Ford is basking in its “last man standing” status this week as it holds its annual shareholder meeting. Automotive News [sub] reports that Ford expects to break even or turn a profit by 2011 without the help of government bridge loans. So confident are stockholders in the success of Ford’s current strategy that they have voted down reforms that would wrest voting control from Ford family preferred stockholders for the fifth time in as many years. This despite a $14.7 billion loss last year, and a $1.43 billion loss in Q1 of 2009. The good news? Ford has restructured its debt, reached a deal with the UAW’s VEBA fund, raised $1.6 billion in its recent stock offering, and its retail market share has “stabilized.” But there’s still plenty of work to be done.
The Freep reports that Ford is still concerned about the size of its dealer network. Not enough to spur the deep cuts that GM and Chrysler are undertaking but enough to motivate executives to call for the “consolidation” of some of its urban dealers. “The only issue we have is we have a few extra dealers in the large metropolitan areas,” Ford’s Alan Mulally told shareholders. “And so that’s where we are consolidating.”
But Ford’s 3,723-strong army of dealers apparently strikes at least one stockholder as somewhat excessive. The unnamed investor questioned Ford’s “case-by-case” consolidation strategy, noting that Toyota has fewer than 1,500 dealers in the United States. Luckily, the Rev. Jesse Jackson was on hand to provide the politically correct justification for not slimming down: Ford has been a leader with minority dealer programs. “Now, in the crunch, there is an attempt to retreat from inclusion,” said Jackson. “There must not be a retreat.”
Not that Jackson stayed completely on-message as a Ford attack dog. “The Ford Fusion, made in Mexico, can be made in America,” he told the meeting. “The automotive industry is the heart of our manufacturing. It’s the backbone of our financial markets.”
And Jackson wasn’t the only one grousing. “At last year’s meeting, talk was of profitability in 2009. Now, there is talk of profitability in 2011,” says stockholder William Thrower. Thrower introduced a measure to limit executive compensation and bonuses, arguing that “as stockholders, we must insist that all available capital be used for . . . restructuring.”
How is Ford going to compete with GM and Chrysler?
They get tens of billions of other peoples money and Ford gets squat. Good luck.
If Ford took government money the Ford family would lose control of the company. Just a matter of time. King Obama wants to control all three companies.
It’s the responsibility of the car buyer to destroy GM and Chrysler now, and deliver Ford from damnation. The weird part is I think there’s a good chance of this actually happening.
JG :
Hallelujah! You sound a bit old time preachy there. And it makes me think of “Brave New World” where Ford has replaced Lord. “In the name of the Ford, Amen.”
Unless Ford can mitigate the advantage of bankruptcy enforced restructuring and a government ownership stake, they’re going to get pounded by their domestic competitors. I’d say they may pull it off, given the fact that they haven’t defaulted, but they may not given the fact that they MAY default and screw their creditors like GM and Chrysler have. Anyone lending Ford any sort of money would be stupid not to consider it given recent events. Burning through $14 billion a year, they’re going to need all the credit they can get.
All other things being better than equal, they’re still struggling with high labor costs and a bloated dealer network.
I would like to see Ford prosper on their current path, but I don’t see it happening.
bluecon :
May 15th, 2009 at 11:08 am
How is Ford going to compete with GM and Chrysler?
They get tens of billions of other peoples money and Ford gets squat. Good luck.
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But Ford does have Alan Mulally. So, yeah, they do have a chance.
How is Ford going to handle the loss of hundreds of auto suppliers in the midwest as a result of the Chrysler/GM mess? Don’t some of these suppliers supply Ford as well?
I don’t think Ford has to worry about competing with a theoretically leaner GM and Chrysler for at least a couple of years.
Assuming Gm and/or Chrysler were able to get their houses in order and survive this, they won’t be running at near full capacity for a long time. I’m reading reports that Chrysler isn’t expected to have C11 cleaned up until 2011. On top of that they have to design and ramp up for building new cars after C11 because not much is going in now.
Ford will turn a profit, worldwide, sooner rather than later. First quarter of next fiscal year.
While it is sometime hard to hear on this blog, what I hear at work at least is that all of the flag waving does have people thinking about looking at a domestic again. Ford will certainly gain share there.
I believe the Fiesta will be a smash hit and realy put some distance between Ford and the other two in the minds of most people.
As long as they keep their eye on the product quality they will do fine.
Using your logic Bluecon Toyota and Honda are doomed because how can they compete? A well run company will always run circles around a poorly run company. Maybe everything that ails the auto industry is NOT all about the UAW or Obama but really about the general economy and on either having good smart or poor dumb management.
It’s always seemed to me that Ford and the other domestics have a far larger dealer presence in rural areas than foreign automakers. That must account for some of the discrepancy between Ford’s 3,700 dealers and Toyota’s 1,500. In my city there are 4 Toyota dealers and 5 Ford dealers. In the rural areas there are 3 Toyota dealers and 16 Ford dealers.
I just drove a Ford Focus on a recent trip. Not a bad little car. Didn’t like the auto tranny shift-lag though, so I wouldn’t buy one. I’ve been spoiled by my Prius’ HSD!
This morning at our sales meeting (I’m a Ford salesman in the Southwest) our owner talked about how he viewed government control of Chrysler and GM and we really look forward to it. Government will never be able to compete against us…they simply don’t understand this business and they are way behind the curve at this time to present a real threat to Ford. Throwing money at the problem won’t work without a well executed plan and the UAW and the US Government won’t be able to put one together.
At best (and I hope this is the governments intention)government ownership will simply stabilize the patient and then get them back into private industry. They are a long way away from really being serious competition with Ford.
Ford’s real challenge now and for the near future is how well it can continue to execute its own reorganization and how quickly the market will stabilize.
At least in our area we are already seeing early signs of market recovery. Our Feb. floor traffic exceeded our July 08 floor traffic and we have seen a little more floor traffic every month since then. As credit gets a little easier to deal with and we have more customers coming in and putting down payments (many say they have been saving since last year when they tried to buy with no money down and were turned down)and are selecting vehicles that fit their incomes and budgets we are seeing an increase in sales and are currently on track at this time to beat our sales as compared to May of ’08.
We aren’t out of the woods yet, but we are feeling more and more optimistic about our future.
For all of Ford’s huffing and puffing they haven’t taken bailout money, they just snuffed out our local minority owned dealer in March. THis is after GMAC killed off the long-time GM/Chrysler/Toyota dealer across the street last December. Now all of us who own all of the aforementioned products now have to drive one hour to the city. The GM dealer pleaded with GMAC to re-structure his $10 million mortgage on his new GM-mandated facility, but they couldn’t do anything except take taxpayer money to save their sorry butts. Both GM and Ford say they want to preserve their rural dealers, but its all hot air.
Not only will I no longer buy GM cars, but I will not buy a Ford either. Both companies have screwed over our rural community and I won’t ever forget how they did it. If Toyota is listening, Amador County, CA is ripe for the taking. The D2.8’s have left the market, probably for good. Chrysler’s, GM’s and even Ford’s word can’t be taken seriously anymore.
A bit off topic, but down here Ford is doing well for themselves. They’ve upped their market share from about 8% (last yr) to 12% (ytd). Which is a bit surprising, as I haven’t seen that many more Ford cars out there on the streets. In my family and among my closest friends there is a grand total of 2 Ford cars (Fusion and Ranger double-cab). Being that that group has among them at least 40 cars. Another example, in the garage of the buiding I live there are 28 cars. Just one Ford. At work at least another 20 cars. Just 1 Ford, too.
And this is a record year in Brazil. But I think this may be short lived ’cause it’s due to them heavily discounting. They do that from time to time. And I’ve seen their market in the last 4 yrs, at least, fluctuate around those low and high points. Seems like they can’t get through their thick skulls that, yes Brazilians want to buy their cars, but no, thank you, they will not pay any sort of premium for the privilege.
YTD:
Fiat 25% (up 1%)
VW 24% (up 1.5%)
GM 19% (down 4%)
Ford 12% (up 4%)
Honda 5% (up 1%)
Toyota 4,5% (stable)
Renault 4,5% (down 2%)
Peugeot 4% (stable)
Citroën 3% (stable)
Others 2%
(Yes that’s over 100, but these are very rough numbers ’cause specially at the bottom end the differences are in fraction (for example: neither Honda, nor Toyota are actually 5%))
One point on Ford competitiveness: With all of the bailout money to GM & Chry/Fiat, there has been very little that went towards product development. Most went to pay current expenses (used for the mfgr of existing inventory), while R&D was extensively cut.
I don’t have enough insight into the auto industry to know how Ford maintains R&D while others cut but it appears to be the case (gotta assume it’s based on available cash). Unless some of the Gov’t money goes towards new product development, then it won’t hurt Ford’s ability to compete in the near term.
dan.
“But Ford does have Alan Mulally. So, yeah, they do have a chance”
Yeah…the guy that said they would be profitable in 2009. The guy that said Ford’s share in Mazda was not for sale. The guy that said Volvo was not for sale. They guy that thought the Five Hundreds only problem was the fact it wasn’t named ‘Taurus’.
Big Al is full of hot air.
Ford wins…
You have to play out the product development timeline. Assume an 18 month cycle…
GM and Chrysler will have some new models and upgrades to existing models coming out into early 2010. At that point they will run dry for 18 months, maybe more…
Anything they do deliver will be half assed given the bankruptcy distractions. Also look for the quality to be horrendous for the next 2 years across all GM and Chryco. Consumer reports will have a hard time scoring them. They could barely execute without being distracted…
Now those line workers have one eye on CNN and one eye on the car…
Ford wins, but the deal won’t be sealed until late 2011 / early 2012.
As DanM said, the bailout money has just gone to keep the lights on at GM and Chrysler. Ford doesn’t have the brand madness problem GM is still struggling with and has a healthier international presence than either one. Have you heard any stories about Ford Europe being shopped around? Nope.
Ford will be able to demand the same kind of contract deals from the UAW that GM and Chrysler get, so no disadvantage there.
Finally, Ford’s much less agressive dealer culling makes sense to me. The really weak dealers are going to die off thanks to the industry slowdown. Those dealers which are able to survive in this environment should be well positioned to succeed going Fordward.
Keeping that strong dealer network in the myriad smaller markets across America is a big plus for Ford. Plenty of high profit margin US branded trucks and cars get sold outside of the major metro areas, and they can be sold with less cutthroat pricing than the city slickers deal with.
Last month our town of 30,000 people had two auto dealerships, one Chevy and one Ford. Now there is one, the Ford dealer. Advantage to Ford.
To DanM’s comment about Ford’s R&D budget:
I can tell you that much of the new product that we are seeing now goes back to a commitment Ford made all the way back in ’02 (not well publicized). We were told that Ford was recommitting to the car and looking to have top notch vehicles in all of its segments. Bill Ford knew then that the company needed to restructure and, in my view, had the foresight to have seen that he needed help with that. Eventually he stepped aside as CEO to put in Mulally.
Much of our expenses over the last two years were actually putting our R&D into production…retooling factories, restructuring worldwide management. From what I have been told, Ford could have suspended all of the restructuring and actually made a profit in the last 2 years, but then we would be no better than Chrysler and GM in our shortsightedness. The only way we can build a viable company for the 21st century is to continue our restructuring plan and continue to invest in our future product. Anything else will most assuredly lead us down the same path as the other “American” car companies. At least this way we have a chance…and the odds continue to improve for us.
The only reason FORD isn’t ‘hat in hand’ to Washington is that, by providence or sheer dumb luck, they hocked everything they owned weeks before the credit markets closed. With the implosion of CRYCO and the future bankruptcy of GM, it is only a matter of time before FORD goes Tixs-Up.
I need to buy a new car as my old heap (1991 Madza Miata, my commuter car) is demonstrating the need to be turned into a refrigerator or something.
Can someone comment on that LA article about Fiatsco not honouring California Lemon Laws. [FYI, some smuck bought a CRYCO something or other and after repair after repair, turned it back to the dealer to get his money back. The dealer took the car back (smiling) and then said ‘Congradulations—Mr. CRYCO customer, you are now an UNSECURED CREDITOR; the line forms in the back!!! My understanding is that he can’t get his money back to pay off his car loan because he didn’t go through CRYCO Financial or GMAC…so he’s out $30K AND has no car to drive!!!]. What is California doing about FIATSCO not honouring its Lemon laws?!!!
MikieDee:
Your question is precisely why I haven’t purchased a new car from ANYBODY. All car companies share common vendors—CRYCO, GM, FORD, BMW, TOYOTA and HONDA use the same Windshield/glass suppliers, the same tyre manufactures, the same Battery Manufactures, the same computer chip and electrical manufactures.
If I were Al Queda, I wouldn’t fight the Americans in Afghanistan—I would take out full page ads attacking CRYCO’s build quality, CRYCO’s not honouring California Lemon Laws, CRYCO’s depreaciation value (etc. etc) and simply erode consumer confidence in buying CRYCO products. CRYCO would go under and ‘trainwreck’ the American Economy as vendor after vendor goes under. Correct me if I am wrong, but all cars built in America use the same Fuse breaker vendors (there are three?) so if Cryco stiff’s the vendors on payment and they goes under—EVERYTHING SHUTS DOWN!!!
I actually think that Ford has a great opportunity to expand its dealer network by bringing in the best of the discontinued Chrysler and GM dealers. I laid out my reasoning in a blog post I added to Ford, Star Trek, and Domus. The potentially added downward price pressure caused by increasing the number of dealers would be greatly offset by the stated benefits.