August Sales

[RichardJensen]

Either way, the product groups COMPETE for the funds. Nobody just states that so and so car needs x level of funding and just gives it to them. It has to be justified.

What does this have to do with the per unit cost of investment?

[g48150]

What does this have to do with the per unit cost of investment?

 

Because every program runs through the "business office", another name for people that wish they were PMP's, everything gets "marked up" there because of the time that the projects just "sit".

 

Ask real Ford engineers what they think of the "business office" and they'll probably tell you to go yourself.

[jpd80]

Because every program runs through the "business office", another name for people that wish they were PMP's, everything gets "marked up" there because of the time that the projects just "sit".

 

Ask real Ford engineers what they think of the "business office" and they'll probably tell you to go yourself.

Only if their patents are locked up in intellectual property that's mortgaged....

[johnnyb82]

I think what this guy is saying is that Ford will not sell any car that will make them worse off. If they over-produce, the money is already spent and they need to sell those cars for any amount that they can.

[RichardJensen]

Because every program runs through the "business office", another name for people that wish they were PMP's, everything gets "marked up" there because of the time that the projects just "sit".

 

Ask real Ford engineers what they think of the "business office" and they'll probably tell you to go yourself.

You guys are talking about things that are barely related, and you insist that I'm the one that doesn't know what's going on.

 

What does the company's aggregate development budget have to do with per unit investment amortization?

 

You say that team A wants $400M for some project, team B wants $500M for some other project and team C wants $400M and the company has only $1B to spend.

 

Now this would argue that the company's -overall- resources are more important than any budgeted amount per unit.

 

However, this flat contradicts the assertion that Ford cares most what the per unit investment amortization rate is.

 

I mean if per unit investment amortization is the prime factor, then it 'pushes' the development budget, but if the development budget is the prime factor (as in, 'we're not spending more than $1B'), then per unit amortization costs are not as important.

 

I mean either the dollars in the pot are most important or the dollars permissible to spend are most important. They can't be equally important.

Edited September 6, 2007 by RichardJensen

[Former Ford ZM]

Per my statement, that was old news. And it was based on the capacity utilization of Chicago. Five Hundred/Montego/Freestyle sales were horrible and they were a burden to unload during wholesale. Nobody was buying them, so in turn the dealers didn't want them. They had a great closing ratio though. It was a good car, we just could not get the butts into the seats. A real shame.

 

As for the going for quality and losing marketshare, isn't that Fields mantra? The painful side is though that the company will have to downsize in order to cut its costs so it can make a profit with less sales.

[akirby]

Keep building them even though nobody wants to buy that many and then have to put $5K on the hood to get rid of them. But that's better than not selling them at all.

 

How did that work out for the old Taurus? All that type of thinking does is keep the factories running which I understand is all some factory workers care about. The problem is if you do that too much then you can't make a profit on anything anymore and the company can't stay in business.

 

Market share without profit is meaningless.

Edited September 6, 2007 by akirby

[bb62]

You guys are talking about things that are barely related, and you insist that I'm the one that doesn't know what's going on.

 

What does the company's aggregate development budget have to do with per unit investment amortization?

 

You say that team A wants $400M for some project, team B wants $500M for some other project and team C wants $400M and the company has only $1B to spend.

 

Now this would argue that the company's -overall- resources are more important than any budgeted amount per unit.

 

However, this flat contradicts the assertion that Ford cares most what the per unit investment amortization rate is.

 

I mean if per unit investment amortization is the prime factor, then it 'pushes' the development budget, but if the development budget is the prime factor (as in, 'we're not spending more than $1B'), then per unit amortization costs are not as important.

 

I mean either the dollars in the pot are most important or the dollars permissible to spend are most important. They can't be equally important.

 

OK, you want the simple statement - in your words "overall- resources are more important than any budgeted amount per unit." This is how the business works. Once the overall situation is determined, then the allocation of funds to individual programs begins.

[bb62]

Ask real Ford engineers what they think of the "business office" and they'll probably tell you to go yourself.

 

g48150, I hate to clue you in, but the business office IS run by engineers. Planning as a career path disappeared with the onset of the Ford 2000 reorganization. Planning (including the business offices) became nothing more than a pass through rotation for up and coming engineers. And guess what, engineers at Ford are the WORST business planners.

[RichardJensen]

OK, you want the simple statement - in your words "overall- resources are more important than any budgeted amount per unit." This is how the business works. Once the overall situation is determined, then the allocation of funds to individual programs begins.

Then allocation would take into consideration, among other things, what the per unit amount is, that is required to amortize costs.

 

Although it would seem to me more forward-thinking to plan future allocations based on a percentage of per unit volume, as opposed to spending the money and then trying to recover it.

 

In other words, budgeting the CD3 sedan MCE off 2006-2008 projected volume at a certain dollar amount per unit---$1,000 per car, with 200k cars (total) over a 3 year model run gives you $600M to play with for the MCE, divvied up among the Fusion, Milan, and MKZ... Now you may also have, say, $500 for new powertrains (split among many more cars, for instance) and perhaps $100 for safety equipment, etc.

 

In other words, I think that investments should be determined based on volumes going forward, as opposed to determining a flat amount and then forcing vehicle and platform teams to fight over it.

 

Where the 'fighting' may be a good idea is if, for some reason, a platform or vehicle team wants to exceed their budgeted quota, perhaps to pay for greater differentiation of the MKZ from the Fusion/Milan, and maybe requesting a hundred million or more for different tooling, perhaps, along with the development costs for a different greenhouse and sheetmetal.

 

Basic idea would be a periodically reviewed non-discretionary formula per vehicle and platform line, as in 'overall EUCD improvements, shared among 8 different EUCD vehicles = $X per vehicle', along with 'Mondeo improvements at $X per Mondeo', and then a discretionary amount as in '$X per Lincoln to fund different sheetmetal'--and then if that works, perhaps moving that 'discretionary' spending to a non-discretionary formula.

 

That, it seems to me, would be a better way of doing it than having the entire budget be discretionary (as it would, for instance, prevent certain programs from being starved, as in D101, and US CDW in the late 90s).

Edited September 6, 2007 by RichardJensen

[bb62]

Then allocation would take into consideration, among other things, what the per unit amount is, that is required to amortize costs.

 

Although it would seem to me more forward-thinking to plan future allocations based on a percentage of per unit volume, as opposed to spending the money and then trying to recover it.

 

In other words, budgeting the CD3 sedan MCE off 2006-2008 projected volume at a certain dollar amount per unit---$1,000 per car, with 200k cars (total) over a 3 year model run gives you $600M to play with for the MCE, divvied up among the Fusion, Milan, and MKZ... Now you may also have, say, $500 for new powertrains (split among many more cars, for instance) and perhaps $100 for safety equipment, etc.

 

In other words, I think that investments should be determined based on volumes going forward, as opposed to determining a flat amount and then forcing vehicle and platform teams to fight over it.

 

Where the 'fighting' may be a good idea is if, for some reason, a platform or vehicle team wants to exceed their budgeted quota, perhaps to pay for greater differentiation of the MKZ from the Fusion/Milan, and maybe requesting a hundred million or more for different tooling, perhaps, along with the development costs for a different greenhouse and sheetmetal.

 

Basic idea would be a periodically reviewed non-discretionary formula per vehicle and platform line, as in 'overall EUCD improvements, shared among 8 different EUCD vehicles = $X per vehicle', along with 'Mondeo improvements at $X per Mondeo', and then a discretionary amount as in '$X per Lincoln to fund different sheetmetal'--and then if that works, perhaps moving that 'discretionary' spending to a non-discretionary formula.

 

That, it seems to me, would be a better way of doing it than having the entire budget be discretionary (as it would, for instance, prevent certain programs from being starved, as in D101, and US CDW in the late 90s).

 

 

Richard, The investment level IS based on volumes going forward, but in aggregate, not by individual program. The prediction process for future volumes isn't good enough to predict specific volumes by vehicle nameplate. So the various programs fight over the money available. Keep in mind that it is a very iterative process that gives lots of room for adjustment and re-adjustment when specific segments shift in their requirements.

 

One thing programs fight over is which programs that do NOT want to fund. In a hypothetical program of say $500 million, programs will fight to utilize existing powertrains rather than funding a new program. This way, each program feels they can spend more on the vehicle itself rather than also funding PT programs. The PT side of the business is a particularly contentious part of the business because the first program to utilize an engine pays for the entire program even if other programs are 1 or 2 years behind. This "first pig to the trough" approach means than few vehicle programs search for upgrading their PTs (one reason why Ford lags in PT development).

 

Part of the reason you can't just come up with some arbitrary number (like your suggested $1000) to be the allocated investment on a per unit basis is that some programs pay for some stuff that other programs don't have to. Case in point is the old Contour/Mystique platform. All the news agencies pointed to the multi-billion dollar program that went away after a short time. But what wasn't shown was that much of the investment was used for a number of subsequest programs even to today. One example of that re-used investment was the 3.0L Duratec engine (same architecture as the 2.5L used by the Contour). The CD4E transmission (as terrible as it was/is) was used in a number of programs. These programs were not "charged" for these programs retroactively. But the overall investment on a year over year basis still remained constant for the total company (just check out the annual reports).

[RichardJensen]

This "first pig to the trough" approach means than few vehicle programs search for upgrading their PTs (one reason why Ford lags in PT development).

If the approach causes those results, it should be changed.

 

Undoubtedly the processes in place work on a certain level, because if they didn't nothing would ever get done.

 

However, an approach that 'forces' a program to pay for engines, transmissions, etc., that will be used elsewhere skews any and all meaningful internal reporting, and should be stopped.

 

I mean, the thing is, you're going to spend the same amount of money either way: the issue is meaningful, useful accounting that leads to decent results (as in new powertrains)

Edited September 7, 2007 by RichardJensen

[Furious1Auto]

I would say it's a lot cheaper to do business there. I'm not privy to the figures. but I have been to Mexico and know the culture. Quality coming out of Hernosillo is better than what comes out of other N.A. plants, and productivity must be significantly higher. You have a hungrier workforce that works harder and longer. As I see it, logistics is only downside. I prefer the Taurus over the Fusion because Taurus is built in States and want to help out this region first, but Fusion is better built and offers Ford more profit I bet if you are buying loaded SEL model. CAP looks to be putting out good quality, but Hermosillo certainly has been great plant for Ford over the years and probably reason why they got the Fusion, Milan, and MKZ. I would have to believe they will get even more in future, especially if UAW gives them hard time. Those guys in Saline talking big when Ford showed them mercy is utter nonsense. They should be glad they still have a job as opposed to talking about a strike. The days of big wages and benefits are OVER no matter what they do or don't do. And they can talk about what Mulally makes till they get blue in the face, but it's not going to change their fate at all.

If they play hardball then they risk losing half of their product line! We know their leaving and will maintain the best we can as long as they build in the U.S. It's a double edged sword! We need to work together to secure our future, it would not be good if either of us (UAW,or Ford) is forced to file bankruptcy!

[akirby]

If the approach causes those results, it should be changed.

 

Undoubtedly the processes in place work on a certain level, because if they didn't nothing would ever get done.

 

However, an approach that 'forces' a program to pay for engines, transmissions, etc., that will be used elsewhere skews any and all meaningful internal reporting, and should be stopped.

 

I mean, the thing is, you're going to spend the same amount of money either way: the issue is meaningful, useful accounting that leads to decent results (as in new powertrains)

 

 

We do this in IT all the time. You must have a higher level budget and business case for shared resources and other investments like R&D. e.g. you don't decide to do a new 3.5L engine based on one vehicle or as Richard said it would never get done. The corporation has to decide that it's a positive business case (or that it simply must be done for CAFE, etc.) and fund it at the higher level. But at the same time each vehicle must be accountable for it's costs. You simply don't sell a vehicle today if you don't believe it can make money for the corporation.

 

For a vehicle you have 3 types of expense:

 

Corporate overhead (everything not directly related to a vehicle or vehicle part)

Vehicle specific (parts and manufacturing cost, certification, testing, engineering)

Shared Vehicle costs (costs for R&D and parts used on all vehicles - airbags, ABS, PCM, brakes, etc.)

 

If a vehicle team decides to use a component specifically for that vehicle instead of using a shared component that's already available, then that vehicle must eat the cost OR convince the corporation that it should be a new shared component to be used on other vehicles - then it doesn't have to eat all of the cost. e.g. Since no other vehicle shares the Mustang platform then the costs for that platform should go against the Mustang's bottom line. The Fusion, Milan and MKZ share the same platform so they can share the development costs (pro-rated based on sales targets).

 

Putting everything at the corporate level takes accountability away from the teams designing and engineering the vehicles. Putting everything at the vehicle level leads to little or no sharing and no innovation. The answer is in between.

[Furious1Auto]

For a vehicle you have 3 types of expense:

 

Corporate overhead (everything not directly related to a vehicle or vehicle part)

Vehicle specific (parts and manufacturing cost, certification, testing, engineering)

Shared Vehicle costs (costs for R&D and parts used on all vehicles - airbags, ABS, PCM, brakes, etc.)

You forgot energy cost! (Electricity, gas, and water)

[TomServo92]

You forgot energy cost! (Electricity, gas, and water)

 

That should fall under corporate overhead.

[akirby]

That should fall under corporate overhead.

 

Exactly, along with pensions, real estate, HR, training, R&D, some advertising, etc..

[old_fairmont_wagon]

the cost of utilities should not ENTIRELY be shoved off onto corporate overhead. For each vehicle rolling down an assembly line, it consumes a certain amount of utilities. Electricity to run the machines and welders. Water to clean parts or cool hot equipment. Heat for the paint/curing rooms, etc. The utilities usage by each vehicle should be applied back to that vehicle. ITs a variable costo f doing business.

 

However, there are also fixed costs which should be part of company overhead. For every building, there must be HVAC. For every building, there are lighted exit signs. This stuff can't be avoided. Thusly, they are fixed costs.

[RichardJensen]

Good old SG&A 'Sales, General, and Administrative'

[Furious1Auto]

the cost of utilities should not ENTIRELY be shoved off onto corporate overhead. For each vehicle rolling down an assembly line, it consumes a certain amount of utilities. Electricity to run the machines and welders. Water to clean parts or cool hot equipment. Heat for the paint/curing rooms, etc. The utilities usage by each vehicle should be applied back to that vehicle. ITs a variable costo f doing business.

 

However, there are also fixed costs which should be part of company overhead. For every building, there must be HVAC. For every building, there are lighted exit signs. This stuff can't be avoided. Thusly, they are fixed costs.

I agree, I wouldn't suggest that it be considered corporate overhead because the costs are generated locally based on each plants usage efficiency! For instance the Rouge facility is a model of efficiency in compassion to all of the other plants in the system and these costs are figured into the budget of it's respective plants! Therefore It must be figured into the per unit cost of it respective products!

Edited September 8, 2007 by Furious1Auto

[630land]

Ok, back to topic, sales #'s

 

Remeber all the screaming about how ''ugly'' the new 2008 Navigator is and ''what a flop it will be''????

 

Hmm, sales of the 'ugly' truck are up! I think it looks fine! Shows again that most message board car execs don't know as much as they think about the market.

Edited September 8, 2007 by 630land

[suv_guy_19]

Ok, back to topic, sales #'s

 

Remeber all the screaming about how ''ugly'' the new 2008 Navigator is and ''what a flop it will be''????

 

Hmm, sales of the 'ugly' truck are up! I think it looks fine! Shows again that most message board car execs don't know as much as they think about the market.

 

 

No, its a failure. It should be up way more than it is. Stupid re badged Fords. I hate all Lincolns. Especially my avatar.

[630land]

Considering gas is 3 bucks, it's doing good, and certainly better than the Panthers. It's not 1998.

[suv_guy_19]

Considering gas is 3 bucks, it's doing good, and certainly better than the Panthers. It's not 1998.

 

 

I know. I think you knew but I was being sarcastic.

[TStag]

Considering gas is 3 bucks, it's doing good, and certainly better than the Panthers. It's not 1998.

 

Lincoln's doing well at present although the real test is whether or not they can sustain their sales growth when their newer models start to age.

 

Land Rover's also showing that the SUV isn't dead. The Ragne Rover is getting on but sales are growing. I just read on a different web site that sales are up 35% ytd in the USA and a whopping 50% in Europe, thanks to the new LR2. What's even more impressive is that the Range Rover is now one of their oldest models selling in a supposedly hostile market.... Looking at the figures I think it is fair to say that at present Lincoln and Land Rover are the only Ford brands doing well in the USA, with a few individual models also doing ok or well. Land Rover is doing exceptionally well and are right up there with BMW now in the premium world (they sell pretty much every model they can physically make).