AFSCME 3357-HOF'S BLOG

Ford's Bad News Day:
New Small Car Strategy announced along with $8.7 Billion 2nd Q. Loss

Last week Ford prepared the markets for bad news in its second quarter 2008 financial statements. Today the figures were released. The bottom line figure is a $8.7 billion quarterly loss. Most of that is an accounting adjustment for written down assets; however, most troubling is the disclosure that Ford's cash on hand went dropped $10.8 billion from this time last year to $26.6 billion total. This 28.8% cash drop is after Ford mortgaged most of its assets to build the cash hoard in the first place. It sets up a race against time for Ford to get new models out and make them successful before the cash runs out.

Ford's North American operations lost $1.3 billion, for the quarter, about double what the European division posted as profit. Speaking of Ford Europe, the biggest product news is that Ford is planning on building a number of European models in the US, converting three truck plants to do so. This is a strategy that armchair pundits (including me) have been advocating for years. In fact, it is the presence of a ready-to-go line-up of efficient cars that gives Ford the best chance of the Detroit 3 to survive over the longer term. Here's the product information as quoted from autonews.com.

The company also reconfirmed that it will:

• Add the European Transit Connect small van to the North American lineup in mid-2009.

• Add a new Lincoln seven-passenger crossover. It will arrive in 2009, Ford said today.

• Add the European Ford Fiesta in sedan and five-door hatchback versions in early 2010.

• Switch over to a new European Ford Focus in sedan and five-door hatchback versions in 2010.

• Build a unibody version of the next-generation Ford Explorer. It will arrive in 2010 and improve fuel economy by up to 25 percent.

Note that none of these products will be available before 2009. Ford doesn't say it will build the Transit Connect in the US. If you read between the lines, the Lincoln 7-passenger crossover will likely be a rebadged and gussied up Ford Flex, which in its second month in the showrooms is already setting the world on fire - NOT. Ford cancelled the planned 3rd shift at the plant that makes the Flex and the Edge. The European Fiesta and Focus should be hits based upon current reviews; however it remains to be seen if Ford can make sell them profitably over here. There was no announcement about some lauded European models that I would like to see here, the Mondeo, Cmax, and Galaxy. (The new Mazda6 is closely related to the Mondeo, and it should be here in a month or two.) Ford's major new products in the meantime include a redone F-150, a made-over Fusion/Milan, and not much else.

Mr. Ranger is hardier than the average bear. The old man of Ford's line-up, the Ranger small pick-up has cheated death more times than Indiana Jones. Since Ranger sales are only down 3% this year, despite no significant updates since 2001, Ford has decided to keep the Ranger at least through 2011. In so doing, Ford granted a stay of execution to the St. Paul, Minnesota plant that builds the Ranger.

To save cash, Ford is putting together a buy-out package for many of the unionized employees in Michigan and Ohio. The Ohio cuts especially will likely result in a reduction of the membership of our AFSCME Local 3357.

Primary Source: Autonews.com (free registration required)