Ford and TexasFord, the company that single handedly created the modern mass-produced automobile, and relied heavily on pickup sales in Texas, is in desperate straits. Burning cash at about $3 billion a quarter, with an incredible loss of $12.7 billion for 2006, the company struggles to come to grips with its own contradictions. Everyone who can jump ship, is. All hourly employees have been offered buyouts, and thousands have accepted. White collar employees have endured a series of purges, thinning out executive and engineering talent. Even longtime Ford NASCAR driver Mark Martin has joined the list of top drivers who switched teams. Ford Motor Company (FMC) has been through periodic crises before. Something always came along to save it, and the company learned to rely on the occasional breakthrough product, or economic upturn, without changing the way it operated. All in the FamilyThe key to understanding Ford is the Ford family influence. 100-year-old industrial companies still surviving under founding family dynasty control are very scarce. Ford family interests have always dominated the now troubled marque. Key points; The family owns only about 5% of the stock, but controls 40% of voting shares thru special Class B preferred stock created in 1956. This defensive capital structure insulated Ford family interests. As a result, corporate governance issues crippled the company. Although family control was formally surrendered with the 2006 hiring of Alan Mulally as CEO, William Clay Ford continues as chairman, representing family interests. Ford's insular corporate culture rewards lifers, and resists outsiders. This conservative careerist environment is manifested in the product. In 2006 Ford terminated the Taurus, once its best-seller, and closed the factory, one of the best. The Taurus decision typified the product development confusion, toward the end it sold only to fleets. All my life Ford has been the dominant brand in the U.S. It outsold, and often outran, rival marque Chevy. As recently as the late ‘90s, Ford had five of the top-10 sellers in America. In 2006 Ford sales fell 8% to 2.9 million. Toyota closed in on the the number two sales rank without breaking stride. FMC market share may fall as low as 14%. Ford market share even fell below Chrysler's in the opening months of 2007. US profitability is generated in high margin but fuel sensitive sectors: pickups and SUVs. F-series pickups, the main cash cow, are targeted by rivals as never before. There is a big new Toyota plant in San Antonio: "Godzilla, having conquered Japan, invades Texas." Like the other Detroit dinosaurs, Ford's "legacy" health care and retirement costs, and union wages, add thousands to the price of their product. Searching for a SolutionFord Motor has too many brands, acquisitions from better days now burden the name. Rate of model replacement, a key indicator in the auto industry, is hampered by so much different source material. The company's suffering premier brands need to go; Lincoln, Mercury, Volvo, Jaguar, and Land Rover. What corporation will buy them? Recently making the rounds as a suitor, Renault-Nissan has stumbled and may be out of the game. Daimler-Chrysler has a bad case of indigestion. Would Toyota, perhaps eyeing GM, want this stuff? Texas retail buyers should be aware that these tarnished brands may be changing hands. There is more than just talk of consolidating Lincoln-Mercury dealerships with existing Ford outlets. The union (UAW) should take a look at what is left of the once union-dominated US trucking and steel industries, and make concessions. You Can Call Me AlNew CEO and President Alan Mulally, an outsider from Boeing, faces a monumental task. Downsizing the struggling company without a serious brain-drain will be impossible. Key personnel, dealers, and suppliers are already looking elsewhere. When Lee S. Iacocca took on the job of saving bankrupt Chrysler, he insisted on the chairmanship of the board as well as the chief executive title. Without the chairmanship, Mulally remains as handicapped as every executive predecessor at the company with the family name. Having secured $23 billion in financing, with plants and other assets used as collateral, Ford is "burning the furniture to stay warm." While downsizing, FMC must create new cars that people want, not the overweight barges (trucks and truck based SUVs) the company wants to build. Incentives and massive ad budgets pushing soft product are ways of the past. Redoing the aging Focus and Five Hundred models is a key project, these, and the Edge crossover must succeed if Ford is to survive. In the J.D. Power and Associates 2006 Customer Retention Study, Fords ranked a respectable 9th out of 37 makes. 53.3% of those surveyed returned to purchase another vehicle. Lincoln and Mercury listed at 25th and 31st. In my opinion, repeat buyers are the strongest indicator of overall quality. Is Ford Still the "Best in Texas?"The biggest problem for Texans thinking of another Ford is the shrinking dealer network. Ford's 3,700 dealers averaged around 700 vehicles in 2006. This is falling toward the lower 600's in 2007, still enough to ensure the network survives, but many will fold. Over-dense Ford dealers are hurting everywhere, the network cannot collapse quickly enough. About 300 Ford and Lincoln-Mercury will disappear by the end of 2007. Ford plans to eliminate at least 600 more during the next few years. Fewer dealers selling more vehicles will generate cash to pay for improvements. In my hometown of Elgin, TX, the dealer who sold me my 2000 Ranger moved out. No new tenant was found, so after a year the empty dealership was torn down, leaving just the concrete slab foundation. Do Texas Ford buyers have to fear the company will disappear? It seems probable that the US auto industry will follow the steel industry model; bankruptcy to clean out unions, suppliers, and creditors, followed by Wall Street shuffling of fire sale assets for big gains (i.e. under-priced sale of Hertz), while Fords remain on the market.
Can Texans still buy Fords? Yes, but check out your dealer carefully for signs of financial weakness. Dealerships not moving cars must resort to other revenue sources to stay alive: remember the texas-cars-and-dealerships.com adage - "approach the dealer through the service entrance." Look for deep discounts on slow selling products. News-Blog updates for Ford12/17/07 Jag and Land Rover Deal: Tata of India 11/08/07 Good News: Ford Reports $380M 3rd Quarter Loss 11/04/07 Ford Folds, Cuts Quick Contract Deal with UAW 10/27/07 UAW Rank and File Approves Chrysler Contract, Ford Next Ford Product ReviewsFord Mustang: Introduction to the Pony Car 2008 Ford Mustang V-6 Deluxe Coupe Review 1999 Ford Mustang Used Car Buyer's Guide Ford Dealer ProfilesHelfman Ford HoustonChampion Ford Gulf Freeway Houston End Ford Review, goto Sitemap
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