Debt Free

Face it. Ford’s in trouble, deep trouble. It hasn’t been a big secret and after today’s announcement of a record $12+ billion loss, you’d have to be in the cast of LOST not to hear about it. They lost more money last year, $6.1 billion, in the North American Market alone, than the estimated total revenues for eBAY or Yahoo in the same period. Ford says it doesn’t expect to make any money in the North American market until 2009. They lost big in the Jaguar bet too, although they turned around the quality problems that have historically plagued the sexy, British carmaker. Even with the quality turnaround, and some beautiful looking automobiles, the Detroit News is reporting they lost a whopping $715 million last year. Why not just say enough’s enough, and pack it in? Maybe Ford should just stop selling cars. 

Actually, a strong argument could be made that Ford could abandon its core North American and European markets while focusing on the emerging South American, Indian and Chinese markets. Their sales in North America were down almost 20% last year alone, even though they introduced an award winning pickup, the new F-150, and the hot selling new Mustang just 2 years ago. To be fair, about half of the loss comes from costs associated with the huge restructuring plan the manufacturer has undertaken in order to right the ship.

The F-150 and Mustang notwithstanding, Ford just hasn’t offered the buying public vehicles they could get excited about. They’ve failed to repeat the sales success of the dearly departed Taurus in the bread and butter family sedan category. This has cost them plenty. The new Fusion, released in the tail end of 2005 as an ’06 model has sold well and has been profitable for Ford, even more profitable on a per unit basis than the Taurus. It’s possible that the Fusion could return Ford to respectability, if not leadership, in the segment. In this product centric business, failure to deliver what the driving consumer is after will all but ensure defeat. Just ask Oldsmobile, AMC and Rambler.

So, what about China? The good news for beleaguered Ford is that sales leapt by an astounding 89% in the Chinese market in 2006. Wow! The bad news is that represents sales of less than 160,000 units, about the number of cars Ford sells in North America in a week. As the Chinese public discovers the joys of driving, and Chinese economic prosperity increases, Ford’s Chinese sales can only increase with it. If sales continue at the present rate, however unlikely that may be, Ford will eclipse its US sales in a decade. Chinese vehicle sales are projected to top 8 million units this year. For Ford’s sake, as many of those as possible should wear a blue oval.

Should Ford just turn its back on the entire North American car market? Even though they’re pouring tons of capital into retooling and building new plants, maybe they should stop pouring good money after bad. They could become a design and engineering company and leave the building to the Chinese. Ford’s building plants in China anyway. Sure, the American economy would take a huge hit if all the car-related manufacturing and supplier jobs went away, but hey, if Ford goes under, they’ll be gone anyway. At least this way Ford can keep paying it pensioners. It’s possible Ford could use some of the same suppliers they do now, so we may be able to retain many jobs at those firms.

If you, or someone you love, works at the Big, Blue Oval, you better hope ex-Boeing chief Mulally can effect a turnaround at Ford, much as he did at the Lazy B. His execution of the “Way Forward” plan is absolutely critical to Ford’s future viability. The chances of anyone reading this working at Ford is dwindling, as Ford is slashing jobs in effort to regain some semblance of profitability. Actually, working at Ford may be similar to working in the cyclical aircraft industry, where huge layoffs are common place. At least Mulally is well versed at making huge cuts.

 

One way Ford could keep production and sales operations in North America would be if they stick to selling trucks here, a market they’ve proven to know well. That’s possible, but that wouldn’t be a walk in the park either. The American auto makers don’t have this all to themselves anymore. Their nemesis, Toyota, has gotten into the market with the Tundra, a legit contender in the full size pickup market. It grows even bigger for 2007, promising to give Ford and GM execs even more sleepless nights. It doesn’t stop there. Nissan is at the party as well, with their Titan. Another legit contender for the full sized pickup crown, the Titan sports a big V8 with over 300hp, just like its American counterparts.

The hometown boys had better look out. There’s gonna be a brawl. At least Ford, GM, and DC haven’t been resting on their laurels; something they got caught doing in the car side of the business about 30 years ago. GM just released a new, vastly improved Silverado pickup and full sized SUV line. Weather or not the newly lowered gas prices will be enough to reignite the “I don’t really need it, but I’m buying a full sized truck anyway” market is open to debate. Let’s hope for the American auto makers sakes the Chinese love trucks as much as we do.