Detroit Making No Efforts? Let’s Look at Ford

Let’s focus on Ford as it has very available data.

In the first move of an announced global manufacturing strategy the newly redesigned Ford Focus, currently a high demand vehicle that as caused one US manufacturing plant to add a third shift, will have it’s new model built both in Europe and the US. Ford will be adding one new plant for that vehicle domestically as well as retooling it’s Mexico plant to switch from the F-150 to the new Focus. These plans were announced in June well before the liquidity problems of today. In addition;

With every new product, Ford expects to be the best or among the best for fuel economy. This is aided by one of the most extensive powertrain upgrades ever for Ford. By the end of 2010, nearly all of Ford’s North American engines will be upgraded or replaced. In addition, within two years, nearly all of Ford’s North American lineup will offer fuel-saving six-speed automatic transmissions or be available with an optional PowerShift dual-clutch unit. Furthermore, Ford will offer EcoBoost on more than 80% of its North American lineup by the end of 2012, and capacity for North American four-cylinder engines to more than one million units by 2011. (July 2008)

Ford has also already leaked they are retooling two plants in the US to bring to domestic production two of their European models that are smaller and gas efficient (June 2008). Ford has also added a third shift to it’s Wayne, Indiana plant to build the high demand Ford Focus. The two Euro models, currently built in Europe for European production, are the Kuga and C-Max both small vehicles  to be introduced for the 2011 model year.

(David Axelrods Saturday statement that Detroit must include plans for ‘retooling’ for it’s short term $25 Billion loan shows only the lack of knowledge of manufacturing industries.)

Ford has also announced that it will continue the cost savings reogranization by continuing employee buyouts and reducing management by a minimum of 15%. This doesn’t count the savings of the newest UAW contract that cuts the beginning salary of new hires by 50% compared to long term workers. It’s the biggest reduction in UAW history.

In July industry sources published Ford’s announced intent to have an entirely revamped product line by 2010. In addition to bringing six small vehicles to North America from Ford’s European lineup, the company is also accelerating the introduction of fuel-efficient EcoBoost technology (turbocharging and direct-injection)and all-new four-cylinder engines, boosting hybrid production and converting three existing truck and SUV plants for small car production as early as December.

Notice the long lead time on retooling, moving manufacturing plants and introducing new and revamped models with new technology. It simply takes a long time to retool manufacturing facitilies. In this light the statements from David Axelrod and other implying an ‘immediate’ retooling of plants and product lines is simply naive.

Will 25 Billion get the job done for all three carmakers? This is problematic and short-sighted with the huge bailout of the financial industry. Those industries sustain jobs and illiquidity without creating any tangible goods. In the latest example, which is absolutely necessary, Citi Group will have the US Treasury “invest $20 billion in Citigroup and guarantee $306 billion in risky assets.”

That is a $20 Billion investment and a guarantee of $306 Billion in risky assets for a single company. Why are we now arguing about a $25 Billion loan to three companies that control millions of jobs? GM alone would cost the country over 3 million wage earning jobs if it fails completely. This debate, other than being politically popular as the Big Three are easy targets, makes no sense. More in Part 2

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11 Responses to Detroit Making No Efforts? Let’s Look at Ford

  1. James says:

    Q:  Why is Toyota kicking our asses?A:   Price and Quality

  2. James says:

    Q: Where can you get a job at which you produce nothing, sit around all day, play dominos and get full pay and benefits?A: GM

  3. Stuart

    I watched the Meet The Press roundtable discussion last night on the bail-outs and the big 3. Problem as I see it is the big 3 have been behind the timnes for way too long when it comes to manufacturing cars and they have been losing out on sales because of it.

    I think Alexrod gets “immediate” won’t happen immediately but honestly I don’t think the big 3 have done enough to ensure the jobs of so many by keeping up with technology and the interests of car buyers.

    American CEO’s have all been getting fat and lazy and now everyone is hurting because of it.

  4. Well, James…the anti-union sentiment is noted. Toyota doesn’t even have the highest mile per gallon fleet average any more. Who does? Ford.

    Toyota is a fine company. But in segment 2 you’ll find that they’ve asked for $56 billion in the EU as well. Interesting for such a wonderful company.

    Pam: Yes the US automakers may not have moved fast enough. Agreed. The UAW has joined the effort and , other than GM which I know too little about, I know the others are trying like hell to catch up. Ford’s worldwide plans show the scope of the issue.

    At any rate, since there are two more articles scheduled for today let’s wait and see what everyone thinks of gambling with 3 million jobs just on a GM Bk. Why wouldn’t a simply GM reorg bk work just fine? Read Part 3

  5. Part 4, likely tomorrow, will be my personal take on what should be done by the companies and their leadership. Things are screwed up but they’ve been screwed up before so we have some pattern to follow.

    Remember it’s the CREDIT CRISIS that is causing such havoc in Detroit. If they could rollover their daily working loans there would be no or much smaller issue. The same reason applies to the financial industry. If they could roll over their ‘reinsurance’ loans they’d be able to dig their way out too with much less assistance.

    Detroit already knew they were behind the 8 ball. They were working on that reality.

  6. James says:

    Stuart, the next time you drive down the highway make note of the cars that you observe.  You will see that Toyotas and the other Asian manufacturers rule to the road.  Why? Quality and price.  The consumer votes for the winner with their wallet. 
    In a world in which the Big 3 produced 50% of the world’s autos workers could be paid a shop rate of $80 dollars an hour plus benefits out the wazoo.  Now good product comes from Japan, Korea, and, soon, China and India. 
    Sorry, but today’s world won’t pay the wages and benefits that the UAW has commanded in the past.  They can change, or they can die.  To give them billions of dollars so that they can keep going down the same road, while not addressing these new realities, is keeping them on life support for a limited time using taxpayers dollars.

  7. James says:

    Stuart, by the way, you referenced my question, but, really, where can you get paid for hanging out all day and producing nothing?

  8. James says:

    Last point, Stuart.  Toyota, Hyundai and Honda all make quality autos, and employ thousands of workers  in the U.S.  None of their executives have come begging for cash.  Can you explain why this is the case?

  9. James:
    A. No one can sit all day, get paid and produce nothing. Unless retired, disability etc.
    B. You haven’t seen the point in a future article about Toyota and all European automakers and sellers asking for $56 Billion in assistance. This is not only information about our industries needing to catch up but more importantly the credit crisis. Absent the credit crisis these companies could use their own equity or banking relationships to do most of what to do.

    C.Next time you go down the road check all the American cars in addition to the others. Kia is on it’s last legs. Subaru is having significant problems at home and in America. Only Toyota and Honda doing reasonably well. And they are asking for $56 billion from the EU.

    D. How do you propose replacing 3 million jobs if, in fact GM actually folds or has a truly problem reorganization plan that necessitate massive layoffs.

    E. The UAW has already reduced new hire wages by 50%.

    The biggest cost issue for any major corp, unionized or not, is health care costs. That will have to addressed by Obama. That is not under any corporations direct control.

    The next segments may not met your approval. Ok. But we cannot risk 3 million jobs for less than 4% of the overall bailouts in progress.

  10. Stuart

    For the sake of argument, if we look at the “credit crisis” we see a few factors causing this mess including corporate greed and rising oil prices. It seems to me that the Big 3 have fed this crisis with their big guzzlers that are so prevelent in their lines.

    It’s no small irony that in June, the best selling car in America was the Honda Civic.

    What irks me as a small business owner is all these huge corporations have made it difficult for small businesses to survive and now the corporate ho’;s get bailed out while the mom and pop businesses close their doors.

  11. Pam: The American automakers wouldn’t be in crisis position, just like Citi Group and all the other Wall Street firms, if they had simply been able to rollover their loans and keep their working capital together.

    The drop in stock market, which reduces the to value of any corp, is much more severe (as a percentage) in the financial markets than the automakers. Again if the banks and fininancial institution were simply plying their trade, making loans, then most of the big companies could at least hold on while they retool.

    Here’s a fact no one will like: Toyota’s one ton truck gets no better mileage than a simplier powered American one ton or 3/4 ton truck. Other than GM, and I continue to say I know nothing about them, both other companies are making huge strides in creating more gas efficient cars and trucks.

    And as to the SUV and Larger Trucks that really don’t get very good mileage, they were the most popular part of the Ford line, except for the old Taurus and current Focus, than any other part.

    Here’s the hard part to accept: Americans wanted the cars/trucks/suv’s they were buying. Only when the gas hit $3.50-$4.50 a gallon did the cry come out for more of the gas efficent cars.

    According to one auto dealer I had a beer with yesterday evening reports from California are that large SUV and truck sales have started to rise. Americans have always had a short memory.

    I will address a lot of this more in Part 4.