There is absolutely nothing from which to derive pleasure in the third quarter results at Ford. Every working hour that Ford makes cars, it blows away $2 million.
The biggest worry of all is that all this year, the external observers have been telling Ford that it is in the wrong shape to do what it needs to do; worse still, that it is in the wrong shape to do what it was saying it was going to do. Yet again, its results have been below its own projections, the reasons have been the things that Ford has been ignoring, and the outlook looks no better.
The company complaints are still that there is overcapacity, weak pricing, a shift from SUVs and high labour costs. It’s not as if the world is in a roaring recession. Car demand, as with consumer demand generally, is pretty benign in most major markets. What happens if things get tough?
The real problem seems to be that Bill Ford is loath to make the big move. As one of his tormentors at the results meeting said: “Brokers are telling their clients that GM is more purposeful than Ford. Why is that?” With each quarterly appearance, Bill Ford’s performance deteriorates. Yesterday the “er” quotient was up to one word in five. Add in the “you knows” and as much as 50% of a sentence had become meaningless.
The sign-off this time was: “We are all very much aware of the challenges…there are opportunities…we are poised to capitalise in the months ahead.” There’s a cogent strategy to leave with his audience if ever there was one.
That Bill is behind the game was amply demonstrated by his prep for Q3 analysts’ conference. While GM talked to unions all weekend to get something positive to announce in its Q3 Monday report, Bill had three days longer and still came up with nothing. It was a lame: “We have an idea what our agreement with the UAW might be on healthcare costs but we will not disclose it today.”
It’s tough for Bill. Unlike the boys at GM, he has to walk past the bust of his Pa and Grandpa on the way to work every morning and every fibre in his being must revolt against the task of sinking the knife into the fabric of the heavily loss-making North American auto business. He has postponed the event until at least January when he plans to come up with the results of his review.
Big move time is here. So far the downsizing to compensate for loss of market share and costly labour has been half-hearted. Ford lost an average of $3bn year in both 2001 and 2002 and took action with closures which facilitated a return to profitability in 2003. But the programme stopped, some plants to be closed were reprieved and losses have resumed.
The disposal of marginal plants should never have stopped and the negotiations with labour on benefit packages running as much as six times the level of the peer group should have started at that time.
Seven years ago Ford was a company worth $60 billion. Today it is worth less than a quarter of that. If Bill told Henry’s bust that news on the way to work tomorrow, he would certainly get the nod of approval for tough action.