Reqsons for Lack of New Ford Products?

[focus05]

But aren't those bonuses and stock op's still considered INCOME..... Would you to lead us into believing that "Well, Anything ABOVE 2 MILL he gets free and clear!"

 

RRRRRrrrrrrrighT!

 

They are income. But it is dependent on company performance. $2 million is actually probably a bit below market value for a CEO of a large company. All the compensation that makes his package competitive is variable. If he doesn't perform or the company doesn't perform, he doesn't get as large a bonus (potentially no bonus, although that rarely happens because if it's bad enough to not reward, the CEO is usually replaced).

 

The going market rate outside of the UAW for line workers is something like $13-15/hour to start and maybe $25/hour eventually along with health benefits and a 401k matching plan (possibly an equity plan). Ford's UAW workers typically make more and (most importantly) have more future benefit guarantees that cost money. That's why all the Big 3 are trying to lower fixed costs. They are paying way above market value. The one way Ford could get around that partially is by setting up a profit-sharing plan with its employees that is part of the contract whereby certain changes in stock price and company profit lead to bonuses that make their *income* go up as well. Paid well during good times and less during bad times. However, I have seen no evidence that the UAW leadership and rank and file can even comprehend such a structure, much less establish compensation in that fashion.

 

It's all about market value. Period. Mulally is being paid market value. The UAW is being paid over market value. There's no way to escape that fundamental problem. The debate about whether or not that is *right* cannot be solved during these negotiations without destroying Ford because the market will continue on and the laid off UAW workers from Ford will have to settle for standing in line for $12-$15/hour jobs that the market will take for their skills.

Edited October 11, 2007 by focus05

[wildosvt]

They are income. But it is dependent on company performance. $2 million is actually probably a bit below market value for a CEO of a large company. All the compensation that makes his package competitive is variable. If he doesn't perform or the company doesn't perform, he doesn't get as large a bonus (potentially no bonus, although that rarely happens because if it's bad enough to not reward, the CEO is usually replaced).

 

The going market rate outside of the UAW for line workers is something like $13-15/hour to start and maybe $25/hour eventually along with health benefits and a 401k matching plan (possibly an equity plan). Ford's UAW workers typically make more and (most importantly) have more future benefit guarantees that cost money. That's why all the Big 3 are trying to lower fixed costs. They are paying way above market value. The one way Ford could get around that partially is by setting up a profit-sharing plan with its employees that is part of the contract whereby certain changes in stock price and company profit lead to bonuses that make their *income* go up as well. Paid well during good times and less during bad times. However, I have seen no evidence that the UAW leadership and rank and file can even comprehend such a structure, much less establish compensation in that fashion.

 

It's all about market value. Period. Mulally is being paid market value. The UAW is being paid over market value. There's no way to escape that fundamental problem. The debate about whether or not that is *right* cannot be solved during these negotiations without destroying Ford because the market will continue on and the laid off UAW workers from Ford will have to settle for standing in line for $12-$15/hour jobs that the market will take for their skills.

 

You need to read this link

And rethink your "market value" comment. The UAW LINE-worker is marginally paid higher then the market. But not nearly as much as the difference in the CEO ranks. Ever wonder why GM and Chrysler workers are not being forced into a pay cut? It obviously is not the problem, Health care is. Was it last year that on average Toyota workers earned more money then Big3 UAW workers?........................ How is UAW Ford workers pay a *fundamental problem*

 

And the last part of the extremely overcooked assumption that the UAW worker makes $75 per hour. Watch how much that $75 figure drops at GM when VEBA is fully incorporated, Along with the healthcare changes. Chrysler and Ford as well.

[Pioneer]

Mulally's salary is, in fact, $2 million per year. He gets bonuses based on performance and stock price as determined by the Board. He will be making somewhere around $6-8 million this year including bonus, is my guess, unless Ford miraculously posts a profit for FY2007.

 

 

And Toyota's CEO TOTAL compensation including salary and bonuses is $900,000. And, he runs a successful auto company. Should have hired him and saved $30+ Million last year.

[Pioneer]

The man was on $11 million salary at Boeing and his salary at Ford is now $2 million.

I wonder how many would trade a $110K/year salary for a $20K salary without compensation.

 

That is a poor analogy. Just because he made that kind of money producing multi-million dollar aircraft, that doesn't mean that is what he is worth trying to run an auto company. Even if he is worth that amount of money, which he isn't, his bonuses should be tied to the companies health. Just handing him $36 Million for the hell of it is the thinking that got this company to where it is today. On the brink of bankruptcy because of managements lack of thinking and shortsightedness.

[jpd80]

And the last part of the extremely overcooked assumption that the UAW worker makes $75 per hour. Watch how much that $75 figure drops at GM when VEBA is fully incorporated, Along with the healthcare changes. Chrysler and Ford as well.

 

No, you do not make $75/hour but,

the cost of a UAW worker to the company is over $75/hour.

 

There's a very big difference.

[jpd80]

That is a poor analogy. Just because he made that kind of money producing multi-million dollar aircraft, that doesn't mean that is what he is worth trying to run an auto company.

It is the perfect anaogy, Mulally could go to any other top flight company ,

take a similary salary/benefits package and no one would say boo.

 

I think you're confusing running a corporate company with product development and delivery.

Overseeing product development and delivery is only one part of corporate governance.

How about all the old empires Mulally smashed?

Or the new era of people communicating?

How about recurring internal savings of $5 billion/year?

 

If Ford are on the brink of bankruptcy, why has cash on hand increased in the last two quarters back up over $37 billion?

Ford have already recovered $4.5 billion of the $12.7 billion lost/used last year.

Edited October 12, 2007 by jpd80

[FordBuyer]

And Toyota's CEO TOTAL compensation including salary and bonuses is $900,000. And, he runs a successful auto company. Should have hired him and saved $30+ Million last year.

 

 

Think about it....Mulally is doing much more than running a well oiled machine like Toyota. He is trying to turn around a broken company and save it. Much different. If he fails, he brings down hundreds of thousands of employes and retirees and whole communities. How much is that worth if he pulls it off? Short sighted thinking gets you nowhere. Turn around specialists demand and get more money than CEO who has never faced adversity. If you want to turn around a company like Ford you have to pay lots of money to find the right person. Ford was willing to pay because alternative was not an option. The verdict is nowhere in with Mulally, but if he does do it he is worth every penny and more.

 

 

Very few of us can comprehend the kind of money top athletes and businessmen command and the lifestyle it gives them. I certainly would like to see their salaries more tied to performance as investor and sports fan, but I have no control over it and accept it grudgingly. In time I think life tends to balance out and it will be the same for all business.

[Pioneer]

How much is that worth if he pulls it off?

 

It's not worth anything to him because his compensation isn't tied to success. He already has his money.

[waymondospiff]

I've been wondering why Ford does not come out with new products like Chysler has last few years. The only thing I can come up with is that the market is so demanding that you have to keep constantly improving the products you already have to stay in business. It leaves very little time and money for anything else. Ford next year is concentrating on the new F-150 and Fusion and soon after Mustang. Along with that they have two brand new products coming out. Also, with limited capital you cannot take chances like Chrysler has and come out with half baked products that are DOA. Ford simply cannot afford it and Chrysler will be in same boat without sugar daddy Daimler anymore. I support Ford spending most of its time and money on keeping its present products current and maybe a new vehicle every now and then like it has been doing. Edge, Flex, MKS, and Verve are enough for now and put your money into F-150, Fusion, and Mustang. Do you think this is enough or should Ford be scattergunning market with a ton of new product?

BACK ON TOPIC:

 

Chrysler's "new" products, '05-'08:

Luxury SUV - Aspen

3-Row Traditional SUV - Commander

Compact CUVs - Compass, Patriot

Traditional small SUV - Nitro

Station Wagon - Magnum

RWD Sedan - 300/Charger

 

Minus the Wagon and "Traditional small SUV" Ford has the Navigator, Explorer, & Escape.

 

Ford's "new" products, '05-'08:

Midsize CUV, 3-Row - Freestyle/Taurus X

Midsize CUV, 2-Row - Edge

Luxury CUV - MKX

Subluxury Sedan - MKZ

 

When you factor that most of Chrysler's "new" products aren't doing all that well the idea of "scattergunning" seems pretty short-sighted.

 

Ford needs good products that can sell in reasonable quantities.

 

Scott

[NickF1011]

It's not worth anything to him because his compensation isn't tied to success. He already has his money.

 

To quote John Bender, "B-o-o h-o-o."

[Edstock]

It's not worth anything to him because his compensation isn't tied to success. He already has his money.

 

How do YOU know? Please provide details. Otherwise, all we have here is a brain-damaged brain-fart.

[ViperPilot]

No, you do not make $75/hour but,

the cost of a UAW worker to the company is over $75/hour.

 

There's a very big difference.

No, you are absolutely wrong.

 

The $75/hour figure comes from

 

1) Hourly wages of the worker

2) Benefits of the worker

3) COSTS OF THE RETIRED WORKFORCE DIVIDED BY THE NUMBER OF CURRENT EMPLOYEES. This is an accepted (why? I don't know) accounting practice of calculating manpower costs.

 

For example:

 

1) An employee makes $30 an hour

2) His benefits cost $20 an hour.

 

The company's true cost is $50 an hour. JUST LIKE (or pretty near to) TOYOTA.

 

The difference:

 

3) Because the Big 3 underfunds the pension fund (allowed by the government), they have to make up the shortfall. If you have 60,000 workers and 10,000 retirees, the cost of the pensions for those 10,000 retirees is distributed across 60,000 employees. So let's say that that actual number is $5 an hour. So what it used to cost them: $30+20+5=$55 an hour.

 

Now, the truth behind the problem:

 

Big 3 employee numbers have been shrinking. Some have been offered buyouts, some have retired and many have taken early retirement packages. SO....now let's say there are 30,000 employees and 20,000 retirees. Now that bigger retiree cost is spread across less employees. So now that cost is say $25 an hour. Now the total cost is $30+20+25=$75

 

THIS is where they get the $75 an hour figure from.

 

Do the workers earn any extra money? NO. They still cost the company the same $50 an hour they always did. JUST LIKE TOYOTA.

 

Do the retirees make extra money? NO. They still put in their 30+ years and still get the pension that was promised to them in good faith bargaining for 30 years. Those people didn't strike during their career; they held up their end. The Big 3 should uphold theirs.

 

Conceivably, if tomorrow there was 1 lonely person working on the line at Ford, and there were 50,000 retirees; by the same method the media could quote that the manpower costs at Ford was $1000/hour. The one guy would still make his $50 in pay and benefits -- but the retiree costs would have grown exponentially. BUT THAT"S HOW IT WORKS.

 

The media likes to grab this magical $75/hour figure and do the circle-jerk around it. But the reality is that the number itself comes from an "accounting principle" and not an actual reflection of what workers (or retirees) make in reality.

[DCK]

I've been wondering why Ford does not come out with new products like Chysler has last few years. The only thing I can come up with is that the market is so demanding that you have to keep constantly improving the products you already have to stay in business. It leaves very little time and money for anything else. Ford next year is concentrating on the new F-150 and Fusion and soon after Mustang. Along with that they have two brand new products coming out. Also, with limited capital you cannot take chances like Chrysler has and come out with half baked products that are DOA. Ford simply cannot afford it and Chrysler will be in same boat without sugar daddy Daimler anymore. I support Ford spending most of its time and money on keeping its present products current and maybe a new vehicle every now and then like it has been doing. Edge, Flex, MKS, and Verve are enough for now and put your money into F-150, Fusion, and Mustang. Do you think this is enough or should Ford be scattergunning market with a ton of new product?

THe problem is Ford didn't even put the money into product development when they were posting record profits.

 

THey are spending less on Product development each year.

 

Yes they need to keep current product on a life cycle and not have it run a decade with minimal updates. Excuses such as "its an orphaned platform why spend the money" don't matter to the public, why the hell would the public by a vehicle that Ford gave excuses to not update it over hot new modern products that the japanese keep fresh, every year they give up more and more segments and market share within those segments putting out crap like the 2008 escape and focus, yet they(and people here) provide pathetic excuses to defend the desicions.......................excuses don't matter, when Ford is throwing market share away, bargain bin pricing their product and dumping new product into fleets.........it is clear their half ass attempts aren't going to fix the situation.

 

Ford needs hot NEW products in hot segments AND they need to keep current products HOT and NEW and if they can't do that then close the doors now. Ford deserves to be out of business with 20 year product cycles.

[DCK]

They've had some "significantly improved" as well as "all new" products come out recently and some that will be out soon:

 

All New or Significantly Improved in 2007:

Sport Trac

Edge

Expedition

 

All New or Significantly Improved in 2008:

Super-Duty

Escape

Focus

Taurus

Taurus X

E-Series

 

All New or Significantly Improved in 2009:

F150 (bigger cabs, 6 speed autos, more HP, etc.)

Flex (due out in Summer 2008)

Fusion (based on EUCD?)

Mustang?

Fiesta/Verve?

 

2010 & Beyond:

Diesel & BOSS/Hurricane for the F150 and Expedition

Ranger replacment based on T6

CV replacement based on Huntsman

All new Explorer based on Huntsman, D3 or EUCD2

F100 Midsize based on T1

B Cars & CUV’s based on global B2

C Cars & CUV’s including an all new Focus based on C2

 

I think that within the next year or two, we'll see a completey revamped line-up with consumer driven products. It's pretty promising, but too bad it will take so long...

"Significantly Improved" is a joke when a product has been on the retail market for 10 years, it needs to be redesigned from top to bottom. The significantly improved escape is throwing market share to the japanese in the segment that is balooning.

[Mark B. Morrow]

You're right...and I also forgot the Aspen.

 

 

So has everyone else.

[NickF1011]

"Significantly Improved" is a joke when a product has been on the retail market for 10 years, it needs to be redesigned from top to bottom. The significantly improved escape is throwing market share to the japanese in the segment that is balooning.

 

We know Kuga is coming. Quit getting your panties in a wad over the '08 Escape already.

 

A LOT of Ford product is coming. And the way the product is coming is changing. Fields and Mullaly have already made a huge impact in the fact that we DON'T have more half-assed "significantly improved" models than we would otherwise. Things like the Focus and Escape are the LAST of the old way of doing things. Every product update that has come even close to that level of upgrading was either cancelled altogether or sent back to the drawing board for more work.

 

Fields sent the Mustang back for a full redo after seeing what was supposed to be the '08 refresh, hence its delay until '09. From what it appears, the '09 Fusion will see very significant changes for a mid-cycle refresh also. Fields also cancelled the EcoSport for our shores, deeming it far below our standards. Instead, our B-car got delayed for quite some time until we could get a product worth launching in the first place.

 

The way of doing things doesn't change overnight, ESPECIALLY when it comes to vehicle engineering, which is often started several YEARS prior to the vehicle's launch date. You can't expect new management to be able to begin every design from scratch in a matter of 12 months.

[DCK]

We know Kuga is coming. Quit getting your panties in a wad over the '08 Escape already.

 

A LOT of Ford product is coming. And the way the product is coming is changing. Fields and Mullaly have already made a huge impact in the fact that we DON'T have more half-assed "significantly improved" models than we would otherwise. Things like the Focus and Escape are the LAST of the old way of doing things. Every product update that has come even close to that level of upgrading was either cancelled altogether or sent back to the drawing board for more work.

1. Giving us the Kuga 4-5 years after its introduction means it is going to be stale, Honda and Toyota will have new CR-V and RAV4's out when we get the Kuga. That means the The RAV4 would have seen for different life cycles during the Escapes Single life cycle.

 

2. People can't have it both ways, you can't defend the Escape as a great effort and then use the excuse it is the last of the "old" way of doing things.

[silvrsvt]

1. Giving us the Kuga 4-5 years after its introduction means it is going to be stale, Honda and Toyota will have new CR-V and RAV4's out when we get the Kuga. That means the The RAV4 would have seen for different life cycles during the Escapes Single life cycle.

 

Guess you never considered the fact that we'll get a Kuga Mk.2 when it does come out to the states? They tried bringing over the current Kuga as a Lincoln this go around, but it was too expensive to do.

 

2. People can't have it both ways, you can't defend the Escape as a great effort and then use the excuse it is the last of the "old" way of doing things.

 

Outside of the engines (which are according to rumor getting updated in 09), whats so wrong with the Escape that makes it horrible? Its selling well...

[Pioneer]

Otherwise, all we have here is a brain-damaged brain-fart.

 

Well, you don't have to call Alan names.

[focus05]

No, you are absolutely wrong.

 

The $75/hour figure comes from

 

1) Hourly wages of the worker

2) Benefits of the worker

3) COSTS OF THE RETIRED WORKFORCE DIVIDED BY THE NUMBER OF CURRENT EMPLOYEES. This is an accepted (why? I don't know) accounting practice of calculating manpower costs.

 

For example:

 

1) An employee makes $30 an hour

2) His benefits cost $20 an hour.

 

The company's true cost is $50 an hour. JUST LIKE (or pretty near to) TOYOTA.

 

The difference:

 

3) Because the Big 3 underfunds the pension fund (allowed by the government), they have to make up the shortfall. If you have 60,000 workers and 10,000 retirees, the cost of the pensions for those 10,000 retirees is distributed across 60,000 employees. So let's say that that actual number is $5 an hour. So what it used to cost them: $30+20+5=$55 an hour.

 

Now, the truth behind the problem:

 

Big 3 employee numbers have been shrinking. Some have been offered buyouts, some have retired and many have taken early retirement packages. SO....now let's say there are 30,000 employees and 20,000 retirees. Now that bigger retiree cost is spread across less employees. So now that cost is say $25 an hour. Now the total cost is $30+20+25=$75

 

THIS is where they get the $75 an hour figure from.

 

Do the workers earn any extra money? NO. They still cost the company the same $50 an hour they always did. JUST LIKE TOYOTA.

 

Do the retirees make extra money? NO. They still put in their 30+ years and still get the pension that was promised to them in good faith bargaining for 30 years. Those people didn't strike during their career; they held up their end. The Big 3 should uphold theirs.

 

Conceivably, if tomorrow there was 1 lonely person working on the line at Ford, and there were 50,000 retirees; by the same method the media could quote that the manpower costs at Ford was $1000/hour. The one guy would still make his $50 in pay and benefits -- but the retiree costs would have grown exponentially. BUT THAT"S HOW IT WORKS.

 

The media likes to grab this magical $75/hour figure and do the circle-jerk around it. But the reality is that the number itself comes from an "accounting principle" and not an actual reflection of what workers (or retirees) make in reality.

 

But that's still money that it costs Ford. Ford's pension is funded. This has NOTHING to do with pensions. This has to do with RHC. Instead of thinking about it in $/hr, think of it flat dollars. It costs Ford a little over $1 billion per year to pay RHC. That will continue to grow to about $2 billion+ even if they stop offering RHC to all new employees from here on out. That's an expense Toyota does not have (will never have). Further, becuase of changes in SEC rules, future health care liabilities have to be accounted for., which means Ford has a nearly $25 billion liability on its books. This rule didn't exist when Ford gave the UAW these benefits. However, that $25 billion raises the cost of borrowing money. So Ford cannot borrow money like most businesses can when things get rough - at least not at a very good rate. So all the outstanding debt that Ford has taken on to fund things costs them more than if they had a better credit rating - probably to the tune of half a billion dollars at this point.

 

Now its true. How you account for that is in proportion to your number of workers. But a declining workforce is a reality for Ford (and all the Big3), and RHC is consider a fixed labor cost, which during accounting can, in fact, be broken into cost per hour. But that doesn't change the fact that Toyota and Honda DO NOT HAVE THAT BILLION+ COST.

 

Now, just funding that $25 billion in liability doesn't eliminate it. The company has to have it completely off its books. Which means VEBA. Once that liability is gone, Ford's credit rating goes up and their cash outflow improves by not paying for retirees' benefits directly. Savings per year. Probably initially about $1.5 billion. In the long run... $2-3 billion. That's all cash. That cash can go to producing new car programs and technology. Again this is a multi-billion cost that Toyota doesn't have.

 

Even if Ford gets nothing else from these negotiations (although it needs to adopt the two-tier wage model) it needs that VEBA to be competitive. Period. The one plus that Ford has is that it just took out a massive loan to shore up its cash so it might be able to fund the VEBA easily all in cash and get the fund rolling faster than GM or Chrysler (Pioneer - that's where Ford's cash came from, why they have it, and why it can't just be used without some careful discretion).

[Pioneer]

(Pioneer - that's where Ford's cash came from, why they have it, and why it can't just be used without some careful discretion)

 

This is directed at me why?

[edselford]

But that's still money that it costs Ford. Ford's pension is funded. This has NOTHING to do with pensions. This has to do with RHC. Instead of thinking about it in $/hr, think of it flat dollars. It costs Ford a little over $1 billion per year to pay RHC. That will continue to grow to about $2 billion+ even if they stop offering RHC to all new employees from here on out. That's an expense Toyota does not have (will never have). Further, becuase of changes in SEC rules, future health care liabilities have to be accounted for., which means Ford has a nearly $25 billion liability on its books. This rule didn't exist when Ford gave the UAW these benefits. However, that $25 billion raises the cost of borrowing money. So Ford cannot borrow money like most businesses can when things get rough - at least not at a very good rate. So all the outstanding debt that Ford has taken on to fund things costs them more than if they had a better credit rating - probably to the tune of half a billion dollars at this point.

 

Now its true. How you account for that is in proportion to your number of workers. But a declining workforce is a reality for Ford (and all the Big3), and RHC is consider a fixed labor cost, which during accounting can, in fact, be broken into cost per hour. But that doesn't change the fact that Toyota and Honda DO NOT HAVE THAT BILLION+ COST.

 

Now, just funding that $25 billion in liability doesn't eliminate it. The company has to have it completely off its books. Which means VEBA. Once that liability is gone, Ford's credit rating goes up and their cash outflow improves by not paying for retirees' benefits directly. Savings per year. Probably initially about $1.5 billion. In the long run... $2-3 billion. That's all cash. That cash can go to producing new car programs and technology. Again this is a multi-billion cost that Toyota doesn't have.

 

Even if Ford gets nothing else from these negotiations (although it needs to adopt the two-tier wage model) it needs that VEBA to be competitive. Period. The one plus that Ford has is that it just took out a massive loan to shore up its cash so it might be able to fund the VEBA easily all in cash and get the fund rolling faster than GM or Chrysler (Pioneer - that's where Ford's cash came from, why they have it, and why it can't just be used without some careful discretion).

 

Very good analysis of part of the true picture! However a couple of things are missing. The numbers are an accountant analysis of where Detroit is today. Can you really blame the retirees that put 35 years of service in this industry for Detroit's mess? Well, I remember back in the 1970's when the Japenese started having the same issues we are talking about here, that is increaseing medical/retiree costs, less on the job workers, rising costs in Japan.

 

Well the Japanese did not put the burden upon the retirees. They expanded their markets world wide and used the cash generated to averge out there costs in Japan. Why does Detroit want it both ways? Why doesn't GM use the huge profits in China to benefit the retirees that worked the 35 years for them? The Japanese do that!

 

Universally, greed prevail and it prevails stronger in this country than any where else!

 

Regards

 

EdselFord

[NickF1011]

1. Giving us the Kuga 4-5 years after its introduction means it is going to be stale, Honda and Toyota will have new CR-V and RAV4's out when we get the Kuga. That means the The RAV4 would have seen for different life cycles during the Escapes Single life cycle.

 

2. People can't have it both ways, you can't defend the Escape as a great effort and then use the excuse it is the last of the "old" way of doing things.

 

The Kuga is likely to arrive sometime in the 2010-2011 timeframe, so 4-5 years is a little pessimistic on your part. That should be right around when the current Kuga is getting a refresh, so we will indeed be getting a state-of-the-art product.

 

And I've NEVER defended the Escape as a "great effort". It was a pretty good effort given the resources available though.

[mettech]

:reading: GM replaced and expand Saturn's line-up within three years.

 

Question: Why didn't Ford do the same for Lincoln and/or Mercury?

 

Answer: Past inept management. :shades:

[silvrsvt]

:reading: GM replaced and expand Saturn's line-up within three years.

 

Question: Why didn't Ford do the same for Lincoln and/or Mercury?

 

Answer: Past inept management. :shades:

 

 

Better answer...lack of new Ford products to base those new models on