When the slide show stopped running at the Ford 2004 financial results conference in Dearborn yesterday, and the questions from analysts and media began, you really could have thought that you had stumbled into either a Jaguar presentation or a Visteon creditors meeting, writes Rob Golding.
They were the two matters that consumed the greater part of the time allocated for interrogation of Ford’s financial hierarchy as they reached the end of the good-in-parts review of a tricky year.
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The Premier Auto Group (Ford’s subsidiary and parent to Jaguar) bombed in the fourth quarter – much against what Ford itself expected at the end of September. It managed to lose $740 – or $1,000 on every $20,000 car sold. Was that all Jaguar? No said Ford, but conceded that Volvo was “doing well”, Land Rover had terrific new products and that Jaguar was going to be good “in the longer term”. When was PAG going to be in profit? That one was parried with: “we will do that on Tuesday” – a reference to a routine business briefing for analysts and journalists next week.
We shall see.
Visteon – the huge component company spun off from Ford and given a separate stock exchange listing – became embroiled in the observers’ hunt for a disaster story, when Ford showed a really substantial provision in the accounts. “Our view is that Visteon has some structural and strategic changes to make. We concluded that our receivable (about $850m) was something that we should reserve for ($600m).” The majority of the debt is thought unlikely to be paid and is therefore effectively being written off, conceded chief financial officer, Don Leclair. The charge stems from Ford’s concern about Visteon’s ability to reimburse it for health and life insurance benefits for thousands of Ford employees who still work at the parts maker.
Underneath the tough stuff was a moment of celebration for Ford of Europe. Not a big celebration and no more than a margin of half of one per cent. But a profit of $114m is a turnaround of a billion dollars on last year and the first for FoE for eight years.
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By GlobalDataAs with GM, who produced its full year results the previous day – the emphasis of the potential to improve financial performance next year is all about product. Ford is particularly cocky about the new Focus in Europe. The memorable quote from Leclair was that Ford market share was up in Europe (though barely measurably so) and that the Focus was going to generate both “extra volume and extra margin” this year compared with last year.
It was the legendary Bob Lutz, now in his 73rd year and head lad in charge of product development at GM, who said that the tide was turning for GM. No matter that Ford is getting back into its stride; no matter that the Asian imports are growing market share and participation in various new SUV niches; his good stuff is coming down the chute and all will be well.
In an interview with the FT from the Detroit show a week ago he said that GM’s new model programmes were “finally coming right”.
He said that there was still a gap in the small sports utility range that they must fill but that with a new global design and engineering structure in place the company could actually respond to product demand changes and produce the goods.
What that means of course is that if everyone is making “much better cars” simultaneously rather than the ho-hum stuff of yesteryear, it’s going to get even harder for anyone to forecast winners and losers among the producers.
Despite the bullishness on product from the domestic players in the US, it actually remains the case that profitability will be more a function of the continuing crisis over pensions and healthcare. And the potential for getting better profit this year than last also depends heavily on being able to find a substitute profit generator for the record credit and finance division surpluses of last year.
– Rob Golding
