New York Times: "Is Ford Running on Empty?"
Ford Made the front page of the NY Times Sunday Business Section. Below are some excerpts, and the link to full article is
HERE:
Is Ford Running on Empty?
By
MICHELINE MAYNARD, New York Times, July 16th, 2006, Dearborn, Mich.
William Clay Ford, Jr: “There’s nobody that has more at stake in this company than I do,” he said in a recent interview here. “Not just financially, but emotionally, and historically and everything else.” Mr. Ford’s challenges are extraordinary. His company reported losses of $1.6 billion in North America last year and lost $1.2 billion worldwide in the first quarter this year. On Thursday, Ford halved its quarterly dividend to a nickel to preserve cash, and analysts expect the company to report tepid second-quarter earnings this week. Many are already forecasting a third-quarter loss. With analysts speculating that the dividend cut means that Ford’s fortunes are worsening, Mr. Ford issued a statement noting that “the headwinds we faced at the beginning of 2006 have only become stronger.”
A casual and ebullient man, Mr. Ford personally owns 6.3 million Ford shares, making him the company’s largest individual holder. The extended Ford family as a whole, which reasserted itself five years ago when it led the ouster of Jacques Nasser as chief executive and replaced him with Mr. Ford, owns 40 percent of the company’s super-voting shares. Ever since Mr. Ford assumed Mr. Nasser’s mantle, there have been doubts, some only thinly veiled, among analysts, investors and employees that he has the chops for the job.
BUT while Mr. Ford has partially streamlined Ford’s bureaucracy and become its public face during his tenure, some of his instincts have not born fruit. A devoted environmentalist, he still bowed early on to the wishes of Ford’s entrenched middle managers and senior executives who wanted the company to keep churning out very profitable but gas-guzzling sport utility vehicles and pickup trucks during a period when oil prices were dirt cheap.
Had Mr. Ford produced more fuel-efficient vehicles like hybrids sooner, he not only would have found his company keeping pace with nimble foreign competitors like
Toyota when oil prices spiked, but he also would have been able to illustrate the bottom-line merit of his environmental values. Instead, Ford, is again in the all-too-familiar spot of playing corporate catch-up.
The family’s financial stake in Ford, including nonvoting common stock and a more powerful and separate class of voting shares, is currently worth approximately $460 million, down almost half since Ford celebrated its 100th corporate birthday three years ago; Mr. Ford’s personal stake is worth about $43 million. A combination of financial self-interest and a prized familial legacy makes Mr. Ford’s tasks more personally imperative than they might typically be at other public companies in need of a turnaround — like G.M., for example, whose headquarters Mr. Ford can spy from his office on a clear day.
As Mr. Ford watches G.M. entertain a potentially historic alliance with a French automaker, Renault, and a Japanese automaker, Nissan, he says he will not rule out a similar path for his company, which already has management control of another Japanese auto company, Mazda. But Mr. Ford said he had more pressing concerns. “Regardless of any deal that we might envision,” he said, “the fact is that we have to fix our North American business.” “Mr. Ford bluntly contends that managers stymied him, as both chairman and chief executive, by getting in the way of projects like the Rouge plant and a hybrid version of the
Ford Escape, a small sport utility vehicle. The Escape Hybrid, which Ford began developing in 1998 in response to Toyota’s hybrid plans, languished for nearly six years before reaching the market. Even then, Mr. Ford said, he had to fight with marketing officials who argued that there was no point spending much money on a vehicle that generated sales of only 20,000 units a year, despite its symbolism as the first hybrid from a Detroit car company.
“Ford’s lineup includes two hits: the Mustang and the Fusion, one of three midsized cars that the company rolled out in the last year. Thanks to this pair, Ford’s car sales are up this year even though its overall sales and market share are down from 2005, continuing a decline that began around the start of the decade. Ford’s overreliance on pickup trucks and S.U.V.’s has hurt it. The latest version of the Explorer, long its best-selling sport utility, made its debut last fall just as gas prices began soaring; sales of the vehicle have slumped.
Consumers, meanwhile, are clamoring for fuel-efficient small cars, but in the United States Ford does not sell anything smaller than the Focus, leaving a missing rung at the bottom of its product ladder and another gap in its pro-environment philosophy. To jump-start things, Ford executives say, they have to develop vehicles they can sell without discounts and which buyers will load with expensive options like navigation systems and powerful engines. The Way Forward pins Ford’s hopes on innovation, which Mr. Ford says is exemplified by cars like the Escape Hybrid, the Fusion and the Mustang.
FORD needs to act quickly on its vow to innovate. Toyota blew by
DaimlerChrysler this spring to claim the No. 3 spot in American auto sales. Next in Toyota’s sights is Ford. True innovation, as illustrated by vehicles like Toyota’s popular Prius, is an elusive goal in an industry that typically needs more than three years to bring its cars to life. That may be more time than Mr. Ford has — and he is battling a culture that still clings to some vestiges of its more prosperous past.
“There should be signals,” Mr. Aversa said. “When things go well, you can take your time and plan for the long term. But when things go rough, you have to execute and do things with a sense of urgency.” Last week’s dividend cut may be one such signal, but whether the Way Forward is the plan and Mr. Ford the right executive to carry it out remain topics of debate among analysts. “Either you intensify this plan and look at the whole business model brutally or you get someone else to do the job,” Mr. Casesa said.7/16/2006 10:53:00 AM
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