Ford’s The Way Forward started with the old slogan “you can’t cut your way to success” and ended three and a half hours later with shareholder questions about the job cuts and factory closures and a demand to know whether this was anything more than happened every year as matter of course.
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Ford has had a succession of big new initiatives, recovery plans and changes of the guard, and shareholder concern that the latest is nothing other than more of the same is legitimate concern.
Since the eighties, when Ford was a leading supplier in the US and Europe of affordable and well-regarded high-performance machinery, Ford’s dominant position has been slowly eroded by the Japanese and Koreans at the cheap end, and by the German technocrats at the performance and luxury end.
There was the World Car programme that was going to sort out the high fixed costs and didn’t. Then there was the acquisition programme started 15 years ago with Jaguar which was going to solve the lack of perceived quality implied by the blue oval badge. That plan is still costing money not making any.
Then there was the recovery plan of 2002 that didn’t recover anything and last year the forecast of profit recovery for 2006 which hollowed out within a matter of months.
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By GlobalDataNow it’s a confident plan that will complete in 2008 and make all well. Its description led Press and analysts to politely ask questions which in translation meant: “Any particular reason why we should believe you this time?”
“I see the cynical expressions on your faces,” said President of the Americas, Mark Fields, during his presentation. But he had seen the same cynicism before, he said, when he was outlining how Mazda could be rescued and he personally had made that plan work; so no apologies. He had the special recipe and it was going to happen.
The one thing that Ford has never tried, of course, is running the company as a meritocracy rather than as a Ford family hobby. One has to wonder whether the grandson of the founder really can spot a crisis when he sees one when throughout his lifetime FMC has been as constant as the tides. Looked at from the long view, is there ever any such a thing as a storm that can sink this particular ship?
The man who did the most for Ford was the Scottish chairman, Sir Alex Trotman, who wrung a record $7bn profit out of the company in 1997 after generating some component-sharing synergies under the Ford 2000 plan launched two years earlier. The negatives of the plan were the centralisation of power which caused enormous turf wars all over the world.
He had groomed Jacques Nasser to replace him as chairman and CEO. After it became clear that Bill Ford Jr. would become chairman in January 1999 and Nasser would get only the CEO title, the story printed by Fortune was that a bitter Trotman told Bill Ford: “So now you have your monarchy back, Prince William.” Trotman, who died last year, was pretty sure that a third generation of Ford family leadership would be at least one generation too many.
Nasser was a radical and too much for Bill Ford who added the title of CEO to his own duties when Nasser was invited to take the long walk.
The sad truth is that Ford – like GM, its similarly doddery compatriot – is now in unfamiliar territory. Having squandered market positions in the US and Europe it has now also lost the advantage of dominant scale. The starting point of controlling manufacture of 7.6 million units a year in its alliance group (4.6m in Ford US) is being abandoned. Capacity is being cut at 14 plants (some of which will be shut completely) and capacity of 1.2 million (or 26%) will be gone forever to align capacity with market share. That’s a lot of purchasing leverage gone.
Yesterday’s The Way Forward event started with an hour’s webcast on the fourth quarter results, was followed by an hour and a half on the revival plan, and ended with an hour of question and answer from the Press and equity analysts. It wasn’t a disaster; neither was it compelling. What sort of company, capable 10 years ago of making a $7bn profit, leads off its results presentation with the boast: “Profitable in Europe, South America and Asia Pacific for the second year in a row…”? The US was in loss but “for first time since 2001.”
Ford is seeking comfort in small crumbs. It talks about the difficulties of “sudden” oil price rises, of rising raw material prices, of market downturn of intense competition; all this just after the longest period of sustained growth in car demand that there has been. Toyota, which came lately to global positioning, has no such complaints and a growing capital value.
Ford’s plan for the future of US manufacture is a worry. The talk is of building cars in America for Americans who are unlike consumers elsewhere in the world and who have particular requirements.
Does this not sound like myopia all over again? While Ford was concentrating on large cars and light trucks in the US, VW with the Golf and Toyota with the Corolla were busy stealing the position that Ford could well have occupied itself had it just hurried along with the Escort/Focus adaptations for its native market.
There is plenty of chat about new approaches to product and maybe, this time, Ford will get it right. But the downsizing that has been announced out to 2012 – if annualised, sound little different to the 10% annual natural wastage of labour and the annual closure of a couple of obsolete plants.
Granted it would have been hard for Bill Ford to announce much more than he has without frightening the horses, but a small war is what is required in his company rather than a gentle retreat.
Those who enjoy an anagram will like the observation that if you do put a war into Ford you get forward.
Rob Golding
