GreekGod
07-21-2006, 07:49 AM
Brace yourself for Way Forward II, the sequel.
After losing $1.3 billion during the first half of the year -- a performance that is $3.5 billion worse than the same period of 2005 -- Ford Motor Co. said Thursday it would accelerate its so-called Way Forward turnaround plan and take "additional actions" within the next 60 days to keep its effort on track.
"We will, in a couple of months, have for you an updated version of Way Forward," Ford Chairman and Chief Executive Bill Ford told journalists and analysts during a conference call to announce the company's second-quarter financial results.
He later said the company would even consider an alliance like the one General Motors is discussing with Nissan Motor Co. and Renault SA.
"I wouldn't rule it out," Ford said during an interview on CNBC. "Would we be open to talks? Yes, we would."
Ford said it lost $123 million in the April-June period.
Will the new plan have more plant closures? More benefit cuts? Broader buyouts? Management changes?
What is on the table?
The answer, Bill Ford said simply: "Everything."
The promised revision to the Way Forward plan comes six months after Ford unveiled the original plan, which a few analysts had criticized for lacking urgency and detail.
The initial turnaround plan spanned six years, through 2012, and promised to idle 14 plants, eliminate 34,000 jobs and take other actions to restore Ford's North American automotive operations to profitability by 2008.
Seven of the remaining plants slated to close have still not been publicly identified.
While Ford didn't suggest that the Way Forward plan would be scrapped in lieu of a new strategy, he said the company was conducting a detailed review of its strategy and would make changes soon.
"Our top priority is to fix our business," Ford said.
The second-quarter results were worse than predicted. Analysts, on average, had expected a profit of about $220 million, excluding charges for buyouts.
More buyouts urged
There is one element of the Way Forward plan that workers and analysts alike would like to see quickly modified.
Several have complained that Ford's buyout program has been offered to workers at only a few plants.
So far, 5,000 workers have taken buyout programs to leave and the company is hoping to shed 12,000 by the end of the year, said Don Leclair, Ford's chief financial officer.
A sweeping program at GM allowed that automaker to cut its UAW labor force by about 35,000.
Analysts and workers eager to leave have been nagging for Ford's buyout program to be extended to all its facilities.
"We would like to see Ford engage in a company-wide attrition program similar to GM's," Himanshu Patel, an automotive analyst at J.P. Morgan, wrote in a note to investors last week.
Mark Fields, the executive vice president charged with turning around Ford's struggling American operations, said the changes to come might include quickening the timetable of some of the Way Forward provisions already announced, but he would not reveal what he was considering.
"We're looking at every element ... which means going potentially further, and faster and deeper than we originally envisioned," Fields said. "If we need to move further and deeper, we will."
The biggest thing Ford could do to improve its outlook and performance is get new, desirable vehicles to market faster.
Last week, Merrill Lynch estimated that, among major automakers, Ford would have the oldest lineup of vehicles in its dealers, with an average vehicle age of 3.5 years. Showroom age is considered a major indicator of market share performance.
Fields has said Ford will significantly freshen its lineup by 2008. But for now, he said: "There's only so fast we can run with our current portfolio."
Revising revival plan
Despite plans to revise Way Forward, Ford executives stood by the plan's framework, pointing to slight improvements in the second quarter.
North American operations, for example, lost $797 million, or $110 million less than the company lost last year, excluding special items such as restructuring charges.
But when looking at the full first half of the year, the North American division lost $1.3 billion, about $1 billion worse than a year ago.
Ford said that his team put together a flexible turnaround plan and that they have been regularly re-evaluating it as market conditions have changed. Now, Ford said, toughening market conditions require a revision.
While Ford executives cited a host of challenges prompting that change -- such as higher commodity costs, sagging consumer confidence and the inability to get buyers to pay more for new cars and trucks -- one of them seems to be hurting more than the others.
Higher gas prices are pushing consumers to shift out of profitable SUVs and pickups into cars and crossovers at a pace that is much faster than Ford seems to have expected.
While Ford car sales are up 5.3% for the year, truck sales look like a sea of negative numbers. Overall sales of pickups, SUVs and vans were down 9.3%.
Lincoln truck sales were down 19.8% overall. Sales of the Ford Explorer and Expedition SUVs both dipped more than 30%.
With conflict raging in the Middle East, it seems unlikely that concerns about rising gas prices will diminish soon.
"I think the products we have coming are absolutely the right ones for this environment," said Bill Ford, referring to new crossovers, such as the Ford Edge and Lincoln MKX, coming to showrooms this year.
Of particular concern to Ford is the impact that the shift away from trucks is having on pickups, as well as SUV and van sales.
Full-size pickups, which industry insiders have long viewed as resistant to gas-price changes, largely because they are work vehicles, seem to be increasingly vulnerable. Full-size pickup sales are down 9.8% industrywide through the first half of the year.
Sales of Ford's F-Series are performing much better, down just 1.9%.
That leaves Ford with a growing piece of a shrinking pie -- and consequences for Ford's bottom line.
Ford is eagerly watching, trying to determine whether pickup buyers are trading in for other types of vehicles or simply deferring their purchases.
"Because we have such a dominant segment share in that, that disproportionately affects our share," Fields said.
Because of the shift away from trucks, Ford also said Thursday that it would cut its third-quarter production to 670,000 vehicles. That's down 58,000 vehicles from a year ago and 40,000 fewer vehicles than Ford previously reported it would build.
"This change from the prior level is more than explained by lower truck production, reflecting our intention to maintain appropriate dealer inventory levels," the company said in a news release.
One analyst, David Healy of Burnham Investment Research, has raised questions about whether Ford will have enough cash to get to 2008, when Ford's lineup reloads.
Leclair assured that Ford, with $23.6 billion on hand, had the resources to get through this rough period.
"We have the capital and the liquidity to pull this off," he said. "We have said all along that we have a plan and if need be, we'll modify that plan. We know what to do."
Contact SARAH A. WEBSTER at swebster@freepress.com (swebster@freepress.com).
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After losing $1.3 billion during the first half of the year -- a performance that is $3.5 billion worse than the same period of 2005 -- Ford Motor Co. said Thursday it would accelerate its so-called Way Forward turnaround plan and take "additional actions" within the next 60 days to keep its effort on track.
"We will, in a couple of months, have for you an updated version of Way Forward," Ford Chairman and Chief Executive Bill Ford told journalists and analysts during a conference call to announce the company's second-quarter financial results.
He later said the company would even consider an alliance like the one General Motors is discussing with Nissan Motor Co. and Renault SA.
"I wouldn't rule it out," Ford said during an interview on CNBC. "Would we be open to talks? Yes, we would."
Ford said it lost $123 million in the April-June period.
Will the new plan have more plant closures? More benefit cuts? Broader buyouts? Management changes?
What is on the table?
The answer, Bill Ford said simply: "Everything."
The promised revision to the Way Forward plan comes six months after Ford unveiled the original plan, which a few analysts had criticized for lacking urgency and detail.
The initial turnaround plan spanned six years, through 2012, and promised to idle 14 plants, eliminate 34,000 jobs and take other actions to restore Ford's North American automotive operations to profitability by 2008.
Seven of the remaining plants slated to close have still not been publicly identified.
While Ford didn't suggest that the Way Forward plan would be scrapped in lieu of a new strategy, he said the company was conducting a detailed review of its strategy and would make changes soon.
"Our top priority is to fix our business," Ford said.
The second-quarter results were worse than predicted. Analysts, on average, had expected a profit of about $220 million, excluding charges for buyouts.
More buyouts urged
There is one element of the Way Forward plan that workers and analysts alike would like to see quickly modified.
Several have complained that Ford's buyout program has been offered to workers at only a few plants.
So far, 5,000 workers have taken buyout programs to leave and the company is hoping to shed 12,000 by the end of the year, said Don Leclair, Ford's chief financial officer.
A sweeping program at GM allowed that automaker to cut its UAW labor force by about 35,000.
Analysts and workers eager to leave have been nagging for Ford's buyout program to be extended to all its facilities.
"We would like to see Ford engage in a company-wide attrition program similar to GM's," Himanshu Patel, an automotive analyst at J.P. Morgan, wrote in a note to investors last week.
Mark Fields, the executive vice president charged with turning around Ford's struggling American operations, said the changes to come might include quickening the timetable of some of the Way Forward provisions already announced, but he would not reveal what he was considering.
"We're looking at every element ... which means going potentially further, and faster and deeper than we originally envisioned," Fields said. "If we need to move further and deeper, we will."
The biggest thing Ford could do to improve its outlook and performance is get new, desirable vehicles to market faster.
Last week, Merrill Lynch estimated that, among major automakers, Ford would have the oldest lineup of vehicles in its dealers, with an average vehicle age of 3.5 years. Showroom age is considered a major indicator of market share performance.
Fields has said Ford will significantly freshen its lineup by 2008. But for now, he said: "There's only so fast we can run with our current portfolio."
Revising revival plan
Despite plans to revise Way Forward, Ford executives stood by the plan's framework, pointing to slight improvements in the second quarter.
North American operations, for example, lost $797 million, or $110 million less than the company lost last year, excluding special items such as restructuring charges.
But when looking at the full first half of the year, the North American division lost $1.3 billion, about $1 billion worse than a year ago.
Ford said that his team put together a flexible turnaround plan and that they have been regularly re-evaluating it as market conditions have changed. Now, Ford said, toughening market conditions require a revision.
While Ford executives cited a host of challenges prompting that change -- such as higher commodity costs, sagging consumer confidence and the inability to get buyers to pay more for new cars and trucks -- one of them seems to be hurting more than the others.
Higher gas prices are pushing consumers to shift out of profitable SUVs and pickups into cars and crossovers at a pace that is much faster than Ford seems to have expected.
While Ford car sales are up 5.3% for the year, truck sales look like a sea of negative numbers. Overall sales of pickups, SUVs and vans were down 9.3%.
Lincoln truck sales were down 19.8% overall. Sales of the Ford Explorer and Expedition SUVs both dipped more than 30%.
With conflict raging in the Middle East, it seems unlikely that concerns about rising gas prices will diminish soon.
"I think the products we have coming are absolutely the right ones for this environment," said Bill Ford, referring to new crossovers, such as the Ford Edge and Lincoln MKX, coming to showrooms this year.
Of particular concern to Ford is the impact that the shift away from trucks is having on pickups, as well as SUV and van sales.
Full-size pickups, which industry insiders have long viewed as resistant to gas-price changes, largely because they are work vehicles, seem to be increasingly vulnerable. Full-size pickup sales are down 9.8% industrywide through the first half of the year.
Sales of Ford's F-Series are performing much better, down just 1.9%.
That leaves Ford with a growing piece of a shrinking pie -- and consequences for Ford's bottom line.
Ford is eagerly watching, trying to determine whether pickup buyers are trading in for other types of vehicles or simply deferring their purchases.
"Because we have such a dominant segment share in that, that disproportionately affects our share," Fields said.
Because of the shift away from trucks, Ford also said Thursday that it would cut its third-quarter production to 670,000 vehicles. That's down 58,000 vehicles from a year ago and 40,000 fewer vehicles than Ford previously reported it would build.
"This change from the prior level is more than explained by lower truck production, reflecting our intention to maintain appropriate dealer inventory levels," the company said in a news release.
One analyst, David Healy of Burnham Investment Research, has raised questions about whether Ford will have enough cash to get to 2008, when Ford's lineup reloads.
Leclair assured that Ford, with $23.6 billion on hand, had the resources to get through this rough period.
"We have the capital and the liquidity to pull this off," he said. "We have said all along that we have a plan and if need be, we'll modify that plan. We know what to do."
Contact SARAH A. WEBSTER at swebster@freepress.com (swebster@freepress.com).
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