It has not been much fun covering Ford’s financial results of late to be frank: no world record financial losses; no threat of bankruptcy; no widespread factory closures; no UAW gun to the head; no delinquent subsidiaries; no family of voraciously hungry little brands to feed. Horribly dull.
Go deeper with GlobalData
The only upside was that it was possible to put the pencil away for a while and take a break from it all.
But there has been a development in time for the half-year results announcement this year that takes the breath away and brings out the pencil sharpener. Ford is building cars that people want to buy. That’s something they have not really thought of doing before. How on earth have they found time for that stroke of genius?
There must have been an event within the company some time in the recent past that allowed the change from a succession of dreadful cars to a flow of good ones. But what was it?
It’s two events, really. First was the change from Doolally management to Mulally management. The second was Alan Mulally’s directors’ meeting where one man in the room was finally brave enough to table a problem that needed solving. It was the door-hinge moment. The director admitted that the faulty door hinge was a problem that was his responsibility but had defied solution. Within seconds, remembers Mulally, the room had provided the answers. Suddenly directors were no longer a bunch of squabbling, glory hunters. They had become a team which could focus on and solve any problem. Importantly, they could finally admit they had been wrong on many aspects of product.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataFriday’s results showed many things: production is up but headcount is not; inventories are tight (Ford is struggling to make cars as fast as people want to buy them); costs are up because of commodity cost pressure (steel, copper aluminium in particular) but, because the cars are good, prices are being raised to match rising cost and to protect margin. More content is going in and that is getting paid for by the buyer. Financial reserves have been brought down. They are not needed at the level they used to be because warranty claims are down.
In the old days, Ford preferred to build cars that people didn’t want and then outwit them by offering irresistible incentives. Incentives were down for the corporation as a whole in the first half; up in Europe.
In the old days Ford liked to take on other people’s problems: Jaguar, Land Rover, Mazda, Aston Martin and Volvo. Today it prefers to get rid of its own. Mercury is to be canned and the brands are reduced to two: Ford and Lincoln. Lincoln, the dowager duchess of the world’s premium cars, will get a makeover from the Mercury savings. There will seven new cars within four years.
Debt is down. It is being repaid by dividends from Ford Credit. Ford Credit is doing better on its bad debt because even sub-prime customers like their Fords so much they pay their instalments.
Then the conference call came to an end. “You can now disconnect …” said the facilitator, “…and have a wonderful day.”
Wonderful day? How can we? There’s been no hint of incompetence, failure, or financial delinquency. There can be no good day for us until…well until GM comes up with a date for its half year financial results. Then we can live in hope for a while.
