Here's why things could get even worse for Ford

[Ovaltine]

Here's why things could get even worse for Ford

http://www.freep.com/apps/pbcs.dll/article...60445&imw=Y

 

January 26, 2007

 

BY TOM WALSH

 

FREE PRESS COLUMNIST

 

As if a $12.7-billion loss in 2006 was not bad enough at Ford Motor Co., here are 10 reasons to worry things may be even worse than we think:

 

1. Ugly numbers get uglier

 

Sales volume, prices and the mix of cars and trucks Ford sold in 2006 all went the wrong way, and things got worse as the year went on: Automotive revenue was down 5% in the first nine months of the year, but plummeted more than 11% in the fourth quarter.

 

2. Red ink to keep gushing

 

Ford predicts its automotive operating loss -- $5.2 billion last year -- will be even bigger in 2007.

 

3. Losses in Asia and Africa

 

Ford lost $185 million in these markets, as rapid growth of car sales in China was overshadowed by problems in Australia and Taiwan.

 

4. Savior no more

 

Ford Motor Credit, the finance unit that offset crummy automotive performance in many prior periods, saw profits drop by $621 million to $1.3 billion after taxes last year. And Ford forecasts another decline for its finance operations this year.

 

5. Pricing under pressure

 

One of Ford's forecasting assumptions for 2007 is lower net pricing for cars and trucks. That will put heat on Ford to spend heavily on rebates and other incentives, if it wants to stop its market share swoon.

 

6. Cash going, going ...

 

Ford's automotive business was burning through cash at a rate of about $20 million a day during the last three months of 2006. The company expects negative cash flow for another three years, but at a slower rate. Better hope so.

 

7. Jaguar

 

No need to elaborate. A money pit if there ever was one.

 

8. GM's revival

 

"The worst of all possible problems for Ford is a rejuvenated, aggressive General Motors Corp.," says David Cole, president of the Center for Automotive Research in Ann Arbor. Ford has been losing sales for years to Asian competitors, but now GM is fielding its strongest product lineup in years, with the 2007 car and truck of the year -- the Saturn Aura and Chevrolet Silverado -- along with a new midsize Malibu and some promising electric and hybrid power train technology. GM just boosted its capital spending on future products by $1 billion a year to about $8.5 billion; Ford will have all it can do to maintain its current cap spending at $7 billion.

 

9. Chrysler's hiccup

 

Just as GM's resurgence is a threat to Ford, so is, in a different way, the sudden reversal of fortune at DaimlerChrysler AG's Chrysler Group, which neglected to turn off the production spigot on big trucks and SUVs last year when gas prices zoomed. An inventory glut resulted in a $1.5-billion third-quarter loss for Chrysler, which slapped rebates as high as $7,000 on some big vehicles to move them. Ford, of course, must compete with those Chrysler fire-sale tactics.

 

10. Don't believe everything you read

 

"We'll return to profitability in our North American automotive business no later than 2008," Ford Chief Financial Officer Don Leclair vowed in reporting Ford's 2005 financial results a year ago. He added: "We're confident in our plan and optimistic we can achieve our goals."

 

Oops. Eight months later, Ford pushed its return-to-profits projection back to 2009.

 

Along with presumably most other Detroiters, I fervently hope that Ford CEO Alan Mulally is right when he says the company is now at rock bottom and that the turnaround plan will work. The Wall Street wizards who trade in credit default swaps, a kind of insurance that quantifies the risk of a company going broke, have cut the odds of a near-term Ford failure in half since last June, so let's hope they're right, too.

 

But there's a big, dangerous mountain yet to climb for Mulally and Ford.

Edited January 27, 2007 by Ovaltine

[g48150]

8. GM's revival

 

"The worst of all possible problems for Ford is a rejuvenated, aggressive General Motors Corp.," says David Cole, president of the Center for Automotive Research in Ann Arbor. Ford has been losing sales for years to Asian competitors, but now GM is fielding its strongest product lineup in years, with the 2007 car and truck of the year -- the Saturn Aura and Chevrolet Silverado -- along with a new midsize Malibu and some promising electric and hybrid power train technology. GM just boosted its capital spending on future products by $1 billion a year to about $8.5 billion; Ford will have all it can do to maintain its current cap spending at $7 billion.

 

Tom lives in bizzaro world, where he tries to capture the imagination (and thus more readers of the newspaper) by dreaming up fairy tales about otherwise asinine situations.

 

GM has a Toyota sized ego and a China sized focus right now.

 

Nothing to see here, move along...

[BORG]

What's worse is that Ford is useful to no other companies so partnerships are not a possibility. Ford doesn't have anything another company wants or can't do better themselves. Ford is on their own and their future has never looked so bleak.

Edited January 27, 2007 by BORG

[sranger]

What's worse is that Ford is useful to no other companies so partnerships are not a possibility. Ford doesn't have anything another company wants or can't do better themselves. Ford is on their own and their future has never looked so bleak.

 

You my friend hit the main point. I do not see anyone wanting to buy Ford. A year ago, I would not have believe that Ford could actually go under. With the new Mustang and Fusion/Milan, I though they they were on the right track. It looked like a company serious about survival.

 

Then came the new Edge and Escape/Mariner/Tribute. Both new models have significant braking problems. The Trio is at the bottom of a very competative small SUV class in just about every way. I think Ford will typically lose money on every one sold because they will have to heavly discount them just to keep the sales numbers flat. The Edge will probably do well out of the gate due to good fresh looks and fall short of the finnish line this year.

 

YOU CANNOT release new vehicles with obvious flaws and or outdated drivetrains when you are under the microscope...

 

It is time Ford realised that they could actually go completely out of business and no one would be there to buy them out...

[RichardJensen]

"Don't believe everything you read"

 

The only point in the article worth taking home.

[sranger]

"Don't believe everything you read"

 

The only point in the article worth taking home.

 

 

Out of curosity, Why do you blindly defend Ford no matter what stupid thing that they do?

[2005Explorer]

Then came the new Edge and Escape/Mariner/Tribute. Both new models have significant braking problems.

 

What do you consider braking problems? Yes, some tests have shown the Edge to have a longer stopping distance then it's competitors, however reviews from new owner's don't show any concern about poor brake performance.

 

How do you assume that the Escape/Mariner/Tribute have "braking problems?" Oh I know you are probably referring to the switch back to rear drums on most of the models, however I don't see how that equals "braking problems." You do realize that almost 80% of the braking effort comes from the front brakes? I bet the change back to rear drums will not effect stopping distance at all. We only believe that all vehicles need 4 wheel disk because of marketing. I am not saying that drums in the rear are better, however I don't think switching to rear drums will cause "significant braking problems"

 

Nevermind, I see the braking test you are refering to from Edmunds now. How does that performance compare to the 2007 full disk model? I don't know does anyone?

Edited January 27, 2007 by 2005Explorer

[sranger]

What do you consider braking problems? Yes, some tests have shown the Edge to have a longer stopping distance then it's competitors, however reviews from new owner's don't show any concern about poor brake performance.

 

The owners might not realise that there is a problem until AFTER then have hit the person in front of them. I seriously doubt that the ownere have tested the emercency braking yet....

 

Also it is not "some tests" it is "EVER SINGLE MEASURED TEST TO DATE" has shown there to be a braking problem. If you really believe that an extra 15-20ft of stopping distance does not increase your odds of hitting the car in front of you the you do not drive in heavy traffic often....

 

How do you assume that the Escape/Mariner/Tribute have "braking problems?" Has anyone even tested these models.

 

Edmunds did a full road test of the 2008 Escape and found the same pathetic 60-0 braking ( 150+ft ) found in the Edge.

[bystander]

There is another reason why 2007 will be another ugly year for the blue oval, call it reason #11: Not enough significantly new product to offset its aging portfolio. This is the underlying fundamental problem with Ford. They are dribbling out all-new products far too infrequently given the competitive environment. How long have we been looking at the Edge? It was unveiled at the 2006 Detroit auto show and just began showing up in dealerships within the last month . It was pretty much Ford's only all-new vehicle this year. The new SuperDuty is a nice upgrade on the old, but it is not all-new by any stretch. The most profitable SuperDuty customers are the ones who order fully-loaded Lariats and King Ranch models--the personal use pickup buyers. Are they going to view the same old 9-year old cab and box favorably against the all-new GM HD models?. Same thing goes for the 'new' 2008 Escape--it retains the same aging powertrains that have fallen behind in the segment, and almost identical looking greenhouse and overall proportions. Toyota and Honda never let one of their bread and butter models age for SEVEN years before changing the sheetmetal.

 

Ford is getting its ass kicked because of a woeful lack of investment in product, pure and simple. What a pity the billions in cash Ford is paying to close plants and entice its employees to quit wasn't spent more wisely 3-4 years ago on more new product.

[2005Explorer]

The most profitable SuperDuty customers are the ones who order fully-loaded Lariats and King Ranch models--the personal use pickup buyers. Are they going to view the same old 9-year old cab and box favorably against the all-new GM HD models?.

 

I honestly believe the so called "personal use" buyers of the SuperDuty still expect much more then just a fancy all new style. There are VERY FEW if any people who buy, even loaded, SuperDuties just to cruise empty around town. A lot of those loaded SuperDuties are purchased by people who tow 5-wheel travel trailers, enclosed car and snowmobile trailers, etc. I think that anyone considering a SuperDuty looks at much more then just style. SuperDuty looks good. Looks tough, in your face. I don't see a problem with the new SuperDuty.

 

If it came down to towing a 40' 5-wheel travel trailer I'd take the new SuperDuty 6.4L Powerstroke anyday over the Chevy HD Duramax and not just for the engine.

Edited January 27, 2007 by 2005Explorer

[FordManBrad]

The pending release of the new RWD Impala and Camaro should be worrying Ford big time. The Impala could steal Police and Taxi fleet sales as well as full size retail sales, as I'm sure that they'll offer an SS model with a powerful V8 to set the image of the car as a powerful all American cruiser. The CV could suffer fleet sale losses and the 500 will be invisible as the Impala and 300/Charger try to outmuscle each other in the full size segment. Its only going to get worse, alot worse.

 

The company I work for recently switched from GM to Chrylser for fleet cars. The old Impalas have been replaced by Chargers. The employees think that its cool to have them for fleet cars with our company logo on the side.

[DCK]

GM could post a 20 billion dollar profit for 2007, record sales and win all auto awards and of course people here would bash GM and say how much of a failure their turn around is compared to Ford's.

[RichardJensen]

Out of curosity, Why do you blindly defend Ford no matter what stupid thing that they do?

Let me answer your question with a question.

 

Out of curiousity, Why do you assume that everyone who disagrees with you is wrong?

[Bluecon]

Out of curosity, Why do you blindly defend Ford no matter what stupid thing that they do?

Figured it out in his first 46 posts.

Time to edit!

[g48150]

GM could post a 20 billion dollar profit for 2007, record sales and win all auto awards and of course people here would bash GM and say how much of a failure their turn around is compared to Ford's.

 

 

And Then? ... GM is an entirely different dog right now than Ford or DCX or any other company for that matter.

 

Is GM a brand? No, GM is a conglomeration of brands, a management of them, not something tangible that's been an icon for the past 100 years. GM could survive by selling off the brands, Ford is tied to its brands, it can't jettison them without "painful" repercussions. Look at GE for example, when Jack Welsh was done with that company, they only operated in areas where they could have a significant portion of whatever market that particular brand of business was in.

 

I'm sure one of these upstart korean or chinese car companies would love to have GM offload a BRAND like Buick or Oldsmobile, then GM could focus on simple things like Chevy and Cadillac. From experience, it is MUCH easier to build a few cars than a bunch, just look at VW back in the day with ONLY the Bug and the Micro Bus, they were having one hell of a time keeping up with demand, and they only had TWO products.

 

GM's problem is poor brand management, Ford's problem is poor product management. We just need a title wave of change to get these problems fixed.

[grbeck]

After having been to the Harrisburg and Washington, D.C. auto shows this weekend, all I can say is that...this article may have been too kind.

 

Ford had the 2008 Focus, Five Hundred and Escape at both shows.

 

The Focus at the Harrisburg show was the blue, higher level coupe, while the Focus at the Washington, D.C., was a red, lower level coupe. The styling of the Focus looks better than I thought it would - especially the front. It is not a bad-looking car. But the sad truth is that this car looks tired and has an "old maid" air about it compared to the Civic. It is better looking than the Cobalt, but at least Chevy has the SS versions to add some interest to the line. The addition of bigger tires and stylish wheels really do add interest to the otherwise humdrum Cobalt.

 

Of course, Ford HAD the Focus SVT, and discontinued it. The bigger wheels on the blue coupe did make it look like a nice little car, but the new design seems to accentuate just how small the standard wheels really are. It fairly shouted, "BORING ECONOBOX" to everyone who looked at it. Meanwhile, the Honda and VW displays were jammed, with many people looking at the Civic and the Rabbit. Younger drivers, in particular, love the Hondas and VWs...while sitting in a Civic Si sedan, I had one 20-something tell me how much he loved it, and that his friend's 50-something FATHER had just bought one, and he would love to have one for himself.

 

Newsflash, Ford - small cars do not have to be cheap cars. Everyone is nervous about gas prices (the most common refrain I overheard at both shows was, "What is the mileage?"). Build a vehicle with decent gas mileage that doesn't make the owner feel as though he or she took a vow of poverty, and watch the sales grow. Honda, at least, has figured out this one.

 

The Five Hundred facelift adds nothing to the car. Incidentally, the Five Hundred at the Washington, D.C., show had a sticker in the window touting the "ALL-NEW 2008 FIVE HUNDRED." Apparently "all new" has a different meaning in Dearborn than it does in the rest of the country. Anyone with one good eye could compare the locked 2008 Five Hundred to the 2007 model about 20 feet away and see that the major changes consist of a new grille, headlight and taillights. The changes don't do much for the Five Hundred, and the vehicle was pretty much ignored by everyone at both shows.

 

The new Escape and Mariner were at the Washington, D.C., show...the Hybrid model did feature rear discs. The regular Mariner did not. The interior changes look nice, but most people won't be able to tell the difference regarding the exterior changes. They already look tired compared to the RAV-4 and CR-V. Even worse, GM had the new Saturn Vue on display, and it is a stunner. It goes straight from being the Rosie O'Donnell of cute-utes to Charlize Theron territory. It's that good. Couple that competition with an aggressive new Dodge Nitro, and the Escape/Mariner look increasingly like toast...

 

Ford did have several Edges on display. They look good, and I noted that the Edge's rear seat was more comfortable than the one in the GMC Acadia and Saturn Outlook (the seat is too low to the floor in these vehicles). But one of the Edges had a $30,000 price tag and regular cloth seats, and, as my friend put, "For $30,000 I at least expect leather." The most expensive Edge was $36,000. I wonder how it will sell at that price. And the GM crossovers LOOK bigger, and are also quite attractive (the interiors - the best from GM to date). If they have similar gas mileage, and similar prices, to the Edge, Ford could end up hurting in this segment.

 

At the Lincoln display, there was a Town Car in the middle. As I walked toward it, I overheard a young man remark to his friend, "Why look at this Lincoln? It hasn't been changed in about 25 years!" Ouch...maybe that is why the lone Crown Victoria at the Ford display in Washington, D.C., was parked in the back of the display, as though Ford was hoping that no one would notice it.

 

GM had the new Malibu on display, and it looks like GM has finally figured out what it knew in the 1950s and 1960s - good styling can sell cars. It looks very nice, although its kinship to the Saturn Aura was readily evident in the interior (especially the door panels). Overall, though, this will be a big winner for Chevrolet.

 

Dodge had the new Avenger on display, and it looks considerably better than the photos would suggest. The "mini-me" Charger styling works. I see two problems with this car: 1. the cheaper versions will look awful, as this car needs the bigger wheels and tires, along with the chrome exhaust tip, to look "right"; and 2. unlike the Charger, which has the Hemi to add glamor to the lackluster V-6s, this car will only come with lackluster V-6s and an equally lackluster 4. The new Malibu and Accord will spell trouble for this one, too.

 

Interestingly, the one new vehicle that I thought would spell trouble for Ford left me disappointed. The new Toyota Tundra just didn't look all that impressive to me. The dashboard, in particular, looked as though Toyota thought "Americans like stuff BIG," so it made the dashboard massive without making it handsome or even particularly easy to read. I didn't see anything that would make a loyal Ford or Chevy pickup owner switch to Toyota. I just wasn't that impressed.

 

Even with that, it's still going to be a tough 2007 for the Ford Motor Company...

Edited January 28, 2007 by grbeck

[sranger]

Let me answer your question with a question.

 

Out of curiousity, Why do you assume that everyone who disagrees with you is wrong?

 

 

Unlike you, I will not duck your question.

 

I am a reasonably smart person. There are certainly people smarter than me and many more who know more about the auto industry than I do. I am an engineer by education, profession and general nature. I can look at what is happening, what has happened, and venture an educated guess at what is most likely to happen in the future. This is of course what makes an "opinion" and opinion. I will then debate my "opinion" until someone offers up some evidence, not just an emotional response, that either proves me right or wrong. I am completely willing to admit I am wrong when enough evidence is presented to warrant that response. So, to directly answer your question, I believe that I am right simply because I have not seen anything that would prove otherwise.

 

Now, will you answer my question?

Edited January 28, 2007 by sranger

[RichardJensen]

Now, will you answer my question?

Your question, being of the "Have you stopped beating your wife?" variety, deserves no answer.

[Bluecon]

Unlike you, I will not duck your question.

 

I am a reasonably smart person. There are certainly people smarter than me and many more who know more about the auto industry than I do. I am an engineer by education, profession and general nature. I can look at what is happening, what has happened, and venture an educated guess at what is most likely to happen in the future. This is of course what makes an "opinion" and opinion. I will then debate my "opinion" until someone offers up some evidence, not just an emotional response, that either proves me right or wrong. I am completely willing to admit I am wrong when enough evidence is presented to warrant that response. So, to directly answer your question, I believe that I am right simply because I have not seen anything that would prove otherwise.

 

Now, will you answer my question?

Your getting all mixed up. You are expecting a reasonable intelligent debate.

HAHAHAHAHA!

[old_fairmont_wagon]

My one comment on the new sebring/avenger is that, it will have, perhaps only second to the 2.5L 4 banger in the Altima, the strongest base 4 cylinder in the segment. That 170+ hp world 4 cylinder has good numbers on paper. I just want to see what it really does in real life.

 

back to Ford for a second. Ford has a glaring problem with market preception. And market perception is the one thing that can't be fixed in a hurry like a defective part. The market views Ford as a purveyor of old, tired designs that are mechanically unreliable. Ford has done very little to counter this until very recently. Filling the headlines with numerous recalls (even if they weren't more than the industry standard) for years didn't help them any. At this point, Ford needs vehicles with bold designs that DO NOT blend into the crowd, an agressive marketing campaign that touts their improved and above average reliability, and also speaks to their usual strengths (ride and handling) and their new market leading initiatives (More AWD all around). Until the public hears your message, they won't know what you are saying. Offer some incentive for them to enter the showroom and actually sample your product, like a $50 gift card or something just for their time.

 

Until Ford can reliably move sheetmetal off of their lots, they aren't going to improve their bottom line. Importing European sheetmetal should be viewed as strictly market testing of other designs. This is not a long term solution. If viewed as a market testing expense, then it makes sense. See what model can sell, see what generates interest. Mercury, for what they are making the brand out to be, needs a small urban fuel sipping people mover. I thought that a Mazda 5 was an excellent base to produce one from, but, importing the S-max makes just as much sense. And, Mercury could make the 5 cylinder work in the US market. I dare say that Marcury buyers are even less concious about what's under the hood of their vehicle than Ford buyers are.

[Tico]

Give Mulally some time. Didn't he say something like "lets get to the bottom as fast as we can because the ride up is a lot more fun?". Lets hope he is getting all the bad news and numbers out now so a smaller profitable Ford can emerge in two or three years.. Lets see where we are in 18 months. If things are not looking up by then well, then the cynics might be right.....

[RichardJensen]

Offer some incentive for them to enter the showroom and actually sample your product, like a $50 gift card or something just for their time.

They did this in 2005. $50 J Crew (IIRC) gift cards for Fusion test drives in like September or something.

[BlackHorse]

The only problem I have with the local Ford and Chevy dealer with respect to test drives is just that the salesperson insists on riding in the car with me. This of course gives them opportunity to discuss my trade in while I'm driving their car. I HATE THAT!!!!!! I'm test driving your car to determine if I like your car. It is a little difficult to formulate an opinion about your car if you are pestering the devil out of me about what I'm trading in for it. Don't talk to me!!! In fact it would be best if you weren't in the car at all!!! I'm 35 years old, I'm pretty sure I can handle your sedan without any problems.

 

The chevy dealer is even worse. Not only do they insist on riding with you, they tell you where to drive. The whole trip is something like,

"Ok, right up here turn right. So, are you planning on trading in your car?"

"Possibly."

"Ok, turn here and follow that road. What year is that car?"

"2004."

"Great, now at the next light turn right. How many miles?"

"Mister, if you want to have a prayer at selling me this car I suggest you quit telling me where to drive and quit asking me about my trade in."

 

I actually had to do that once with my chevy dealer. They wonder why I won't buy cars from them.