Anybody else watch the news? Ford losing billions

[bmxmon]

12.9 billion dollar loss for Ford, crazy. I cant understand how a company can lose that much money and still be operating.

[drudis]

Ford and GM will never have the lion's share of the market, but they wont go under either. Smaller, fewer millions of cars sold, more limited selection (Ford wont make Freestar)...

I have confidence, and am counting on it. drudis@FORD.com

[Mr 5 0]

Originally Posted by drudis:

Ford and GM will never have the lion's share of the market, but they wont go under either. Smaller, fewer millions of cars sold, more limited selection (Ford wont make Freestar).

I agree, Drudis, and I voted that way.

The days of any domestic car company capturing nearly a third of the U.S. new-car market is long gone. Today, if a domestic car company can hold a 20% market share, they are doing pretty well. Actually, domestic auto manufacturers new-car market share has been dropping for some time, so Ford is hardly alone in it's troubles. Ford currently has a 17% market share which is predicted to drop in 2007. That means many millions less income from sales and a proportionate drop in Ford's profits, as expenses continue to rise every year. Toyota currently holds about a 15% new-car market share in the U.S. and that share is expected to rise slightly in 2007. Honda's U.S. new-car market share hovers near 10%. Apparently, any American car-buyer's aversion or hesitancy regarding Japanese cars has now vanished. Excellent build quality, good selection, high value retention and a fair base price, as well as a reputation for getting high gas mileage, will do that. It certainly isn't your father's domestic auto market, any more.

Meanwhile, as reality sets in at the corporate offices, decades of union contracts that were negotiated and signed by Ford execs on the confident (and short-sighted) assumption that 'The Big Three' would always have 95% of the U.S. new-car market - and the resulting profits - have be jettisoned - at a cost of billions to Ford, as well as GM and Chrysler. This will change the scope and 'generosity' of future contracts with the UAW and Ford, as well as those negotiated by GM and the restructured DaimlerChrysler AG.

Oh, salaries may stay fairly high to attract and motivate good workers but the days of a basically low-skilled auto worker making three times what he would have made in another job will be over. Auxiliary benefits (health and other insurance, pensions, etc) will also be cut drastically and if they have a brain, the union bigwigs will look at the company's (anemic) balance sheet, stop whining about executive compensation (which is really a stockholder issue and just a straw-man to justify higher wage/benefit demands from the unions) and take a reasonable deal for their members. I believe that a union strike in the near future could bankrupt Ford, which would be unfortunate for everyone concerned. I trust that won't happen.

Meanwhile, expect the cost of a new V-8 Mustang to go into the $30,000. range - while quality may or may not improve. We'll see. One can hope, anyway.

[Unit 5302]

This is an obvious question. Chrysler is already owned by a foreign company, Daimler. Although the name says Daimler Chrysler, there's no doubt where the ruling body of power lies. Ford is the next company on this block with rumored talks of Toyota purchasing Ford ongoing. Mulally has no great automotive history background with which to hold pride in, and Ford is currently screwed. Toyota has also indicated they are open to purchasing Ford Motor Company.

I don't think most people on this board understand exactly how dire the straights Ford is navigating are right now. They're absolutely on the verge of collapse, hemorrhaging cash from every location. After basically mortgaging everything they can get their hands onto, just to free up enough cash to try and turn the company around, it's a last ditch effort to avoid bankruptcy.

If things don't go exactly how Ford needs them to go over the next couple of years, I expect the Ford name be sold to Toyota, Honda or another major international company in a desperation move to maintain some value in the company.

[Mr 5 0]

Originally Posted by Unit 5302

This is an obvious question. Chrysler is already owned by a foreign company, Daimler. Although the name says Daimler Chrysler, there's no doubt where the ruling body of power lies. Ford is the next company on this block with rumored talks of Toyota purchasing Ford ongoing. Mulally has no great automotive history background with which to hold pride in, and Ford is currently screwed. Toyota has also indicated they are open to purchasing Ford Motor Company.

I don't think most people on this board understand exactly how dire the straights Ford is navigating are right now. They're absolutely on the verge of collapse, hemorrhaging cash from every location. After basically mortgaging everything they can get their hands onto, just to free up enough cash to try and turn the company around, it's a last ditch effort to avoid bankruptcy.

If things don't go exactly how Ford needs them to go over the next couple of years, I expect the Ford name be sold to Toyota, Honda or another major international company in a desperation move to maintain some value in the company.

This rumored 'Toyota buys Ford' scenario could become reality.

For other reader's edification, Toyota is currently #1 in sales in Japan. Here in America, Toyota is #2 in sales, right behind GM - and gaining. GM has announced that it plans to 'trim' vehicle production this year. Toyota plans to expand production. With billions in cash on hand, Toyota could probably afford to absorb Ford, especially if Ford sheds it's hyper-expensive UAW pension obligations, as they are attempting to do with the buyout package the company mortgaged it's soul to pay for.

Ford CEO Alan Mulally and Toyota Chairman Cho had a 'summit meeting' (tellingly, in Japan) back in December. While Ford and Toyota spokesman stressed that it was only to discuss 'cooperation on hybrid vehicle technology', no one paying attention was fooled as to the likely purpose of that extra-high-level meeting. However, the Ford family's controlling interest in the company could be a stumbling block to a future Japanese takeover of Henry's 104-year-old institution. Ford family pride (ego) may not allow them to let go of control without a fight. Even so, Ford's steadily deteriorating financial circumstances may force Ford family members to face -and accept - reality. It isn't 1959 anymore.

Japanese automakers, hungry and willing to take risks, started from scratch in the U.S. and, after spending years as little more than 'niche' auto manufacturers, making underpowered, tiny cars that most Americans then laughed at, learned, adapted, and, with design innovations, clever marketing and a dedication to excellence, even if it reduced profits a bit, have basically eaten domestic auto manufacturers lunch with reliable cars that people really want to buy.

Oh, Ford has certainly had it's moments - like the 1964½ Mustang - but a huge corporate bureaucracy and moribund management apparently could not be overcome. The brilliant Lee Iacocca - who was the major force behind bringing the Mustang to life, as it were, was abruptly fired by Ford Chairman Henry Ford II- because, as Mr. Ford said, "I just didn't like him". This boneheaded act of arrogance occurred in a year (1978) when the Ford company had a 2 billion dollar profit. Such was the arrogance and incompetence of of Ford senior management. No wonder the once-powerful Ford company has fallen on hard times. Sure, the over-generous union pension deals, benefits and high salaries hurt, but they are only a part of Ford's problems, not the true cause of Ford being in the unenviable position it finds itself, today. 'Poor management' may sound like a catch-all term but, in Ford's case, it fits.

For instance: allowing the popular Taurus to just fade away and then, ceasing it's production entirely (translation: they killed it) was a typical bonehead decision by Ford management, no matter what anyone may think of the now-defunct Taurus. The original Ford Taurus made it's debut in 1986 and was hailed by car critics as a true innovation in auto manufacturing. It was FWD, which was fairly unusual in a medium-priced U.S. car 20 years ago. The Taurus also abandoned the boxy body style most cars (including Fords) had being using for many years, going for an 'ovoid' (egg-shaped) look, which most potential buyers found appealing. Ford made improvements in the Taurus almost every year. Well, for awhile, anyway. Believe it or not, for a few years in the early-to-mid '90's, the pedestrian-but-popular Taurus was America's best-selling car.

Then, recognizing this was the kind of car the U.S. car-buyer wanted, Toyota and Honda basically co-opted it with the Camry and Accord and finally eclipsed it in U.S. sales, while Ford watched and then allowed the Taurus to become a rental-car staple. It's re-sale value as well as it's popularity slowly went down the drain while Ford looked the other way and pushed SUV's and pickup trucks for short-term gain. Japanese auto manufacturers also push their SUV's, vans and pick-up trucks, but they don't neglect their staple vehicle: the family sedan. As I see it, the Taurus was a winner out of the gate that Ford basically allowed Japanese auto manufacturers to mimic, improve on and finally, sail past it in sales, gaining customers (and their loyalty) as they found the Japanese cars were not 'cheap', but user-friendly and a good value, too. Sales of Camrys and Accords soared. Ford management yawned.

I think some of us certainly do understand the dire straits Ford is currently attempting to navigate. As a more-or-less disinterested observer (I don't hold any Ford stock) I have to honestly state that I see Ford as being in a corporate 'death spiral'. That being the case, a Ford-Toyota merger, similar to Chrysler-Daimler, may occur soon. That assumes that the Ford heirs and stock-holding relatives are willing to get out of the way and allow it to happen in order to see the Ford name - and their stock's value - survive.

We'll see.

i gotta agree with Mr 5 0 and drudis. either they learn to compete in this world or they will be bought out quickly.

[69fastback]

It is Fords on fault. They chose to go with the big SUVs instead of getting good GPA. I can't blame them though because at the time the big SUVs were making all the money. Then all of the sudden the Jap crap with good mileage started making all the money. I am a life long Ford fan and all the other brands, including the Chevy, can kiss my ass. I am one of the last few people that believe in American iron let alone Ford. I will live and die Ford for the rest of my life. If there is anyone else that has the balls to feel the same way then let me know?

[Mach 1]

I think ford has a good product line, I beliieve the 500, fusion, new mustang, etc... have all gotten good reviews, they are all good looking cars, and I havent compared them value wise to the competition, but I dont see why they cant survive in the long run..

not to mention the many die hard ford truck guys that are extemely brand loyal

[Mr 5 0]

Originally Posted by Mach 1

I think Ford has a good product line, I believe the 500, Fusion, new Mustang, etc... have all gotten good reviews, they are all good looking cars, and I haven't compared them value-wise to the competition, but I don't see why they cant survive in the long run.

Not to mention the many die-hard Ford truck guys that are extremely brand loyal

Unfortunately, truck sales alone can't save Ford or they would have, already. That's why Ford had to borrow 18 million to 'restructure' the company last year and put much of it's real estate up for collateral. Sales are in the dumper. It doesn't look good. That's why Ford/Toyota merger stories are floating around

While the current Ford vehicle line is decent, the new models are mostly unknown quantities to the average new-car buyer and past Ford quality issues still haunt the company, hurting both public acceptance and sales for the new models. Once you buy a new Ford and have it need go back to the dealer for repairs time and again, that sours you on the brand, as it has many people over the years.

Enter, the Japanese auto manufacturers, who have built up a reputation for both innovation and build quality, as well as holding good re-sale value. Check the retail price on a 2003 Ford Taurus or Focus and a similarly equipped, same mileage 2002 Accord, Civic, Camry or Corolla. There's usually a difference of thousands in the retail price -used - and it's always less for the Ford. There is a simple reason for that: high demand for Japanese cars. Fairly low demand for domestic models. In this instance, Ford. Sure, the Mustang holds it's value pretty well, but the Mustang is a very small part of the market and can't 'save' Ford, any more than it's truck sales can.

This is partly a case of 'chickens coming home to roost' or, more accurately, minus the metaphor; actions have consequences.

[1SVT2NV]

its all bs they do this all the time to gain buisness and promote their attempts at regaining the market

[Mr 5 0]

Originally Posted by 1SVT2NV

its all bs they do this all the time to gain buisness and promote their attempts at regaining the market

No, it's quite true. Do some research and find out.

Ford, a 104-year-old American car manufacturer with a worldwide reputation that has to borrow millions to 'restructure' and use it's factory and office real estate as collateral while rumors float around that they're either about to go bankrupt or will be absorbed by a foreign car company is hardly going to help them 'gain business' or regain the market. Who wants to buy a car from a company that could be out of business next year?

Ford's stock price is holding fairly steady (at about $8. per share) but institutional investors are very worried about the Ford stock they now hold. If they begin to sell off, Ford is finished, as the smaller investors will panic and everyone will try to sell, killing the price of the stock, which would be fatal for the company.

If this is a way for Ford to 'gain business', it's sure a strange method of doing so, as their sales are down 20%. Maybe Ford needs a better idea.

[1SVT2NV]

Originally Posted by Mr 5 0

No, it's quite true. Do some research and find out.

Ford, a 104-year-old American car manufacturer with a worldwide reputation that has to borrow millions to 'restructure' and use it's factory and office real estate as collateral while rumors float around that they're either about to go bankrupt or will be absorbed by a foreign car company is hardly going to help them 'gain business' or regain the market. Who wants to buy a car from a company that could be out of business next year?

Ford's stock price is holding fairly steady (at about $8. per share) but institutional investors are very worried about the Ford stock they now hold. If they begin to sell off, Ford is finished, as the smaller investors will panic and everyone will try to sell, killing the price of the stock, which would be fatal for the company.

If this is a way for Ford to 'gain business', it's sure a strange method of doing so, as their sales are down 20%. Maybe Ford needs a better idea.

Its the old theory make them think your weak when your strong. Do you think ford could afford to spend billions developing the ford gt if they were going out of buisness. or even cars like the svt cobra. ford has had the number one selling pickup 30 years running. dont believe everything you hear my friend. Ive worked for ford I know how things are going. Same thing goes for gm. its all hype. It pushes americans into buying domestic to protect our economy

[Mr 5 0]

Originally Posted by 1SVT2NV

Its the old theory make them think your weak when your strong. Do you think ford could afford to spend billions developing the ford gt if they were going out of buisness. or even cars like the svt cobra. ford has had the number one selling pickup 30 years running. dont believe everything you hear my friend. Ive worked for ford I know how things are going. Same thing goes for gm. its all hype. It pushes americans into buying domestic to protect our economy

Well, we're all entitled to our opinions but I have to disagree with this one. Ford sales are down 20% and their stock is shaky - but it's all 'hype'? That makes no sense. People buy cars and if Ford can't sell as many of their cars as Toyota, etc then they lose market share. That isn't hype, it's simply economics.

A new car - foreign or domestic - now costs an average of $29,000. A 2007 Mustang V-8 coupe has an MSRP of almost $26,000. and goes out the door for about $2,000. less, not including state sales taxes. I seriously doubt that any notable portion of the car-buying public is going to feel sorry for Ford (or GM or Chrysler) and start buying domestic cars that they don't really want and that take a good chunk of a years pay to purchase, out of sheer patriotism. That's ridiculous.

Ford truck sales are important but they have also fallen, as have SUV sales. Foreign manufacturers, mainly the Japanese, are making steady inroads on this particular market segment. As I stated in an earlier post, truck/SUV sales are only one portion of a large market and, alone, cannot save Ford, a company that hasn't made a profit for almost two years.

I don't know what kind of optimistic fairy tales (let's just call it 'hype') the company feeds Ford employees, who are likely to lose a lot of their cushy benefits in future Ford-UAW negotiations, but if I worked there, I would ignore the "we're just pretending to go broke to get sympathy" line and start looking for another job. But that's just me.