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Ford Accelerates Product Plan Toward Recovery

Posted by: David Kiley on August 6, 2009

TRAVERSE CITY, MI—Ford Motor Co. Thursday gave new guidance to analysts and the media about its intentions to restructure its product lineup and costs in order to make a profit.

The automaker says that it will replace or refresh 70% to 90% of its vehicle lineup, based on sales volume, worldwide by 2012. That level rises to 140% to 160% by 2014, said chief financial officer Lewis Booth.

Moreover, as Ford unifies its products worldwide, it says its plan calls for producing 680,000 vehicles worldwide per vehicle platform, up from 345,000 today. What does that mean? Ford, for example, today sells a Ford Fusion mid-sized sedan in the U.S. and a Mondeo mid-sized sedan in Europe, but on two different vehicle platforms. That creates much higher cost and waste. Ford is building the next generations of those cars together, and they will virtually the same worldwide. That new system is applied to the new global Focus, Fiesta and some new models that have not yet been introduced.

Deutsche Bank auto analyst Rod Lache said Wednesday that he believes such moves will contribute to Ford earning a small profit in 2010, a year ahead of CEO Alan Mulally’s schedule.

A recent report by BankAmerica/Merrill Lynch forecasted that Ford should be able to gain at least three points of market share in the next four years as its rate of refreshing its products is jumping ahead of Toyota, as well as staying well ahead of U.S. rivals General Motors and Chrysler.

“New cars are a bit like doughnuts…people like the freshest ones the best,” said Booth.

Ford’s shares have been on a tear as General Motors and Chrysler have been in Chapter 11. Ford closed at $8.44 on Thursday, up from $1.74 on March 9.

The company is facing a total debt load of $40 billion by 2011. But Booth hinted that the company is looking at raising equity in the public markets to pay some of that down.

Ford lost $30 billion from 2006 through 2008.

Ford reported a surprise $2.3 billion net profit for the second quarter, a huge improvement over its year-ago loss of $8.7 billion for the quarter. That was made possible by a $3.4 billion gain from the company’s reduction of debt; on an operating basis, without that, Ford lost $424 million, or 21¢ a share. Still, the consensus estimate of analysts, according to Thomson Reuters (TRI), had been that Ford would post a second-quarter operating loss of 53¢ a share.

Reader Comments

Ed Straker

August 6, 2009 12:44 PM

New cars are a bit like doughnuts? New cars are a bit like new cars, overpriced and inefficient.

Why is it that these restructuring
decisions made by Detroit today feel like common sense modifications that should have been implemented 30 years ago in the wake of the 70s fuel crisis?

Hello, McFly! Common platform, reduce costs... What an idea? Okay, "A Better Idea..."


August 6, 2009 1:49 PM

I am rootin' and tootin' for Ford they deserve our respect for handling this debt load on there own and not seeking government bailout.

Go Ford!

Fred Amos

August 6, 2009 10:13 PM

why are the Hybrid so hard to come by in the midwest, have only seen 2 during July, and they were 60miles apart.
hard to buy one, in the Kansas city, Mo. area

I thought the Hybrid's were the future cars, and the ford is great after test driving them

Greg Krivicich

August 8, 2009 6:50 AM

Another point to make is the fact that Ford did not take TARP money. That has a positive impact to many consumers. And the Ford commercials are effective in promoting their vehicles. However, if I were the Ford PR department, I would lose the doughnut analogy.

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