Ford Motor Co. marks one year with a Ford at the helm
October 30, 2002
By JOHN PORRETTO
Two weeks ago, Ford Motor Co. posted third-quarter earnings that topped Wall Street estimates, yet the positive note was overshadowed by concerns about profits and pension-fund deficits.
Last week, chairman and chief executive Bill Ford Jr. traveled to New York and Boston, meeting with investment professionals and talking up the automaker's ongoing turnaround. By week's end, Standard & Poor's had lowered its credit rating for the world's second-largest automaker, citing concerns about the restructuring that Ford was so busy touting.
It was a year ago Wednesday that Bill Ford Jr. took control of the troubled company founded by his great-grandfather 99 years ago, and the past couple of weeks could serve as a microcosm for the entire 12 months.
Ford himself best described the period in a recent newspaper interview: brutal.
"The company was in such bad shape when he took over it was going to take more than just a new figurehead," said Mike Wall, an analyst with Grand Rapids-based IRN Inc., an automotive forecasting and research firm.
"The financials were bad enough that they're still having to fight off a bunch of issues," Wall said. "People are concerned about pension funds, the way incentives are affecting the bottom line and reports of Jaguar losing $500 million. He had a long way to go -- and still does."
After dismissing CEO Jacques Nasser on Oct. 29, 2001, Ford stepped in the next day and made it clear he would bring more to the table than just the Ford family name. He told employees he bled Ford blue, and his aim was to emerge from the red.
Aside from his pedigree, the 45-year-old Ford had a 22-year work history at the company, and he wasted little time on a turnaround.
In January, Ford laid out a restructuring plan that called for eliminating 35,000 jobs -- 10 percent of the company's work force -- closing five plants and eliminating four models.
The new CEO also said he wanted to improve profits by $9 billion by mid-decade. Ford lost more than $5 billion in 2001.
After reporting third quarter earnings earlier this month, Ford officials said they were on track to reduce non-product costs by $2 billion this year and $3 billion in material and others costs by mid-decade.
Still, analysts questioned whether the cost-cutting measures were enough. Ford responded last week saying the company would slash another $1 billion in costs.
The news sent Ford stock soaring to its largest one-day percentage gain in some 10 years, but generally the shares -- along with others in the auto sector -- have been battered on concerns about industry growth and the overall economic picture.
Ford shares lost ground again Tuesday, falling 43 cents, or 4.9 percent, to close at $8.35 on the New York Stock Exchange.
Other worries for investors: $162 billion in debt as of Sept. 30, U.S. pension plans that are underfunded by $6.5 billion, ongoing incentives that continue to squeeze profits and declining market share.
IRN's Wall said he believes Ford's long-term prospects are hampered by a limited new product offering in the next couple of years. Wall said a new F-Series truck and minivan were among a slim lineup that could use a hot-selling car to compete with GM and Chrysler, among others.
"The only way they're going to get themselves out of this is going to be product," Wall said. "If they want high volume to replace the Taurus, they better get something out there."
When S&P lowered Ford's credit rating on Friday, the same as it did to GM on Oct. 16, it cited concerns about the "adequacy" of the restructuring effort.
Within hours, Ford vice chairman and chief financial officer Allan Gilmour responded by saying the downgrade did not reflect the "fundamental strength" of the company's business and reiterated that the revitalization plan was on track.
Gilmour said the automaker had nearly $26 billion in gross cash and less than $1 billion in debt coming due within five years.
David Healy, an analyst with Burnham Securities Inc., said the company seemed to be making good progress getting "its eye back on the ball as far as quality and product are concerned."
Many observers said Nasser had become distracted from the company's core automotive business by the Firestone tire controversy and lawsuits against the automaker.
"I think Bill Ford has succeeded in settling down management and improving morale," Healy said. "He's become an articulate spokesman for the company as it gets back to basics, and that's what it's going to take.
"How profitable they're going to be when the turnaround is complete will depend on industry sales and pricing -- things that are pretty much beyond their control."
My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.
My next Ford.....