| Sportymonk |
Thought we ought to be fair and let Ford have their time in the sun (or trashpile).
From USA Today - http://www.usatoday.com/money/autos...thur-usat_x.htm
What will troubled Ford do?
Updated 8/3/2006 10:06 AM ET
By James R. Healey, Sharon Silke Carty and Chris Woodyard, USA TODAY
A flurry of developments at Ford Motor makes the company seem in even worse shape than bigger rival General Motors.
The latest: Ford (F) reported in a filing with the Securities and Exchange Commission late Wednesday afternoon that it lost more money in the second quarter than it previously reported — $254 million instead of $123 million. Ford said it had changed its estimate of pension-related costs.
That brought the automaker's losses for the first half to $1.4 billion, vs. a first-half profit last year of $2.1 billion.
GM (GM), by contrast, reported a net loss of $3.0 billion the first half, but — delighting Wall Street — said it made an operating profit of $1.2 billion the second quarter if the big costs of employee buyouts and other restructuring costs were set aside.
Ford also said in the SEC filing that its Premier Automotive Group — Jaguar, Volvo, Land Rover and Aston Martin — would lose money this year instead of breaking even, as previously forecast.
Jaguar, puzzlingly, is the drag.
"The past 10 years we've seen growth in the luxury and premium market. Growth in sports cars, different kinds of niche vehicles. Vehicles that appeal to people that have extra money. While all these other companies have been exploding, Jaguar has gone nowhere," says George Magliano, an analyst with Global Insight.
Earlier Wednesday, Ford announced hiring former Goldman Sachs banker Kenneth Leet as a strategic adviser to CEO Bill Ford.
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Ford's announcement said that "Leet will report directly to Bill Ford and work closely with senior management in exploring a broad range of strategic alternatives for the company." Talks with Leet had been going on about two weeks, Ford said.
Ford Motor, founded by Henry Ford, still is controlled by the Ford family. "Having people from the outside can help," says Stefano Aversa, COO of AlixPartners, an international turnaround consulting firm based in Michigan. "It is more difficult for a family business to achieve a turnaround," he says, because the family is personally involved, not professionally detached.
Ford spokesman Tom Hoyt pointed out that in a question-and-answer session July 20 after Ford announced second-quarter earnings, Bill Ford said "all aspects of the business are on the table." However, Hoyt said, Ford also said the company had no plans to sell any of its brands or the profit-making Ford Motor Credit financing arm.
A report Wednesday in The Wall Street Journal, relying on unnamed sources, said that Leet would specifically look at selling Jaguar and Ford Motor Credit and forming alliances with other companies to cut costs. A source with knowledge of Ford's talks with Leet, but who didn't want to be identified because details weren't being released, confirmed that report to USA TODAY.
"It's a very dark moment for Ford," crisis-management expert Gerald Meyers said. "I'm sure they're considering thoughts that have never occurred to them before. I wouldn't be surprised if Ford did something radical."
Bill Ford has said bankruptcy is not an option, but Burnham Securities analyst David Healy says he thinks Ford is headed for a bankruptcy filing within five years. He predicts the company will burn up $7 billion this year and up to $9 billion next year. It has $23 billion cash, including its health care fund.
Meyers, CEO of struggling American Motors when Chrysler bought it in 1987, thinks Ford should go private: "The stock is cheap. It wouldn't take much to buy all the (shares the Ford family doesn't own). Then they could repair to their inner sanctum and work out their problems out of the glare of the press and the SEC," and without relentless demands for short-term profits from shareholders.
"Radical times call for radical solutions," Meyers says.
"I would never say never, but I think chances are pretty slim," because the family wouldn't want to come up with the money to buy all the shares, says John Murphy, auto industry analyst for Merrill Lynch.
It would cost about $13.3 billion to buy all 1.9 billion outstanding Ford shares at Wednesday's closing price of $6.96. That was up 38 cents on news of Leet's hiring.
Even though Wall Street cheered Ford's hiring of Leet, the move can be seen "as bordering on a desperate measure to restructure, and an acknowledgement that some of the previous restructurings haven't worked," says Bill Schwartz of TBM Consulting, which advises automakers and others on production and strategy.
Also Wednesday, Ford tried to blunt an unveiling of redesigned 2007 GM pickups by announcing price cuts of up to $1,400 on its F-150 pickup and a boost in towing capacity to as much as 10,500 pounds.
Ford's F-Series pickups remain the best-selling vehicles in America, but sales are collapsing — down 45.6% in July from a year earlier, according to Autodata, and off 12.3% the first seven months.
Year-ago sales were inflated by extraordinarily generous sales incentives. "But for whatever reason, if your F-150 sales are off 40%, that's a stark number, like losing a member of your family," Meyers notes.
GM's full-size pickup sales are sagging, too, in their last year before the redone 2007 models are launched this fall, but GM's haven't fallen as far as sales of Ford's newer-design F-Series.
The news flurry Wednesday comes after a shocking monthly sales report Tuesday. Toyota outsold Ford Motor last month, taking over the No. 2 spot in U.S. new vehicle sales. Toyota itself said that probably won't last, but it shows Ford's vulnerability.
GM, despite a sales slump, remains comfortably ahead of Ford and Toyota.
Ford, overall, is in worse shape than GM, says Global Insight's Magliano. Both have high labor and health care costs, and both are losing market share as consumers increasingly turn toward more fuel-efficient cars and trucks. But Ford's future product lineup looks less promising, he says.
The F-Series was the only Ford among the 10 best-sellers last month. GM had four vehicles in the top 10: Chevrolet and GMC full-size pickups and Chevy Impala and Cobalt sedans.
Says Merrill Lynch's Murphy: "Fundamentally, Ford is in pretty tough shape.
"I think everything is pretty much on the table at Ford right now." |
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| N_Jay |
quote:
Originally posted by Sportymonk
. . . . .
GM, despite a sales slump, remains comfortably ahead of Ford and Toyota.
. . . . ..
Anyone can sell a lot when you are losing money!
I hate industries that measure on volume, it makes management make bad decisions! |
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| ramirami |
quote:
Originally posted by N_Jay
Anyone can sell a lot when you are losing money!
I hate industries that measure on volume, it makes management make bad decisions!
except when you are trying to win customers back... if you have a great product then it makes sence to give it cheap....
but they dont have a great product do they :rolleyes: |
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| N_Jay |
quote:
Originally posted by ramirami
except when you are trying to win customers back... if you have a great product then it makes sense to give it cheap....
but they don't have a great product do they :rolleyes:
If you have a great product you don't have to win customers on price.
If you have to lose money to sell your "great product", then you are lying to yourself about just how great the product is!:eek: |
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| 5Gs |
quote:
Originally posted by N_Jay
If you have a great product you don't have to win customers on price.
If you have to lose money to sell your "great product", then you are lying to yourself about just how great the product is!:eek:
but sometimes people don't know if you have a great product or not (not that I'm saying their cars are anywhere near great products). so you may have to lose money initially on the product, and then get it back later (by selling more at regular price). |
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| ramirami |
quote:
Originally posted by 5Gs
but sometimes people don't know if you have a great product or not (not that I'm saying their cars are anywhere near great products). so you may have to lose money initially on the product, and then get it back later (by selling more at regular price).
yup!! |
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| N_Jay |
quote:
Originally posted by 5Gs
but sometimes people don't know if you have a great product or not (not that I'm saying their cars are anywhere near great products). so you may have to lose money initially on the product, and then get it back later (by selling more at regular price).
Not in my book.
If you drop the price initially you will establish a lower perceived value for your product that will be very hard to change.
You are better off taking the same value loss by selling it targeted to lower profit segments that are well aligned with your product attributes (early adopters or your differentiating features).
You can recover the profits later by maintaining the price as your costs are reduced when volume increases. |
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| N_Jay |
quote:
Originally posted by ramirami
yup!!
Many a great company has lost money on that "Yup!" |
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| ramirami |
quote:
Originally posted by N_Jay
Not in my book.
If you drop the price initially you will establish a lower perceived value for your product that will be very hard to change.
You are better off taking the same value loss by selling it targeted to lower profit segments that are well aligned with your product attributes (early adopters or your differentiating features).
You can recover the profits later by maintaining the price as your costs are reduced when volume increases.
perceived value can be gradually increased... case in point Hyundai... |
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| Sportymonk |
I have noticed that most of the ads for GM deal with great deals or low price. I don't want a cheap vehicle, I want a good vehicle at a fair price. Can't comment on Ford ads. "Come on baby beep my beep" and "do what I want to do" (As he shakes his finger in my face!
Why don't they tell us how much room they have compared to others and how much power, etc. Tell us why their car is better. Never mind, now I see why they shake their finger in my face and tell me how cheap their car is!:eek: |
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| N_Jay |
quote:
Originally posted by ramirami
perceived value can be gradually increased... case in point Hyundai...
That works well (and has been used often) by new market entrants whoes differentiator is their low price (based on low production costs).
They DO NOT lose money during their market growth stage.
See;
"The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market"
"Good to Great: Why Some Companies Make the Leap...and Others Don't"
"The Innovator's Dilemma When New Technologies Cause Great Firms to Fail"
And, although not directly applicable, there are lessons to be learned from;
"Crossing the Chasm" |
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| 5Gs |
quote:
Originally posted by N_Jay
Not in my book.
If you drop the price initially you will establish a lower perceived value for your product that will be very hard to change.
You are better off taking the same value loss by selling it targeted to lower profit segments that are well aligned with your product attributes (early adopters or your differentiating features).
You can recover the profits later by maintaining the price as your costs are reduced when volume increases.
so first you hate the industry that measures on volume, but now that's what will return a profit. interesting... |
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| 5Gs |
quote:
Originally posted by N_Jay
Many a great company has lost money on that "Yup!"
and many companies have gained money. works both ways. for example, the local jamba juice gives out coupons for their new drinks (that customers may not pay to try). it's free. they lose money on every one they give away. after people have had a chance to try them, and like them, jamba juice makes a profit selling them at regular price. the local starbucks does this too. I know drinks are not cars, and the economics behind them are greatly different, but I'm just pointing out a business model. |
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| N_Jay |
quote:
Originally posted by 5Gs
so first you hate the industry that measures on volume, but now that's what will return a profit. interesting...
Don't measure yourself on volume, measure on profit.
The fact that a profitable product becomes more profitable with volume has lulled some into the false belief (myth) that any product will become profitable with enough volume. |
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| N_Jay |
quote:
Originally posted by 5Gs
and many companies have gained money. works both ways. for example, the local jamba juice gives out coupons for their new drinks (that customers may not pay to try). it's free. they lose money on every one they give away. after people have had a chance to try them, and like them, jamba juice makes a profit selling them at regular price. the local starbucks does this too. I know drinks are not cars, and the economics behind them are greatly different, but I'm just pointing out a business model.
A free sample of a product to introduce a new user is VERY different from a discount that will affect the long term selling price.
If I give away 1 to sell 10 at full price, then I sell another 10, I am ahead of the game.
If I discount the first 10, 10% each to sell them, I am likely to have to discount the next 10 also to keep them selling.
Look at what happened with GM and their rebates and other discount programs.
Sales plummeted as soon as the discount was no longer available. |
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| 5Gs |
quote:
Originally posted by N_Jay
A free sample of a product to introduce a new user is VERY different from a discount that will affect the long term selling price.
If I give away 1 to sell 10 at full price, then I sell another 10, I am ahead of the game.
If I discount the first 10, 10% each to sell them, I am likely to have to discount the next 10 also to keep them selling.
Look at what happened with GM and their rebates and other discount programs.
Sales plummeted as soon as the discount was no longer available.
ah yes, but discount programs do work too. honda has discounts and/or rebates, but they're not suffering. works both ways. sounds like the problem here is not the business model, but as ramirami pointed out, the product itself. |
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| N_Jay |
quote:
Originally posted by 5Gs
ah yes, but discount programs do work too. honda has discounts and/or rebates, but they're not suffering. works both ways. sounds like the problem here is not the business model, but as ramirami pointed out, the product itself.
Yes, but they only discount and rebate towards the end of the model year/cycle. They (as us early buyers have found out) been very tight with pricing at the beginning of the model year, and with most "popular" models.
As for the problem, it is both product and process.
They are intertwined. |
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| Sportymonk |
Forbes
http://www.forbes.com/2006/08/10/fo...utos_newsletter
Ford bought Jaguar in 1990 for $2.5 billion. Add to that amount the billions spent in rebuilding Jaguar factories, in engineering new models, in covering 15 years of losses, and the money Ford could have earned by putting all that money in the bank instead of spending it on Jaguar. I figure Ford has about $10 billion tied up in this nameplate.
Hey, there's an idea! Sell Ford and put the money in a bank. At least they would make money. |
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