RichardJensen

I'm not saying I disagree w/you entirely---and it's possible that CAFE is more of a factor in this than either of us realize. However, you shouldn't comp global margins w/US volume. The chart below is a lot less elegant (but it's easier to cut/paste into Excel & mess around with). It would be interesting to comp. Ford's NA revenue per unit with the industry as a whole. Also, margins are going to be roughly cyclical, based on product launch timing, etc. It'll take more than 9 years of data to observe whether Ford's margins are trending upward after smoothing out cyclical effects. Toward that end, I've clipped comparable data from 1997-2000. As can be seen, over all, Ford has definitely improved their margins while seeing a significant drop in market share and sales. And there's a pretty weak correlation between market share & margin per unit. NA Volume (K) Revenue ($B) Pre-tax net ($M) Revenue/Unit Profit/Unit Margin/Unit Market share 1997 4,016 $ 89.00 $ 4,434.00 $ 22,161.35 $ 1,104.08 4.98% 19.70% 1998 3,988 $ 87.00 $ 4,612.00 $ 21,815.45 $ 1,156.47 5.30% 19.20% 1999 4,385 $ 99.20 $ 5,418.00 $ 22,622.58 $ 1,235.58 5.46% 19.90% 2000 4,933 $ 103.90 $ 4,886.00 $ 21,062.23 $ 990.47 4.70% 19.10% 2010 2,413 $ 64.40 $ 5,409.00 $ 26,688.77 $ 2,241.61 8.40% 16.58% 2011 2,686 $ 75.00 $ 6,191.00 $ 27,922.56 $ 2,304.91 8.25% 16.67% 2012 2,784 $ 79.90 $ 8,343.00 $ 28,699.71 $ 2,996.77 10.44% 15.58% 2013 3,006 $ 88.90 $ 8,781.00 $ 29,574.18 $ 2,921.16 9.88% 15.90% 2014 2,842 $ 82.40 $ 7,443.00 $ 28,993.67 $ 2,618.93 9.03% 14.96% 2015 3,073 $ 91.90 $ 9,345.00 $ 29,905.63 $ 3,041.00 10.17% 14.95% 2016 3,019 $ 92.60 $ 9,001.00 $ 30,672.41 $ 2,981.45 9.72% 14.85% 2017 2,967 $ 93.50 $ 7,511.00 $ 31,513.31 $ 2,531.51 8.03% 14.96% 2018 2,920 $ 96.60 $ 7,607.00 $ 33,082.19 $ 2,605.14 7.87% 14.37% Correlation: -0.868007306

Yeah, that's another possibility. If the panels themselves are out of spec, then it doesn't matter if the robots weld them perfectly.

I would posit this: Safety/emissions/economy improvements have caused the price of a new car to increase faster than overall inflation, thus reducing the number of new cars purchased per person. With fewer new cars purchased, the Swiss Army knife vehicles, like crew cab trucks and utes, are going to be preferred over, say, personal coupes. Thus government regs are indirectly impacting consumer demand.

See, that's fascinating: The MPG targets for the Escape & Chrysler 300 are nearly identical. CAFE MPG is calculated using the old-school mid 70s EPA tests, without the subsequent adjustments made in the mid 80s, or the additional tests added a little over a decade ago. Window sticker combined mileage is, I think, like 75-80% of the CAFE MPG, which suggests 37MPG combined for the entire Escape fleet, volume weighted.

I really need to dig into the upcoming CAFE regs. It's a complicated cycle: Manufacturers have some influence over the shape of CAFE regs (nothing like the influence that German manufacturers have over the structure of EU regs, but they still have influence). Trucks & Utes are more profitable than sedans---have been for years---so manufacturers are going to prefer CAFE regs that go easier on utes & trucks because that benefits their bottom line. Simultaneously, trucks and utes are more profitable for a variety of reasons---not least of which is that many truck purchases can be written off as business expenses, while utes have a higher perceived usefulness (even if that usefulness is rarely put to use), thus meaning higher revenue per unit. The combination seems likely to accelerate a shift in market more than would occur without both factors.

Also: Is there a difference between panel gaps attributable to assembly errors and panel gaps attributable to poor calibration in the largely automated body shop? Thinking of your typical vehicle, I think the only panels attached by factory workers are the doors, front fenders, bumpers and hood. And I guess the fuel door if you want to count that. Pretty much every other piece is, AFAIK, attached by robots.

You get what you manage for. In the wake of the disastrous Escape/Focus launches, Ford promoted Jim Padilla, who was something of a stick-in-the-mud when it came to new product designs, but was also fanatically committed to quality. One of his stock lines was, 'The customer sees the problem. Why can't you see the problem?' After he retired, the company relaxed that focus, and the first hiccups were the Focus and Fiesta launches, not the CD4 Fusion.

And, I'd add, don't underestimate the impact that regulations have on the marketplace: Government regulations on automobiles are almost entirely targeted at manufacturers. Consumers do very little heavy lifting when it comes to compliance. Make no mistake, safety regs, emissions regs and fuel economy regs have overwhelmingly altered (and largely for the better) the products available for purchase, and that, in turn, has driven changes in buying habits.

Understanding that hybrids (and EVs) are basically volume constrained, if Ford has to do a, say, 33% volume mix of Fusion hybrids to stay CAFE compliant, they're not going to like allocating that much of their hybrid volume to a less profitable product.

Something I haven't checked out---and am thinking I should: What's CAFE compliance look like for sedans over the next few years? Here's the thing: Federalizing the Mondeo should be dirt cheap. It'll use powertrains already sold in the US, and the underlying architecture has to meet US crash test criteria. I mean, it seems that it would be incredibly easy for Ford to turn a profit on even 120k Fusion sales per year, or maybe even less, provided it's coming from a shared plant. Amortization/first unit costs would be tooling and minimal compliance re-engineering, I would think. Everything over that would be gravy. However, if the CAFE requirements for sedans essentially require selling nothing but hybrids & low power options, then we're looking at another instance where CAFE is shaping the market.

Statements that also apply, more or less, to sedans. I mean, here's where I'm at with this: Ford's sedans, theoretically, should have been paying their way. They might have only been returning $.03 on the dollar, but I don't think Ford was having to rob trucks & utilities to fund the sedans. I mean, to the extent that there are shared systems between the sedans & utes, sedans actually help amortize the development cost of new utes. So, it's not like Ford had to make a choice between guns and butter. They apparently decided to get out of the sedan business because they figured they could trade, say, two Escape sales for every four Focus sales, with the Escape being more than 2x as profitable as the Focus (effectively upping their margin). Problem is, I don't think the current sales mix is sustainable, I don't think they can grow the utility business enough to recapture all the revenue (amortization volume) and profits they're giving up, and when the sales mix shifts again, as it always does, Ford's going to have to sell people on the notion of Ford sedans all over again. I tend to agree with Borg somewhat in the notion that Ford's wishy-washy approach to sedans (or, going back to 1970 or so, the less profitable section of the market, whatever it may be) is a drag on their long-term profitability. Over the increasingly long ownership cycle (isn't it close to 10 years now for purchases?), their customer acquisition costs have got to be higher if they keep shifting their strategy every five years or so.

The problem is, that's a one-size-fits-all approach to business. A local grocery store chain decided that they weren't making enough money from their eat-in deli section, so they converted their eat-in delis into full service pub-style restaurants. Think Applebee's, but much more generic and attached to a grocery store. It didn't work out, and now they're revamping these restaurants into a food-court setup that is basically a tweaked version of what they had in the first place. This goofy decision was made because someone took a look at their deli's profit per square foot and comped it with the profit per square foot of a restaurant (and you get some sense of how low the margin is on groceries when you realize they're looking to up their profit margin by adding a restaurant). If you don't know beans about a business, you can always say, 'hey, let's raise our margins.'

In the wake of Ford's decision to once again abandon the US passenger car market because it was 'too hard', I came up with this theory: You get like 20 or maybe 30 years of your life where people pay attention to you, professionally. Say from your mid 30s to your mid 50s, give or take. Before that you're too young, and after that you're too old. So stupidity tends to run on a 20-30 year cycle (i.e. the S&L crisis ---> mortgage crisis). During your 20-30 years of influence, you can pretty much keep people from doing really stupid stuff that happened when you were getting started in your professional career. But by the time you get close to retirement age, you've got younger employees coming along that don't really remember the stupidity of the past, and they have all sorts of reasons why this time it's different (but it never really is). At least this time around, as akirby points out, Ford has global architectures, so it'll be easier for them to undo this particular bit of stupidity once it bites them in the ass.

Same. It's a good way to get a foothold, and the moniker that sticks long term may well be "Mach" instead of "Mustang"

In a vacuum, I'd agree, dust off "Thunderbird." And I think that if they'd done that, it would work just as well, but they'd have to do more work putting meaning into the brand because 'Thunderbird' really doesn't signify anything for target customers right now, whereas 'Mustang' at least means something.

It's a movie which, if it's at all possible, has the opposite of spoilers. The only bits that you don't already know are the bits they made up-----and those bits are almost uniformly silly or cringeworthy.

Thanks! That was a fun piece to write. I should have a follow-up on C next year. "Hollywood magic" also explains the way they crammed the Mustang launch together with the announcement of Ford's Le Mans program, as well as the overly dramatic moment where HFII stops an entire factory by having a guy hit one button--along with the silly speech he gives after the fact. I'm kind of surprised they used that goofy slideshow scene for the Mustang, because, IMO, the actual Iacocca demonstration would've translated well to the big screen---he lined up the Chevrolet range opposite the Ford range, and pointed to the gap where the Chevy Corvair was and said, basically, 'we need to fill this gap.'

Hi. I'm back. Got married between my last appearance & now. Me and Mrs. Jensen went to see the movie last night. And you know what? I never thought I'd find myself defending Lee Iacocca, but that movie just did *not* do him justice. Or Leo Beebe. I mean, criminy, one of the advantages all the Ford factory teams had at Le Mans was that all of them had Holman-Moody trained pit crews. And that was a Ford corporate (i.e. Leo Beebe) decision. But I have to say, the main reason why I went to see it was Christian Bale as Ken Miles. That was an absolutely inspired bit of casting. Little details were great. They nailed Enzo Ferrari--honestly, I think he was more spot on than Hank the Deuce. Sets were fantastic. Loved the lit up Esso "Oil Drop Man" south of the main grandstands. Because of all that attention to detail, it was a bit jarring when they used doctored up GT-40s for the J-Car and Mark IV, because I'd have to think that, as cheap as a fiberglass mockup would be for cars that didn't have to do much actual driving, they could've gone the extra mile. But you're talking what? One out of a thousand movie viewers that are going to catch that? It was also weird that they recreated Miles' Daytona GT-40 with an absolutely impressive attention to detail, yet Hansgen's car was way off. I mean, I can kind of understand why they'd do that. The whole point of the scene seems to be suggesting that Leo Beebe got Holman-Moody involved because he didn't trust Shelby, so it helps 'tell' that story if the GT-40s look very different. But during the actual race, Hansgen's GT-40 looked just like Miles'. In fact, I'm about 99.99% positive that the red stripes on Miles' car, the green stripes on Hansgen's, and Gurney's blue stripes (as well as the large circles applied to other cars) were done before the race because the cars were numbered sequentially in the 90s, were otherwise identical, and the bright colored patches would make them easier to identify. The colors were only applied on the infield sides of the cars. Of course, showing mostly identical cars would make it harder to believe that HM & Shelby were at odds with each other. It would almost look like HM & Shelby were part of a coordinated factory effort..... ? I was not expecting much from Matt Damon as Shelby--I figured he was too much of a real-life character for Hollywood, that they would've turned him into a caricature, but Damon's actually pretty restrained. And that scene where Carroll sells the same Cobra three times---I mean that, in a nutshell, was ol' Shel. He bit off more than he could chew with the Le Mans efforts, but there's no way on Earth Ford would have won at Le Mans without him. Ken Miles' death hit him hard too. Robert Lane met Shelby once, with a friend of his. Robert told his friend not to make a fool out of himself, and they had barely started talking when his friend said, 'What happened to Ken Miles?' and Shelby said, "The goddamn car just broke up on him" and turned around and walked away. Thoroughly enjoyed most of the movie. They went to such lengths to get certain things right, so I found the deliberate mischaracterizations (and outright bungling of facts, like Ken Miles being kept back from Le Mans in '65) jarring--kind of takes you out of the moment.

Jason's right. They'll get roughly 20% of what they spend on the renovation back as a tax credit from the feds (I've got quite a bit of experience in this area), not to mention the state historic preservation credits--and that's right off the top, before you start getting into other incentive programs. And what they spend on the building will be transferred on the balance sheet from 'cash' to 'property', which means no effective change to the bottom-line. Renovating this building, in accounting terms, will not reduce Ford's income. Frankly, I'm really excited to see this. There are very few companies in Detroit in a position to rehabilitate this building, and Ford's one of them. It's the first thing Ford's done that I agree with in months. (FWIW: One of the reasons why I'm excited about this is that the Pennsylvania Railroad built three mammoth stations: Penn Station in NYC, Chicago Union Station and this station--this ensures two of the three will be kept around)

Think I followed most of you guys back. Thanks! Like the interaction, just cannot get excited about what's going on at Ford right now. I should add, I'm on facebook too, but I pretty much only use that account for posting nonsense

Guys. This is basically why I don't come around here any more. I caught this show the first time around: https://fueleconomy.gov/feg/bymodel/Ford2001.shtml I don't need to see it again, I've already seen the ending. Not trying to be anti-social though. I'm on twitter at https://twitter.com/RichAJensenand Instagram at: Rich.Jensen

Q3 2017: https://www.reuters.com/article/us-tesla-results/tesla-stock-falls-on-model-3-delays-biggest-ever-quarterly-loss-idUSKBN1D15TP Q4 2017 www.latimes.com/business/autos/la-fi-hy-tesla-earnings-20180207-story.html But hey, at least they managed to put one in space, right?

And you can make the exact same argument about their consumption of water, both in the San Joaquin Valley and in Los Angeles. Change their way of life? No way! Force other people to pay for their profligacy? Absolutely. The very idea that Los Angeles residents want their waste water dumped in the ocean instead of passing it through natural and manmade filtering systems and back into their water supply, even though that's exactly what happens to the water before it gets to them​, is a prime example of the gigantic gap between Californians who see their state as progressive and the reality--that they are as interested in passing the buck and avoiding the real costs of their actions as any other humans anywhere else on the planet.

Let's pause for a moment and take a look at what's going on here. This is what California built. California is now spazzing out about putative climate change due to cars. And what is their solution? Is it a soul-searching investigation into the sustainability of their own way of life? A realization that they have set the gold standard when it comes to irresponsible and profligate consumption of energy? Nope. They want to force people somewhere else to foot all of the cost involved in fixing a problem that they are in large part responsible for. So just remember that the next time someone wants to heap a lot of praise on CARB for 'forcing' manufacturers to build electric vehicles: They made a mess, and they're doing their dangedest to make someone else foot the bill for it.

I mean, this product, if it's available at all, is going to be like that fleet of H2 ICEs that Ford set up at a Florida airport. You're going to have this vehicle that comes with a disclaimer long enough to reach to the moon and back that is going to be leased (not sold) to a few select entities and is going to patrol a handful of tightly mapped, low speed, dense urban centers, and then disappear without a trace. There is a level at Ford where the impossibility of widespread autonomous vehicles is understood and there is seemingly a concrete barrier between that level of engineering and all of the management above it that just won't shut up about it.