Ford North America Report Card

Detroit News is reporting Ford fix-it plan off track.

Report: Sales goals missed, morale low
Ford Motor Co. is failing to meet key goals in its turnaround plan and employees are losing confidence in the company's ability to save itself, according to an internal report released to employees and obtained by The Detroit News on Thursday.

Titled "Report Card: Ford North America," the report paints a grim picture of a company unable to stop its downward spiral.

Ford missed its retail sales goal in the United States for January by 10,600 vehicles -- or nearly 1 percentage point of market share -- and now expects to miss its retail market share goals for February and March, the report shows.

The company hit its material cost reduction target for January, but will miss its targets for February and March by a wide margin, according to the current forecast.

Ford's problems are not lost on employees, only 47 percent of whom say they have confidence in Ford's long-term success. And less than 45 percent believe the automaker's "Way Forward" plan is working, according to the results of an employee survey included in the report.

The failure to meet the plan goals is the first sign of real trouble for CEO Alan Mulally's new regime. While Ford lost more money in 2006 than ever before -- $12.7 billion -- most of that damage was done before the former Boeing Co. executive was tapped to lead Ford last fall.

Since then, Mulally has stressed the need for unblushing honesty and rigorous accountability, urging his executives to set realistic goals for 2007. However, Ford's Americas team failed to meet these supposedly more realistic targets.

That is bound to put more pressure on Ford Americas President Mark Fields and his team. Wall Street is likely to be more indulgent with Mulally, according to Bradley Rubin, who follows Ford for BNP Paribas. "He's already done the hard thing, which is raising the capital and getting enough cash in there to fix Ford's problems," Rubin said. "It's not about how much they lose in '07. Earnings have taken a back seat to whether or not they have enough cash and financial flexibility."

In December, Ford put up all of its U.S. assets to secure more than $23 billion in financing to fund the turnaround plan.

Fields went over the report with employees Wednesday as part of his regular weekly Webcast, but acknowledged that he is having a hard time convincing them to keep the faith.

According to a quarterly survey of employee morale, results of which were included in the report, most employees have a dim view of Ford's future. Just more than 50 percent were optimistic about the future a year ago, and Ford set a goal of increasing that number to 60 percent this year. But it has already fallen to below 50 percent.

Product -- or the lack thereof -- is a major cause for this pessimism. Only 38 percent of workers surveyed said they believe Ford has "the right products to move the company forward."

According to the report released to employees this week, the shortfall in retail sales was "due to greater-than-expected segment shift out of pickups, unfavorable share performance related to SUVs and lower-than-planned availability of (Ford's) new products."

Ford is well on its way to meeting its goal of cutting some 44,000 jobs in the United States by 2008. The company also plans to idle 16 factories by 2012.

Product -- or the lack thereof -- is a major cause for this pessimism. Only 38 percent of workers surveyed said they believe Ford has "the right products to move the company forward."

Wow. I guess that says it all. 62% of the work force does not believe in the company. In the just wondering department: After Ford gets rid of 44,000 employees and shuts down 16 plants, exactly how much of Ford's US operations will be left?

Ford Monthly Chart
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In December, Ford put up all of its U.S. assets to secure more than $23 billion in financing to fund the turnaround plan. Near term that staved off bankruptcy, at least for a while. The questions now are: How fast will Ford burn through that cash? What is going to happen to car and truck sales heading into a consumer led recession? I suspect the burn rate will be a lot higher than anyone thinks once this recession gets going.

Technically Ford is challenging a brutal monthly down trend line that has capped every rally since 1999. It is also sitting modestly above a long term support line dating all the way back to 1993. If that support breaks, Ford will be following the airlines and auto parts manufacturers into bankruptcy.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/