On Monday, Ford announced sweeping changes to its business model. Dubbed "Black Monday" by the UAW Ford cut wide and deep. They axed 14 plants and 25K workers and 4K "white collar" workers from the payroll. Bill Ford Jr. (current Ford Scion) made the case in plain English to all who were listening: the old Ford was broken and he was going to fix it. No longer would Ford build cars based on capacity availability, it would build cars based on what the customer wanted. What a novel concept.
One can hardly blame Ford for making the changes. North American operations lost over $l.4 Billion last year alone. The company's cost structure has spiraled out of control and is only getting worse. Onerous contracts with the UAW (agreed to by previous Ford managment I might add) have handcuffed the company's ability to be nimble in the everchanging auto market. In the end it was "rip the bandage off" time at Ford and Bill was just the guy to do the pullin'.
So where does this leave Ford now? The rank and file response to Ford's plan is positive but of course it would be when a company with a bloated cost structure hacks off a significant chunk of SG&A. However, a company cannot cut its way to success. Even Jr. mentioned that in his speech to the press.
The bottomline is Ford is losing for the same reasons any company loses in a marketplace: complacency. Ford's problems stem from poor designs and hooking its wagon to SUVs and trucks. They made no attempt to manage their risk against rising gasoline prices. And, most importantly, they stopped listening to their customers.
Can they rebound? Of course they can. And, most importantly, management will have time to do so. The Ford family controls this company and Bill and his cronies are going nowhere. They can ride this long term plan out and not worry at all about losing his job. In effect, if Ford is the right guy to turn around the company (and many feel he is) he will get it done.
Hawk's View: Personally, I'm not a Ford fan. I've never liked their designs and found their cars to be somewhat staid (the Mustang notwithstanding). However, I actually think Ford Jr. can turn it around. As stated before, unlike GM he's the man in charge and is going to be there as long as he wants. This might be bad if Ford Jr. was a lightweight but I don't think he is. As a result, The Hawk thinks Bill Ford's Way Forward Plan will rebound the company and probably make great granddad proud.
Author's Note: If interested in reading more about the auto industry, click on the link in the title of this article. It will take you to Forbes.com and to Jerry Flint. Mr. Flint has been covering the auto industry since the Model T (OK, not really but close). His contacts and insight are second to none. Enjoy.
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