US:Ford feels the heat from shareholders
Ford feels the heat from shareholders
CEO faces questions about fuel economy, corporate governance and the firm's financial future
Bryce G. Hoffman / The Detroit News
As Ford Motor Co. investors gather Thursday for the company's annual meeting in Wilmington, Del., many are preparing tough questions for Chairman and CEO Bill Ford Jr. about the financial future of a company that continues to disappoint stockholders.
Mark Blair is one of those stockholders. The 65-year-old millwright from Plymouth would like to retire from Ford, but worries about how much his stock has eroded in recent years.
"It's like a gray cloud," Blair said. "That's your future. It's money you've counted on all these years."
Ford's shares have fallen 28 percent this year and closed at $7.17 Tuesday. The stock topped $30 a share in 2001 and has dropped steadily since, burning through more than $45 billion in shareholder value. The market value of Ford's outstanding shares is about $14.3 billion, compared with $200 billion for Toyota Motor Corp.
More troubles have erupted in the last year, to the dismay of Ford shareholders. High gas prices have hurt demand for the Ford Explorer and other large SUVs, crimping profits.
Squeezed by rivals and a slump in sales, and facing mounting U.S. automotive losses, Ford has launched another sweeping restructuring plan for North America that calls for shuttering 14 plants and eliminating some 30,000 factory jobs by 2012. The company has identified seven of the plants and has begun offering buyout packages to thousands of workers. But Wall Street remains largely unimpressed.
Bradley Rubin, a credit analyst with BNP Paribas in New York, said it is a question of speed. General Motors Corp., he contends, is pursuing a similar cost-cutting strategy, but is on track to complete its restructuring much faster.
"GM is going to be done -- theoretically -- four years before Ford," Rubin said. "That's a huge gap."
While Ford is offering buyouts only at certain factories, GM is offering them to every one of its factory workers.
It also plans to close more plants sooner. In a regulatory filing Tuesday, Ford said half of its planned plant closures will not come until after 2009.
GM also has been more aggressive in its negotiations with the United Auto Workers. Earlier this year, GM won health care concessions from the union worth $15 billion. Ford, with fewer workers and retirees, negotiated a similar deal worth $5 billion.
"(Ford is) too worried about upsetting the UAW," Rubin said. "It seems like GM is addressing their problems better."
But Ford has done one thing that GM is still reluctant to do.
"While our plan is certainly a long-term plan, it also has a very near-term objective of achieving profitability for our North American automotive operations no later than 2008," said Ford spokesman Oscar Suris.
GM has set no such target for its return to profitability. Then again, Ford is the same company that promised in 2002 to deliver $7 billion in pre-tax profits by mid-decade -- a mark it has clearly missed.
Ford has another advantage in its balance sheet. Unlike GM, Ford was profitable last year. Though Ford's North American automotive operations lost $1.6 billion last year, the company as a whole made $2 billion in 2005. Most analysts expect that trend to continue, albeit with less room to spare. Ford lost $1.2 billion in the first quarter.
"The company has a tremendous amount of financial resiliency," said Glenn Reynolds, a debt analyst with CreditSights Ltd. in New York. "(Ford) has room to restructure and buy down costs using its balance sheet liquidity, and the company in the end will take all measures to avoid a financial crisis given the family stake."
Not everyone on Wall Street is so sure. While Bill Ford denies that bankruptcy is even a possibility, J.P. Morgan published an report on April 24 showing the credit market has set the probability of Ford defaulting on its bonds within three years at 43 percent.
While the Ford's family's controlling stake in the automaker gives Bill Ford more job security than other CEOs, namely GM's Rick Wagoner, he nonetheless is under tremendous pressure. Given the persistent market share and stock declines, Bill Ford increasingly faces questions about his leadership and his commitment to turning around the automaker founded by his great-grandfather.
Bill Ford recently took on more responsibility for managing the day-to-day operations of the company following the departure of President and Chief Operating Officer Jim Padilla last month. In a conference call with analysts and reporters on April 21, he tried to dispel any doubts about his position.
"My commitment today to you, to every employee, to every shareholder, and to every customer is that we will define our own destiny and reassert ourselves in the industry that we practically invented," Bill Ford said. "Three months in, we are in the very early stage of this strategy to transform the way we do business down to its very core. This transformation isn't going to be quick and it isn't going to be painless. It will involve risks -- and the financial rewards will not be immediate. But in the end, I believe we'll get there."
Ford had said these restructuring moves would cost $3.4 billion in 2006. In its filing Tuesday, the company reduced that figure to $3.3 billion, saying that $100 million would be spread out over the next 12 years to comply with federal accounting requirements.
Ford's restructuring plan is not just about idling factories and cutting its work force. Led by Executive Vice President Mark Fields, Ford has launched a new marketing campaign designed to show the American consumer just how much is changing in Dearborn. Internally, it has begun tearing down bureaucratic barriers to progress that some insiders say are at the heart of the company's woes. And Ford has rededicated itself to producing more compelling vehicles, like the popular Ford Fusion sedan.
Sales of the Fusion and its siblings, the Mercury Milan and Lincoln Zephyr, have exceeded expectations. But analysts remain worried about Ford's more profitable sport utility vehicles.
The fact that Ford's SUV sales have fallen dramatically over the past year is less cause for concern in Dearborn because company executives anticipated the shift. They believe rising oil prices will continue to undermine demand for the big vehicles, so they are focusing on more fuel-efficient cars and car-based crossover utility vehicles to be more in synch with demand.
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.....