You have to feel sorry for the Ford boys. They have done a lot of the things they said they would do and are proud of the results, writes Rob Golding.
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But the benefit never reached the bottom line. The consequence was that when Bill and the band got in front of the press and analysts yesterday, they were gradually worn down into sounding defensive rather than upbeat.
Clearly the big problem was always going to be the domestic market in the US where they just cannot build cars fast enough because the shift away from fuel-hungry trucks and SUVs has been seismic.
Compared with a year ago in the second quarter, Ford’s SUV production was down 19%, light trucks down 10% and pickups by 8% while cars were up 14%.
But it still was not a good enough performance to make the financial figures look good. Ford lost both volume and market share and the US$42bn of sales revenue yielded a loss of US$123m. That’s more than a billion dollars worse than it was a year ago.
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By GlobalDataIn the automotive sector alone, losses trebled to US$808m compared with Q2 2005. The home market dumped US$800m and the Premier Auto Group – the Brand of Bothers – dumped US$162m.
There is just no end to the trouble for Jaguar, Volvo, Land Rover and Aston Martin. From the hints dropped they run in that order of naughtiness when it comes to failure to deliver.
Jaguar dropped 10% of its volume in the first half despite the image of the range being much enhanced by superb product launches. Volvo dropped 7% because it is waiting for three new models between now and the end of the year. For a while Volvo had the look of an achiever so it is sad to see the Swede in the naughty boys’ corner as well. Land Rover should do well at the end of the year as new Freelander cuts in. Aston Martin has traded profitably for a little while though it would have to go some to offset the under-achievers given its tiny size.
Bill Ford tried to win acclaim for what had been achieved but there was little conviction in his voice. “There is new candour and urgency in the company; there is intense focus on restructuring.” The buyouts and attrition of labour had made “significant progress.”
The cash position does not look too bad. It was US$23.6m at the end of the quarter which is only down US$1.5bn year on year. The cash left at the end of the year should be US$20bn so although Ford is still living off capital, the outflow could not yet be described as a haemorrhage.
Part of the call for cash of course is redundancy for the guys who are in the factories being shut. That cost US$300m in the quarter. The other big call is funding far too much stock of the wrong product. The big trading obstacles to profit in the quarter has been the unwinding of currency hedges which have been in place for years with reducing benefit, and the vast increase in fuel costs.
That cuts in three ways. Ford uses a lot of gas in the making of cars. Its most profitable products use so much of it that people no longer want to buy them. And household budgets get tighter.
It’s not pretty situation for the profligate users of fuel. Does anyone remember telling them it would be like this?
Rob Golding
See also: US: Ford second quarter loss increases
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