, you can’t cut your way to profits. At some point, Ford’s going to have to build something the North American car market really really wants. The forthcoming Transit van, turbo’ed Taurus, Fusion, etc. ain’t it. Fiesta? I wouldn’t don those sombreros just yet.
And even if Ford’s products suddenly prove popular, the US new car market has to recover (thing three) for that to meme anything. Some pundits are [still] predicting that new car sales have . . . wait for it . . . bottomed out. Q3 and Q4 will see a lift. Maybe. Probably not. And even if the recovery clocks in on schedule, or Uncle Sam juices the market with cash4clunkermania, there’s the fourth item on our agenda of despair: Chrysler and GM’s “restructuring” (i.e. death and dissolution). More specifically, The Mother of All Fire Sales.
At some point soon, there will be an AWFUL lot of new cars going for peanuts. All the inventory marked HUMMER, Saab and Pontiac are about to go for cheap. And then there’s everything else Chrysler and GM makes. The Detroit News taps JPMorgan analyst Eric Selle to make the point (in the last sentence of a story entitled “Mulally: Ford plan working”): “The threat to our Ford model is the potential for its competitors to file for bankruptcy and slash prices to maintain volumes.” In other words, Ford will have to compete with Chrysler and GM products going for a song. Say goodbye to the possibility of maintaining Ford’s margins (should they even exist).
There’s more potential fallout from the fallout. Never mind the supplier collapse problem; the feds have shown themselves willing to keep the big 2.8’s parts makers in business, come what may (or may not). How about the Chrysler/GM fire sale’s effect on “the perception gap”? Chrysler and GM redux will have sealed for all time their rep as discount brands. Can Ford’s “we didn’t take any bailout bucks” mien protect them from a more general “domestics are cut rate automobiles” branding problem?
As always, cash burn is the best way to judge Ford’s prospects.
Ford burned through $3.7 billion in cash in the first quarter, down from $7.2 billion in the fourth quarter of 2008. That left the company with $21.3 billion in cash to fund its automotive operations.
If you multiply Ford’s Q1 cash burn by four, assuming that the market doesn’t get worse, that’s $14.8 billion per year. Assuming Ford needs a $5 billion “pad” (low-balling) to keep the lights on, The Blue Oval Boyz will be down to their last couple of billion in just over a year. Just in time for another bailout?
[Thanks to Ken Elias for the headline title.]
Buuuut, and it’s a big but, as the inventory winds down, the remainders are the dogs. You can’t GIVE them away. They’ll have to be shoved off into fleets. Look to find Thrifty to start advertizing they have Challengers for rent by July. That won’t affect Ford’s domestics sales.
And another thing, price isn’t everything. As this drama grinds on, the damage done to the reputations of the respective manufacturers will start to really add up. Ford’s is the best by far. That will translate into sales. How much? Unknown, but the sales figures for April might give us a clue.
Say what you will, but reducing cash burn is the first step to returning to healthy operations. Nobody expected them to suddenly turn around and show big fat profit numbers, and most people expected them to burn billions more than they did. It is an accomplishment to have patched up some of the holes in the dam.
It will be interesting to see what happens when Chrysler files C11 – I sure won’t go buy a Caliber, pretty much no matter what the price. If GM follows, things will indeed become very difficult for Ford. Ford won’t find salvation in the Transit, Fusion, Taurus, and certainly not the Fiesta, but where it might find a long-term solution is by offering products across it’s lineup that are reliable and high-quality, which all the cars listed are.
All the cars you listed are good value propositions that compete well with the market leaders (or will soon). Ford’s in trouble, sure, and losing $1.4b is hardly a champagne-popping business victory, but nobody’s saying it is. I’m convinced that Ford has really gotten it’s act together in terms of engineering quality, reliable cars and I hope they stick around long enough for it to bear fruit.
Journalistically, this little silver lining was a decent story with an interesting angle – Ford Loses Only $1.4b, Hooray! A story about how Ford (and every other domestic) is screwed? Kinda getting dead-horsey.
Actually, Ford distancing itself from the “fire sale prices” of GM/Chrysler is going to help it. There will be a lot of cars going for cheap, but that is NOT the market Ford wants to compete in, but rather be in the minds of Toyondissan buyers who want to make a good long term investment.
I have been amazed at the climb in Ford stock. Doesn’t a GM and/or Chrysler bankruptcy put all sorts of strain on Ford? When an airline goes under, all the other ones suffer. How is this going to be different?
The Fusion works.
Do you want a car that people jump for in the beginning like the Chrysler 300 or PT Cruiser or do you want a car that doesn’t sell all that great in the beginning but is getting a reputation for being a great car?
So the government is going to fund the GM and Chrysler bailouts, likely to the tune of tens of billions and Ford is competing with their own money? Just a brilliant strategy.
This is so the Ford family can retain control of the company despite owning a tiny amount of stock.
The spoiled progeny of Henry Ford should see the writing on the wall and leave the running of the company to a pro like Mulally.
I don’t care what news outlets say, I don’t care what bloggers say. The market bidding Ford stock up is a good indication that the company is going in the right direction. Given the terrible state of the car market right now, 1.4 billion loss is out right fantastic. If you disagree, then all you have to do is short the stock or buy some puts. You’ll be pretty rich if you turn out to be right.
I think if Ford can get through the next 12 months without taking any PTFOA handouts, it won’t matter if GM and Chrysler bankruptcies prompt a massive garage sale sell off of inventory, because Ford won’t be lumped in with the Bailout twins, and should be able to use that to their advantage in advertising and sales.
If Bill Ford and Alan Mullaly pull this off it will be the turnaround of the century (of course we’re only ten years in, but still…).
For grins I checked online inventories of family cars at a number of local Ford and Mercury dealerships, and was shocked to find that there isn’t a Taurus or Sable stocked at any of the dealers within 50 miles of here. There are a few dozen Fusions spread around and exactly one Milan.
Two out of three of the nearest Ford dealerships closed within this past year. The closest Chevy dealership shut down last week. San Jose’s long time dominant VW dealer is gone. The VW dealers who are left have only a handful of cars in stock compared to what they routinely carried two years ago.
Toyota is projected to loose $5B in its current year ( http://newsdaily.com/stories/tre53b0ak-us-toyota/ ). By that measure, Ford is financially in about the same hot water as Toyota. Shall we start predicting Toyota’s C11 filing now?
Fiesta? I wouldn’t don those sombreros just yet.
Well, no. By the time Ford stops dragging their feet and gets that thing on the market (what are we looking at…3-4 years since they announced it??), the competitors will have something FAR better than the Fiesta. By the time it goes on sale here, it will already be a two year old model in Europe. Ford is doing the same, bonehead things with the Fiesta as GM did with the Camaro.
If you multiply Ford’s Q1 cash burn by four, assuming that the market doesn’t get worse, that’s $14.8 billion per year. Assuming Ford needs a $5 billion “pad” (low-balling) to keep the lights on, The Blue Oval Boyz will be down to their last couple of billion in just over a year. Just in time for another bailout?
Sums it up perfectly…and you can bet that when GM goes C11, the market will drop…and Ford will suffer.
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The Fusion works.
How????
The Hybrid is not worth the $28K starting price. The Prius is a mid-sized car, gets BETTER mileage, and starts around $12-$22K…the same price for a stripped, 4-banger Fusion.
NONE of the ‘new’ Fords work because they are WAY overpriced. $32K for a Fusion??? Almost $40K for a Taurus??? $45K for the station wagon…err…Flex???? What are they smoking?
And the Fiesta will only be slightly less than the Focus…thus, it will not sell.
All of the work Ford has done in an attempt to not take any bailout money (which they actually have…Volvo from the Swedish govt) will become pointless once GM goes C11. With the HUGE competitive edge GM will have, Ford will not be able to compete.
$32K for a Fusion??? Almost $40K for a Taurus??? $45K for the station wagon…err…Flex???? What are they smoking?
No one says you have to buy the loaded versions!
Starting price for a Fusion is 19k. For the Taurus, 25k, for the Flex 28k. That’s all class competitive pricing.
As for the Prius vs. Fusion Hybrid–
1) The Prius is uglier
2) The Fusion doesn’t have the “Greenie”/hippie stigma
3) Ford can actually make a profit on it, IIRC Toyota loses money on the Prius.
At some point, Ford’s going to have to build something the North American car market really really wants.
Maybe Ford doesn’t really need a homerun car.
Without GM and Chrysler, doesn’t that mean Ford is going to basically 100% own the pick-up, SUV, and utility van categories?
“The Fusion works.”
Yes it does! Put that together with a good marketing campaign and the RS or ST Focus. Should work. A little insane Focus RS sedan would be awesome.
@P71_CrownVic Fiesta debut at the Geneva Motor show in March 2008 so 1 year ago not 3-4. It started production in August 2008 and sales started in September/October. Full production in Europe started in January 2009. Fiesta released was originally planned for Q4 2009 in the US but looks like it’ll be Q1 2010. So about 1 year after Europe. The delay was caused by the fact that the original plan was to bring the Ecosport to the US. Ford US decided to join the Fiesta program because it would be a better competitor. Also Ford will be introducing a 6 speed DCT as the “automatic” available on the Fiesta. Future releases of global platform vehicles will not have the 1 year delay. The strongest competitor in the market will be the Honda Fit which went on sale in August 2008. Honda typically refreshes in 4 year cycles so that will mean a new Fit in 2012 which is when the next refreshed Fiesta will be coming to North America. Toyota should have a new Yaris coming out in 2010 so that might be a challenge to the Fiesta, but it’ll unlikely match it for features and performance. It’ll most likely be cheaper though.
3) Ford can actually make a profit on it, IIRC Toyota loses money on the Prius.
No…Ford has specifically stated that their hybrid program loses them money. That is why they limit production of Escape hybrids to 25K a year…and they are doing the same with the Fusion hybrid.
Toyota can be quoted as saying that they will be making a profit on the Prius with the most current refresh.
And the Fusion is no looker either. IT looks like a new TL with that goofy, three-bar grille.
Ford has the most incohesive design department of any Detroit automaker. there is not a single design element that is shared with every model…unless you consider ‘ugly’ a design element.
—————
Maybe Ford doesn’t really need a homerun car.
Without GM and Chrysler, doesn’t that mean Ford is going to basically 100% own the pick-up, SUV, and utility van categories?
Where is GM going????
@P71_CrownVic Fiesta debut at the Geneva Motor show in March 2008 so 1 year ago not 3-4.
No, it was 2007…and it was at the Frankfurt Motor Show.
http://www.tuningnews.net/autoshows/frankfurt2007/?page=8
Page 8.
And I didn’t mean 3-4 years up to today, I meant 3-4 years until it (finally) goes on sale.
2007-2010 = 3 years.
It just boggles my mind how it can take so long to change nothing.
Being controlled by the Ford Family can be both a blessing and a curse. While they are not always correct, they do care about the long-term preservation and prosperity of “their” company. Its a lot more than you can say about Cerberus and other buccaneering fast buck artists.
In addition management does not have to worry about pleasing Wall Street all the time like most companies obsess over meeting earnings projections. They have done a far better job of reacting to the profound changes in the market that the board of bystanders at GM. It
Ford has or will soon have a competitive product in most every market segment.
While the Transit will never be a barn-burning home run like the F150 or Taurus in its prime it could be a solid contributor player. There are a lot of small business that need something cheap with a lot of cargo capacity.
Hybrid or EV-ized with Right Hand Drive it could even become a good postal vehicle.
For grins I checked online inventories of family cars at a number of local Ford and Mercury dealerships, and was shocked to find that there isn’t a Taurus or Sable stocked at any of the dealers within 50 miles of here. There are a few dozen Fusions spread around and exactly one Milan.
This is the problem the Big 3 face as they reduce production to manage inventory. They are left with too few units on too many lots, so no dealer has a proper level of inventory. I sell Hyundais, and we must have 50 Sonatas, 25 Elantras, 30 Accents, etc. Plenty of everything. Contrast that with a Ford lot. A couple Tauruses, a dozen Fusions and Focuses, and a shit load of F-150s in the corner. People want to see what they want, not have the dealer swap it in.
Hybrid Fusion vs. Prius….
One thing that doesn’t get touched on much is the inherent deficit of a hybrid: The more parts you have, the more likely it is statistically that one will break. Hybrids are a moving violation of Murphy’s Law. You. Cannot. Make. A. Hybrid. Last. (like a plain old car).
The only way the Japanese have pulled this off is durability and quality control that’s damned near a repeal of the Laws of Thermodynamics. But.
1) There is no way their hybrids are going to have the durability of a plain-and-simple Civic or a Corolla
2) There is no way the hybrid Fusion is going to be as durable as a Prius or Insight
2) There is no way the hybrid Fusion is going to be as durable as a Prius or Insight
Why not? Who says? From a technical standpoint, explain why a hybrid Fusion won’t be as durable. Show me hard stats and data…not Consumer Reports bs. Asmuch as people want to “hate” onm Ford, they are carching up and fast. They do NOT have a long way to go with the exception of public perception.
“And the Fusion is no looker either. IT looks like a new TL with that goofy, three-bar grille. ”
Dude, the Prius is one of the most ugly car ever created. Until the Insight, anyway. The Fusion is way more conservative and traditional, it looks like a vanilla sedan. The Prius (or Insight) for that matter screams I’M A MAC USING, PARLIAMENT SMOKING, PBR DRINKING ART STUDENT HIPSTER!!!
Some people like that, but there’s a market for people who don’t, but still want a hybrid. A early 20s liberal art student in college might get his parents to buy him a Prius, but a 30-something middle-class conservative father in the suburbs wouldn’t be caught dead driving one.
I know your Grandma got rear ended when she was driving a Pinto, and your Aunt rolled over in an exploding Firestone-equipped ’98 Explorer*, but try to be a little more objective!
*Just guessing!
Have to agree with P71CrownVic on the pricing thing, Ford has to get the prices down, somehow, don’t ask me how. I like Ford and think they are moving in the right direction (slowly) but man are they getting expensive on all fronts other than a stripper Focus.
The Ford sales numbers don’t lie and they are bad.
The government is paying GM and Chrysler to sell autos in competition with Ford. How do they win that game?
http://media.ford.com/images/10031/March09sales.pdf
The Fusion works because it is reliable. Has been since it was introduced. People who own them will tell everyone they know how good they are. It will build a reputation just like Camry and Accord have for 25-30 years. How “good” a car is when new means diddly. VW Passats are considered great cars until you own them for more than 3 years.
“the competitors will have something FAR better than the Fiesta. By the time it goes on sale here, it will already be a two year old model in Europe. ”
More likely we’ll have lost interest in tiny cars and want huge trucks and CUVs. Tiny cars never stay popular for long.
Ford doesn’t need a home run. Let’s see if they’ve learned anything in this crisis. The name of the game is constant continuous improvement. They don’t have to be the best at anything. They have to be the most well-sorted out. Kind of like Prius vs. Fusion Hybrid. Which is the “real” car? Which compromises less? Keeping the line they have now and possibly adding Fiesta, Transit and Ka will go a long way to solving their problems. Not too many cars to disperse attention so they should be able to improve all of them steadily. I guess they’ll be here in 20 yrs time if in 20 yrs time their line-up is made up by the : Ka, Fiesta, Focus, Fusion, Taurus etc
davey49, I don’t fully agree with your assessment that people’s attention will have shifted from the small car segment back to behemoths in 2010. There’s a good chance that we’ll see a big gas price wallop if the economy starts to recover (due to present slowed production in response to slower demand growth related to the economy falling behind increased demand as economies recover). If gas hops up to the $3-4/gallon range again and the economy gets back on track, folks will cast their eyes Ford’s way, assuming they’re still in business. I know I want one like crazy…
I’ll say one thing for the Transit: if Ford brings out a passenger version, this just might give Honda the swift kick in the backside it seems to need before getting around to fixing the several flaws in the Element.
The most trivial (and therefore vexing) of these is the lack of bumper strips on the doors. I don’t care whether that was an artifact of designer hubris or GM-style cheapthink. Hell will freeze over before I buy a new car where the doors will be covered in dings. Several other flaws are well-known. One that isn’t often cited is that the Element is too short to take bikes in the back without removing the front wheel. This for a vehicle that was intended to be marketed from day one to the outdoors crowd?
So, if Ford can get Honda off of dead center, that would be something Element buyers have yet to accomplish by themselves. There won’t be an Element in my driveway until Honda fixes its inexcusable deficiencies.
Robert…I hadn’t thought of what the GM and Chrysler Fire Sale pricing might do to Ford’s sales and you’re right-it’s gonna hurt. I don’t think the GM and Chrysler fire sales are going to attract any Toyota-Honda-Nissan-Mazda-Hyundai loyalists away from their relatively happy ownership experiences, but for the ‘Buy American’ crowd, the thought of a severely discounted G8, Solstice ,Aura, Vue, Sky, Outlook etc with some fantastic cheap deals complete with a U.S. Gov’t insured warranty might do some serious damage to Ford’s sales. For awhile.
Prius vs Fusion:
Prius is too hacthback looking vs Fusion sedan styling. The sedan style currently sells the most (trucks being a different category) – Fusion, Camry, Accord, Lexus, BMW, MB, etc. .
As for price, I recall some thread on this site saying a Prius fully optioned is $28K.
I don’t think GM & Chryco cars will be at any more fire sale prices than they are now. Dealers will still have existing inventory at current Msrp. and their cost with them.
Okay..let’s set the record straight, Ford only has the Mustang, the F150, 250, 350, trucks and the Focus, which is a rebadged Mazda 3, same goes the Mazda 6 clones! Really if it wern’t for Mazda there wouldn’t be a Ford, same goes for the Escape..Actually I am trying to say…Why can’t Detroit build AMERICAN DESIGNED, MADE CARS HERE, I am truely disapointed that even GM has to bring in cars made in Europe, Austraila and even China, even though I will laugh at the VW/Chrysler Rebadge…Look at Honda, Toyota, first bulit in Japan, now built here and still kicking our butts with exceptional cars and trucks…my friend has a new Trundra and I was very impressed with the tailgate feature, a soft drop tailgate, that really amazed me, though I will forgive Ford, because somebody created the fold away pole and step feature on their tailgate, but, hey Detroit get back to making, not importing cars and rebadging them…poor excuse for calling them American made cars!
I don’t know about this firesale. I mean, the backlog is bad, but it isn’t bad enough to toss your brands reputation and residual value completely in the shitter (especially when the government is financing the waiting period). Better to use the inventory as a cash flow buffer while you renegotiate your contract with the UAW or hell, send it to the junker. Maybe we just differ on our definition of firesale prices. Firesale to me is the Chrysler dealers selling stuff at 50% off, not just lots of money on the hood.
As far as the bankruptcy improving GM’s competitive position so much that its just unfair, I doubt it.
To split GM into Good Motors and Bad Motors, Bad Motors is going to have to ask permission to sell this stuff. Creditors will be able to object if the price is too low (in their opinion). To quickly settle it (and the valuation of assets is time consuming) Good Motors is going to have to offer so much that the creditors won’t want to fight about it or at least can’t plausibly claim the assets are worth more than the stuff they are buying.
So Good Motors is going to be saddled with a fair amount of debt from the get go. This, couple with their inherited brand problems, an R&D program that probably suffered irreversible damage during the turn-off-the-escalators phase, and having the President’s Men up their butts, and all the other new and old problems I can’t even think of, and I don’t think Good Motors is going to have an enviable competitive position compared to Ford that is the last domestic that hasn’t pissed everyone off.
carguy64
the current US Focus is not a rebadged Mazda 3, they are different platforms. The Euro Focus and Mazda 3 are on the same platform, but i was ynder the imperssion it was a Ford platform.
and why is it people on here keep comparing the Fusion Hybrid to the cheaper Prius. Then you might ask why would someone choose a Camry Hybrid when the cheaper Prius is right there on the same lot. Because they aren’t meant to compete with each other, just like the Fusion Hybrids competitor is the Camry Hybrid.
Ford is in great shape.
Despite comments from Crown Victoria-loving contributers who know very little, the business is already making great strides.
Ford is already seeing great benefit from not taking Federal money. The product line-up is the best in its history and when consumers do return to the showrooms they will see a range of vehicles that is far better than anything the competition offer.
The Fiesta already is a home-run in Europe and Asia and will be here too.
Mulally and team know what they are doing and should be congratulated.
I think Ford has a pricing problem. Because my 06 Fusion has been such a good car, I decided to look at a Ford Flex to replace my wife’s car a few month’s ago. I was looking for a 7 pass AWD crossover in the 40 to 45k range. I looked at a loaded Flex. (My wife and I like all the goodies) It’s sticker price was 44k!!! I liked the car but when all was said and done for a few grand more I could get an MB R class! We wound up with an Acura MDX that came out to the same price as the Flex when both were discounted.
I don’t worry about Ford…
If they can keep things together while GM and Chrysler are cashtrated, I see them being the last domestic standing with a decent line up and an intact quality reputation.
Can you imagine the quality problems on GM and Chrysler products being made this year? The line workers must have one eye on the line and one eye on CNN.
Once unemployment really starts to ramp up, there will be a massive resurgence of buy American and that will equal Ford.
Imagine the campaign:
“Ford! Great Products! Great Quality! Keep your money in American to keep American’s working!”
The reality of what really is an American car will be lost in the hysteria / panic.
To split GM into Good Motors and Bad Motors, Bad Motors is going to have to ask permission to sell this stuff.
There seems to be a lot of misunderstanding about the good company/ bad company concept.
The Bad Company won’t be doing anything but liquidating. It would be the dumping ground for debt and some or all of the assets that the new-and-(hopefully)-improved company has no intentions of using.
Any future business would come only from the Good Company. The Bad Company won’t sell any cars.
The good/bad structure is really a legal structure that is designed to prevent creditors from tying up all of the assets. The creditors may sue, as they would argue that the whole thing was a dodge meant to screw them, but then again, they probably won’t fare well in such a case.
From the government’s and taxpayer’s standpoint, it’s the best way, because the creditors will get less. Remember — if the creditors get more, it will be coming out of your pocket.
John Horner:
Toyota is projected to loose $5B in its current year ( http://newsdaily.com/stories/tre53b0ak-us-toyota/ ). By that measure, Ford is financially in about the same hot water as Toyota. Shall we start predicting Toyota’s C11 filing now?
What? Toyota? Maybe Nissan.
Maybe if their losses were $40B. Toyota’s market cap is 10x Ford’s. Toyota can easily raise capital in the marketplace.
Ford has been doing a lot of things right, but I still don’t understand why they put the Edge, Flex and Taurus X all out in essentially the same market segment. I guess the X is already dead, but I still don’t understand why they have both the Edge and Flex … and why those products have such horrible names!
Despite comments from Crown Victoria-loving contributers who know very little
Yeah, I know how the truth can be bothersome…
The Fiesta already is a home-run in Europe
So was the Astra…so was the Mondeo that was renamed Contour.
and the Focus, which is a rebadged Mazda 3
No, our Focus is the same one that we got in 2000. While the rest of the world gets the Euro-designed Focus, we are stuck with a hideous, cheap, rebadge of a 10 year old car.
and why is it people on here keep comparing the Fusion Hybrid to the cheaper Prius. Then you might ask why would someone choose a Camry Hybrid when the cheaper Prius is right there on the same lot. Because they aren’t meant to compete with each other, just like the Fusion Hybrids competitor is the Camry Hybrid.
Because they are in the same class…ergo…have similar dimensions.
P71_CrownVic :
April 26th, 2009 at 11:17 am
Because they are in the same class…ergo…have similar dimensions.
“Oh there you go, bringing class into it again.”
“That’s what it’s all about, if only people would-”
The Fusion and Prius may be in the same class, but they do not have similar dimensions. The size classifications used by the EPA are misleading because they are defined as the total passenger and cargo volume in cubic feet. According to the EPA, the Prius and the Camry are the same size – 112 cubic feet – but the Prius is 96 passenger, 16 cargo, while the Camry is 101 passenger, 11 cargo. The Fusion is rated at 116: 100 passenger, 16 cargo.
Unsurprisingly, then, a comparison of the interior dimensions of these cars will show that the Fusion and Camry are almost identical in size, while the Prius is quite a bit smaller than both. The Prius is a midsize on the strength of its hatchback configuration, which lends it more cargo space, and to a lesser extent on the strength of its higher roofline. The Fusion and Camry have a great deal more people room.
But you have to draw the statistical line somewhere, and the EPA draws it around the 110-119 cubic foot range. Thus the Prius (112) and the Fusion (116) are both nominally midsize cars, while the Camry (112) is nominally the same size as the Prius. Which just goes to show that EPA size classifications shouldn’t be taken as the holy grail.
***
Anecdotal, I know, but some friends of mine are getting ready to turn in their 2006 Fusion SEL (four-cylinder, automatic) at the end of its lease. Three years, 40000 miles, zero defects. One of the most common configurations, from the first model year, and it’s needed nothing but routine maintenance. And it hasn’t been driven gently, either. That speaks well of what Ford is doing these days. They’ve got the product, now they’ve just got to ride out the economic storm – and keep on with the product.
Three years, 40000 miles, zero defects.
Are we supposed to be proud of that?
That Ford can build a car that will stay glued together for 40K???
To tout lasting a mere 40K as an accomplishment is telling of how bad off Ford really is
but I still don’t understand why they have both the Edge and Flex … and why those products have such horrible names!
The Edge and Flex are different enough to justify…but the Escape and Edge are not.
Both seat 5
Both can only tow 3500 pounds
Why Ford needs two 5-seat SUVs is beyond me. Drop the horribly selling Edge, and put a nickle or two into the interior of the Escape.
But I will agree, whoever is coming up with these new Ford names needs to be fired. Lincoln is all messed up…with their MK everything…and Ford thinks they sell Razors (Fusion, Edge)…and their ugly grilles mimmic that!
Why Ford needs two 5-seat SUVs is beyond me.
Toyota has the same issue of redundancy with its SUV/CUV lineup.
The RAV 4 AND the FJ Cruiser. The Highlander AND the 4 Runner. The Land Cruiser AND the Sequoia. Why?
The RAV 4 AND the FJ Cruiser. The Highlander AND the 4 Runner. The Land Cruiser AND the Sequoia. Why?
The Highlander is no more an SUV than my wife’s Camry. The 4Runner is BOF, normally with 4WD (both high and low) that has real off-road capability.
Anyway if they should get rid of anything it should be the Escape not the Edge. The Edge is better looking, inside and out.
For a while there it seemed like Ford couldn’t build a car that would hold together for 40,000 miles. So yeah, I think zero defects over 40,000 miles is a tremendous accomplishment in light of previous experience. It’s what we take for granted from Honda or Toyota, but it’s not what people came to expect from Ford. If it does become the expectation, and if Ford continues to justify that expectation, then they will survive and even thrive.
Robert, I would be interested in some type of quantitative analysis of the few potentially profitable Ford models vs. firesale competition from bankrupt brands. For example, every F-150 sale Ford loses to a Dodge Ram has much more revenue impact than loss of a Focus sale to a Dodge Caliber. In addition to profit margin, inventory quantities matter too. There are very few Saturn Astras in inventory, limiting their impact even if they were given away for free, but enough Saturn Auras exist on the lots to potentially depress Fusion profits.
Related thought. By building a few hybrids and not taking bailout bucks, is Ford well positioned to make money by cranking out the politically incorrect full size pickups and SUVs that Government Motors will be reluctant to subsidize? Can’t imagine that the Car Czar would approve cranking up Ram production in Saltillo, Mexico or Tahoe production in Arlington, TX with political pressure to go green and/or save jobs near Detroit or Cleveland.
George B:
Good point. It’s hard to predict where this is going, as the whole business has entered the political realm. Well, more than usual. A LOT more than usual.
But no matter what happens, chaos is better for small, highly maneuverable companies than large, ponderous ones. To wit: the effect of wildly swinging gas prices on Ford vis-a-vis Hyundai.
@ P71_CrownVic: Seriously, seriously, did you get rear-ended in a Pinto? The only time you ever post it has to do about Ford, and it’s only ever something negative.
Yes you can get a Fusion for $32k…you can also get one for $19k. You can get a Taurus for $40k…a twin-turbo, top-of-the-line 350hp SHO Taurus. You can also get a Taurus for fifteen grand LESS than that. The Flex…hell ANY car is overpriced when you stuff it with every option; if you want to whine about how a loaded-to-the-gills Flex costs over 40 grand, why don’t you complain how an Odyssey or Sienna or Traverse or Murano or Pilot or Highlander also tops 40k loaded? Right. They’re not Fords.
The Fiesta is taking a while to get here, yes, but it’ll be on sale in America a year later than Europe. ONE year, not 3-4. A showing of a pre-production concept doesn’t count. The next-generation Focus, which will be designed in Europe, will go on sale in America and Europe at the same time. Same with the Mondeo/next-gen Fusion.
And unlike your Astra example, the Fiesta will not be saddled with the worst engine in the lineup and nonexistent advertising when it arrives. The US market will get the top-line engine and a transmission Europe doesn’t even have yet (they’re still stuck with a 4-speed auto). Hell, Ford’s already advertising the Fiesta over here, and it’s not even on sale yet! When did you last see an Astra ad?
The Contour, unlike the Fiesta, was too small for its class. That failure will not be repeated.
As for the Fiesta’s pricing, save your bullsh*t for when it actually goes on sale, and thus is actually priced.
The Edge and Flex have a different market segment. The Edge is large but it is more of a personal or couples car,not so much for people with children.
The Flex is definitely a family car.
jakecarolan- The mid size sedans and pickups are always the biggest sellers but there is always a large 3rd tier of buyers each year. Compacts are often in the 3rd tier, throughout the 1990s until 2005 it was the mid to large SUVs. Now the 3rd tier seems to be becoming the compact CUVs. The tiny cars are generally stuck down in the 4th or 5th tiers of sales. I like the idea of the Fiesta but I can’t imagine sales will be high. I know myself that even with $4-$6US per gallon gasoline I would not buy a Fiesta.
The Escape is Ford’s 2nd best selling vehicle these days, and it seats 5 only if the people are skinny and very friendly with each other.
“The RAV 4 AND the FJ Cruiser. The Highlander AND the 4 Runner. The Land Cruiser AND the Sequoia. Why?”
The Rav4, Highlander and Sequoia can’t go off road, the FJ Cruiser, 4Runner and Land Cruiser can. After that just split by price/size
Try to explain Nissan, they have the Murano, Pathfinder and XTerra. All similar sizes
I doubt that Ford intends to sell a lot of Fusion hybrids. Its main purpose is to build credibility for the regular gasoline-powered version, because having it (hopefully) makes Ford look like a credible player. If they don’t sell a single hybrid but can use it to build the brand value of the regular Fusion (and by extension, the Focus and Fiesta), then it will have done its job.
Ford is taking an interesting approach. While GM likes to engage in flagwaving, Ford asks the consumer for a second chance, while quietly distancing itself from the Detroit bailout candidates. It’s as if Mulally went to the hearings just to make it clear that while we’re all friends and everything, Ford is not quite like those other two (losers) sitting at the table.
Looking at their financials, though, it appears to me that a slow recovery in the car sales market would necessitate that they get some federal loan guarantees, at the very least. Ford’s gambit has been to negotiate pay downs of their debt, knowing that Uncle Sam will have their back if they start running out of cash.
Ford has done a decent job of maintaining market share, and they set on rightsizing the company to perform with perhaps 10% of the retail market, plus fleet. If Mulally can pull that off, he’ll have done a masterful job and earned every penny of his compensation.
There’s two major schools of thought on this one.
1. Chrysler goes bye-bye soon. The PTFOA throws them under the bus to set an example for GM and the unions and the bankers and bondholders to get it together. GM gets cut into Good and Bad. Bad goes. Good goes later. Ford remains. Because Ford is “The Last Real American Car Company,” (I’d better trademark that) they will survive, then prosper and then thrive. We’ve seen this before with Harley-Davidson (although they’re having a tough go of it now.)
2. Uncle Sam continues life-support until the economy “turns” whatever that means. Chrysler zombies on and struggles for a couple of years, spits out a handful of Fiats and croaks like a frog. GM, split into Good GM and Bad GM, and Good GM soldiers on for a while. The economy “turns” and the PTFOA keeps what’s left of GM alive through the election, while we all are numb to the Zombie Infestation in Detroit.
Throughout all this Ford has holed up in a house, the dawn comes, and their customers show up want to buy real American cars….whatever that means.
PCH: To get the assets out of the bankruptcy estate (where all of GMs property goes the instant they file their petition), GM will have to petition the court to sell it. That’s just bankruptcy law. They can’t just DO IT after they file (or before really, something like would fall under the courts jurisdiction.) That’s just basic Chapter 11 law (11 U.S.C. 363 for starters). Since those are the good assets and are assuredly covered by security agreements, those assets will have to be sold for their fair market value. Determining that value is going to be very hard to do (what is the Cadillac name worth in this environment? Their patents? How much is a Tahoe factory worth these days?) The only quick way to get everyone to agree to it is pay substantially more than they are worth.
So to create new gm they will have to give the creditors a chance to block the sale. To make sure the bankruptcy is super quick they will have to overpay substantially to quash creditor carping. Otherwise they risk someone dragging the bankruptcy on and on. Since they will be buying all the good assets, the secured creditors will NOT be letting this stuff out of the bankruptcy estate for a song.
So New GM will be overloaded with debt from day one or the ultra quick bankruptcy will be not so quick.
They can’t just DO IT after they file
Which is why the Good Company would be created prior to the filing.
Since those are the good assets and are assuredly covered by security agreements, those assets will have to be sold for their fair market value.
Which of course is all quite debatable. The bondholders don’t stand much of a chance.
So to create new gm they will have to give the creditors a chance to block the sale.
We’re talking about the federal government here. They won’t wait or give anyone a chance before the fact to block anything. They’ll act, and put the ball in the court of the creditors if the creditors wish to litigate.
So New GM will be overloaded with debt from day one or the ultra quick bankruptcy will be not so quick.
The bankruptcy doesn’t need to be quick, because the Good Company will hit the ground running.
This Good/Bad model is used already in dealing with failed banks. Here’s the template for handling this situation: http://www.businessweek.com/bwdaily/dnflash/content/sep2008/db20080925_760466.htm
The bondholders don’t stand much of a chance. They’re already talking about equity because they know that they aren’t going to do well in a battle with Uncle Sam. My money is on the government.
I think I’ll create a “Good LW” and sell him my house for $1. Bank of America is going to be pissed when they find out that the “Bad LW” doesn’t own the home and won’t be making any more payments.
Obviously Bank of America didn’t understand the concept of liens and collateral when they gave me a mortgage.
The transfer to the new company would be a preferential transfer and be subject to court review as well. I mean, the whole point of the exercise is to remove assets from the bankruptcy estate. That’s a no no even if you do it before you file.
The creditors will have the power to fight it, continue it, and otherwise throw a monkey wrench in the works. And then they can appeal it if its egregious.
That link is a story about a bigger bank buying a crap bank. I’m not seeing the good company bad company template you are talking about in that article. There is no bankruptcy going on there, just one company buying a failed company and that changes things. My argument is entirely based on bankruptcy law.
You cannot transfer assets for a song and then file bankruptcy. That is bad faith, a red flag, and eminently reversible. Before or after bankruptcy, new GM is going to have to pay top dollar for the assets if they want this to be done quickly. That’s just bankruptcy law.
@ PCH101
I think it’s interesting that nobody is covering the larger story. Let’s say this all works according to the US Government plan… Goes off without a hitch…
The bondholders take a bath and the contracts that they own these assets in the event of a default and can liquidate them if they like becomes null (if only for political and PR reasons).
I’m thinking that all bankers with half a brain will no longer lend money backed by assets if they believe that they could ever be put in this situation.
That should be a big boost to the credit markets!
I’m not seeing the good company bad company template you are talking about in that article.
The FDIC created a Good WaMu. All of the deposits and other assets that Chase wanted went into Good WaMu, which they acquired.
What was left of the old WaMu became, by default, Bad WaMu. That entity was quietly put into BK.
The news that hit the media was that Chase acquired WaMu and the depositors were safe. The news that didn’t get quite the attention was that the shareholders and creditors got stuck with a useless bag of debt, while all the good stuff was bought for pennies at their expense.
This is the fate of Chrysler and GM if the bondholders don’t play ball. The bondholders are presumably not stupid and know this. If they want to litigate, they’ll spend years doing it, and no court is going to stop the Good Company from functioning.
I’m thinking that all bankers with half a brain will no longer lend money backed by assets if they believe that they could ever be put in this situation.
Nope. Bankers are in the business of making loans. This is unusual enough that it’s a blip in the scheme of things.
They would have been just as badly off, if not worse, had the government not intervened anyway. As it stands, they’re lucky that Uncle Sam didn’t nationalize them for being undercapitalized, because most of them are most likely technically insolvent. No moral high ground there.
A long time ago, all the bond and stockholders and most all of the other creditors were rich people who supposedly could afford to take the hit. So a BK had a limited damage to the system.
Now, those same people are everyone who has a job and a 401k or pension, but it’s even less wrong than it used to be because those people need to pay their fair share! Besides, most of them are cheating on their taxes already, might as well punish them all.
This is THE problem with BK’s, and the even bigger problem with these BK’s where the executive and legislative branches intrude themselves. The people who CAUSED the problem come out with the least pain.
All the while, Ford and it’s workers, owners, and creditors are going to get shafted as well, and no one here as explained how they will avoid it in anyway that shows they understand what’s going to happen. When GM goes COMES OUT OF BK, they will be able to undercut Ford on every truck. So even if everyone refuses to buy a GM at the BK sale, that won’t matter. What’s really likely to happen is that GM will selectively screw suppliers in order to hurt Ford with the results. I also would not be surprised to hear that the PTFOA allows this because what they really want is to get their money into, and their thumbs on top of Ford anyway.
toxicroach: I think you see the GM and Chrysler situation in the light of a normal commercial situation. Once Uncle Sam is involved, the power dynamic changes. Most of the large creditors have their own relationships with Uncle Sam to consider. Many of them have taken bailout bucks of their own.
In a typical bankruptcy situation the creditors hold most of the face cards at the table. This time they are holding a few 10s and Jacks. Any negotiation hinges on the relative power dynamics amongst the various players.
Like I mentioned earlier…if it wasn’t for Mazda, their wouldn’t be Ford…same goes as the Volvo unit, all it was is a cheap attempt to create much better offerings from Ford..Same goes for GM..Saturn is getting chewed up by Opel Europe..because really GM can’t make a great car either, did you ever envision the Camaro being from Down under??? whats next…Caddies from China, thats where the new La Cross is being designed and remember the Mazdang, that would of been a a huge mistake for Ford! I think I really blame Detroit bean counters and Management for crappy cars and lackluster perfomance!
No doubt the give away deals about to be even more aggressive will hurt Ford. To a lessor degree they will also hurt Toyota, Honda, and Nisson.
The only strategy that allows Ford to make it (as the obove three will) is to not be seen as just one of the D3. Can they do it? Well, not entirely, but maybe a little with a lot of hard work, careful marketing, and a couple of good products. Close call right now but what choice do they have other than to try? No way will they live through a price war if they have to match dollar for dollar. Would I pay more for a new Taurus than a 40% off 300 or Charger? I probably would but how many are like me? The number will determine if Ford survives.
Could be worse. Ford could need to sell Fiat’s to make it (who can even say that with a straight face?).