Ford: Q4 Will Be Even Worse

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The selling price of Land Rover and Jaguar, though, is far more difficult to calculate. It all depends on who gets stuck with the bloated, high-cost manufacturing plants that produce Land Rover and Jaguars. If a buyer of the brands took on the plants, one Ford executive says, "someone could probably have them for a dollar."

The automaker's North American operations are both the biggest drag on earnings and the biggest and most important business to fix. Besides generating a bigger loss of income a year ago, revenue fell from $18.2 billion to $15.4 billion, as sales of pickup trucks and sport-utility vehicles suffer.

Ford's newest passenger cars—Ford Fusion, Mercury Milan, and Lincoln Zephyr/MKZ—have outperformed sales expectations in their first year on the market. But the company's Ford Five Hundred, Freestyle crossover, and Mercury Montego, all built at the same plant in Chicago, have been disappointing. The cars' designs and power trains have been roundly criticized in the auto press, and Ford has had to discount their prices and shuttle more to rental fleets to make up for tepid retail demand (see BusinessWeek.com, 10/12/06, "Why You're Paying More to Rent a Car").

The Unkindest Cut

Ford is pinning high hopes on the Ford Edge five-passenger crossover, arriving at dealerships in November, as well as the mechanically similar Lincoln MKX. The company is hoping that consumers who have become disenchanted with the Ford Explorer and Expedition SUVs will find what they want in the smoother, more stylish Edge. Ford is projecting Edge sales of 100,000 and 150,000 units a year (see BusinessWeek.com, 10/18/06, "First Drive: Ford's Edge").

" Lowering costs and shedding employees will only get Ford so far," says Gimme Credit's Lombard. The company also has to rack up some successful product launches that don't require a lot of discounting to get consumers to sign on the dotted line. "Improved financial results also depend on how new products, like the Edge, MKX, and new Volvo models, perform," Lombard adds. Ford doesn't expect to post any company-wide profit until 2009 at the earliest.

In his five years running the company, Ford Chairman and newly retired CEO William Ford Jr. has gotten a lot of things wrong. But he also frequently said the company has to get its products and their marketing launches correct—and that the company can't cost-cut its way to prosperity. About that, he is most certainly correct.

Kiley is a senior correspondent in BusinessWeek's Detroit bureau.