bagwell

Troubled automaker unveils plans to shift product line, bringing European-made vehicles to North America.
By Aaron Smith, CNNMoney.com staff writer
Last Updated: July 24, 2008: 4:11 PM EDT
NEW YORK (CNNMoney.com) -- Ford Motor Co. announced plans to transform its vehicle lineup on Thursday and reported the largest quarterly loss in its 105-year history.

Ford's (F, Fortune 500)stockended the session about 15% lower at $5.13 a share.

"Because of deteriorating economic conditions, demand has declined dramatically, especially in North America," said Ford CEO Alan Mulally, who also blamed rising gas prices for the decline.

Mulally said the company is working toward reducing its salaried workforce by 15%. The company aims to save $5 billion annually, and has managed to reduce costs by $1 billion so far.

He also said the company is now shifting its focus "to bring to the North American market smaller, more fuel-efficient vehicles that people increasingly want."

The company said it will make big changes to the vehicles it sells domestically - bringing six small cars made in Europe to the North American market.

Ford said that three large truck and sport utility vehicle plants in Wayne, Mich., Louisville, Ky., and Cuautitlan, Mexico would be switched over for the manufacture of small cars. Re-tooling will begin in December, the company said.

In addition to converting the three plants in North America, Ford said it will ramp up production of small utility vehicles at its Kansas City, Mo., assembly plant, including the Ford Escape, Escape Hybrid, Mercury Mariner and Mariner Hybrid.

Fortune: Can this car save Ford?

Mulally said that, in the second quarter, Ford rolled out two new vehicles - the Ford Flex, a "crossover" car-based SUV, and the Lincoln MKS luxury sedan. Mulally said these are the first vehicles with "eco boost" technology, providing better fuel economy.

Mark Warnsman, analyst for Calyon Securities, said that Ford has a "good plan" but "they've got to say in business long enough to make it work."

"They're not going to have these smaller vehicles in the U.S. until 2010 or 2011 and they're going to have to hustle to keep up with demand," said Warnsman, noting that Honda Motor (HMC) is Ford's top competitor in producing small, fuel-efficient cars.

As production winds down, Ford has been slashing production of SUVs and large trucks to meet the reduced demand, and delayed the launch of its new F-150. But some truck and SUV lines will continue, at least for now.

Ford said it will continue to produce the Ford Ranger through 2011 at its Twin Cities, Minn. plant, which was scheduled to close in 2009. The company also said it would shift production of the Ford Expedition and Lincoln Navigator to its Louisville plant from Wayne, Mich.

Tough quarter: Ford said it lost $8.7 billion, or $3.88 per share, in the second quarter, including pre-tax special charges primarily due to the write-down of assets. A year earlier, the automaker announced a profit of $750 million, or 31 cents per share.

Without charges, Ford reported a loss of $1.4 billion, or 62 cents per share, in the latest quarter.

Revenue, excluding special items, fell to $38.6 billion from $44.2 billion a year earlier.

Ford said the special items included $8 billion in write-offs stemming from the loss in value to Ford North American and its Ford Credit lease portfolio. For this, Ford blamed "deteriorating economic conditions."

Ford managed to beat analyst expectations on revenue, but missed on earnings. Analysts expected Ford to report a 14% drop in revenue to $34.6 billion, and a loss of 27 cents per share, without charges, according to consensus compiled by Thomson/First Call.

Hard-hit: Ford, like its American rival GM (GM, Fortune 500), has been hard-hit by economic weakness. In particular, rising gas prices have severely hampered consumer interest in big trucks and SUVs. In 2007, Ford lost its place as the No. 2 automaker in the U.S. to the Japanese automaker Toyota (TM).

Ford has been offering buyouts to the hourly employees among its 54,000-strong workforce. But only 4,200 workers accepted, far short of the company's goal. On Monday, Ford said that a new round of buyout and early retirement offers had been made to workers at 17 facilities.

On Wednesday, the rival U.S. automaker Chrysler also announced that it was cutting 1,000 salaried jobs.

Ford's stock has fallen 10% so far this year. But it still managed to outperform the S&P, which has dropped 12%.

Calyon has received compensation from Ford for non-investment banking services in the past 12 months.

First Published: July 24, 2008: 7:32 AM EDT







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http://money.cnn.com/2008/07/24/news...ion=2008072416

LexFather

Geezus that is just awful performance. My goodness

knihc2008

iTrader: (1)

The night is darkest just before the dawn...?

bagwell

drastic times call for drastic measures - the plan to convert most of the SUV plants to the Euro designed cars is a great idea and sounds like a good plan.....do it ASAP!

mmarshall

Part of the problem (in fact, a BIG part), is just panic on the part of the car-buying public. People actually make recessions in the auto industry worse than they otherwise would be, because they WON'T buy new cars, and give all kinds of excuses for it....jobs, mortgage, apprehension, fear, etc.....

Now, I'm not saying that one should go out and get a new car just for the sake of GETTING one, or get a new LS460 when you can only afford a Corolla. But, so many people are driving around in worn-out junk with 150-200K miles on it, burning oil and leaking anti-feeze, NEED a new car, and simply WON'T go out and get one because they are innundated with a bunch of doomsday economic woes on the nightly news, and then they start panicing themselves. It is ridiculous. If you need a new car, then GET one.

What does this have to do with the thread topic.....Ford's downturn? Simple. Ford and other auto firms wouldn't be in the mess they are in if people simply stopped worrying about the doomsday economic news every night, went out, shopped and got new cars when they needed them, and stopped trying to get another 100K miles out of a worn-out car wih 200K miles already on it. But today's media is so powerful they have millions of people believing that they CAN'T buy new vehicles, and they have to sit on every penny they have like Scrooge. So, because people aren't buying, when in many cases they COULD be buying, companies like Ford suffer.

Faymester

... or before it goes completely black


How about working on the RELIABILITY?!?!?!?!?!? I know it's a difficult idea to understand but there's a reason why Toyota sells so many cars.

remember --> FORD: Found On Road Dead


oh and yes, mmarshall i agree ... bad times in the economy are often compounded by the media and peoples own insecurity and gullibility (i think i invented a word there)

bagwell

not only the reliability....but of course MPG as well...with bringing over the Euro models they will have competitive vehicles with these top US selling car in 2008 (thru June).


Toyota Camry
Honda Accord
Honda Civic
Toyota Corolla
Nissan Altima
Chevrolet Impala
Chevrolet Cobalt
Honda CR-V
Toyota Prius
Chevrolet Malibu
Pontiac G6

uh, of course that's part of it but - Honda and Toyota aren't hurting are they?

luxury1

But you really can't blame people for thinking this and it actually makes a lot of sense.

Look at it this way; Joe works at a store and poor economic times have decreased that stores sales by 30%. He is still employed today but will he be in three months? Maybe or maybe not. Thus, with a somewhat uncertain future, does Joe want to assume a lease or finance contract for 3-5 years (keep in mind that the average buyer doesn't pay cash)? Joe will most likely keep his car that still works so that he doesn't get into a sticky financial situation. That is what many Americans are thinking right now.

ISF_GG

iTrader: (2)

Another big problem with Ford (and GM) is they have relied heavily on large SUV's and trucks for a large part of their profits. With the relatively quick rise in gas prices, those large vehicles are now sitting on dealers lots with no one interested in buying them. It will take some time, and financial pain for both Ford and it's dealer network to adjust to these changes.

<VENOM>

Many things contribute to Ford not doing so great but the obvious is they are known for Trucks and SUV, and the trend is going towards anything fuel efficient, the foreign cars dominate that market

<VENOM>

If funny but the local Toyota dealer is advertising 10k off Tundras and 11k off Sequoias I'd love a Sequoia but it's way excessive for what I need, Im have not seen any adds for Ford/GM/Chrysler like the Toyota one

mmarshall

Understood, but if customers don't come in to Joe's store and BUY things, the chances will increase that Joe WILL be laid-off. Same thing in the auto industry...people don't buy cars, it only makes the situation worse...and increases the chances the Ford people will be let go.

There is no magic wand in economics....a free-market, capitalistic economy depends on sales. When people don't buy, it only makes a recession that more probable.....and that means even MORE layoffs.

Also consider this: Joe, of course, may be only one person, but when Person A
puts off a car purchase because of economic fears, then Person B does the same thing, and Person C, D, E..........well, you get the picture (it's a domino effect). Pretty soon, auto sales across the country dry up, and then companies like Ford are in REAL trouble.

You see my point? Recessions come about mostly because people (and companies) DON'T spend. It becomes a vicious circle....the deeper the recession gets, the less likely people are to do what is needed....more spending.

Like I said earlier, I primarily blame the media for causing much of it....they are the ones continually spreading gloom and doom. If they would only just shut up and let people go out and buy what they need.....and the country needs.

-J-P-L-

It's all about product and Ford (as well as GM and Chrysler) still are not delivering what people want. They've watched for decades now Toyota and Honda dominating the car market and have put forth no real effort to compete with Camry, Accord, Civic, Corolla and now the Fit and Yaris. WHY??!!!!

They are capable but have just let themselves fall.

Think about it. Ford's smallest car is the Focus (really there only small vehicle) They don't make an all important sub-compact. GM's only sub-compact is built by Koreans. Chrysler's smallest vehicle is the Caliber and only tops out at 29 mpg. Anyone else see the enormous problem here?

People like me bought a Yaris because a compact is too big! Just check out "Yarisworld" or "Fitfreak" to see how many people feel the same way.

WHen are the US automakers going to take their heads out of the sand? Based on their continued product plannig, they deserve to be bankrupt.

mmarshall

Yes and no. Over the years, it has been very difficult for U.S. automakers to design and build good subcompacts at a profit. Most of their attempts have been either poorly engineered, poorly built, unreliable, unsafe in accidents, or otherwise just not competitive with those from Europe and Asia. So, many American-marketed subcompacts (the Chevy Aveo I just reviewed is a good example) are designed and built overseas and simply given a rebadged American nameplate.

There are a number of reasons, of course, WHY American manufacturers have had a difficult time building good small cars, but that is a subject for another thread, not this one.

And, of course, the simple fact that a subcompact is designed or built overseas does not automatically make it a good small car either.....witness the Smart-for-Two, a rolling coffin in any kind of significant accident.

Shawnmack

I called it about 2 weeks ago without the F-150 Ford is Doom. GM and ford just can't compete with the big 3 from Japan.