How long can Ford do this?

S&P CUTS FORD’s CREDIT RATING. Standard & Poor’s
Ratings Services reduced its long-term credit ratings for
Ford Motor Co., Ford Motor Credit Co. and Hertz Corp. to
BBB-, which is one step above “junk” grade.
S&P also reduced its short-term ratings from A-3 to A-2
and says it expects only “limited improvement” in Ford’s
profitability and cash flow over the next few years.
But the agency also soothed jittery investors by giving
Ford a “stable” outlook and saying it expects no further
reduction in the company’s ratings over the next two
years—even if cash flow and profitability don’t improve or
if Ford posts minor losses.
Ford says the rating downgrade fails to reflect the
company’s progress and current condition.
Last month S&P reduced its rating for Daimler-
Chrysler from BBB+ to BBB and left General Motors
unchanged at BBB.

RE: How long can Ford do this?

As long as the American people keep buying foreign products, the value of American companies will diminish until...

RE: How long can Ford do this?

well there is more detail to that article. And ford was and is undergoing complete restructoring. Last year they were in losses this year they are going to break even and who knows maybe next year they might even have a small profit. But things are not lookin "that bad" for Ford. The sales of the New F 150 are strong the new mustang is comming out next year and there will be a replacement for the Taurus out soon. So i don't think all bets are off.

RE: How long can Ford do this?

As long as the American people keep buying foreign products, the value of American companies will diminish until...

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I think that Domestic companies got too comfortable with their product and living off past fame while people could not take it any longer, so Foreign makers jumped at the open chance. What do you think Dave?

RE: How long can Ford do this?

As long as the American people keep buying foreign products, the value of American companies will diminish until...

Click to expand...

I think that Domestic companies got too comfortable with their product and living off past fame while people could not take it any longer, so Foreign makers jumped at the open chance. What do you think Dave?

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Oh I agree 100%. People flocked to the Japanese, because they HAD NO CHOICE. The Japanese did it brilliantly. They didn't ignore the entry car buyer. They made relatively exciting and cheap cars with good fit and finish (they didn't come across as cheap cars) and priced them right. Once they got the customer loyalty, it was easy to put them into the staple of domestic sales. Midsize, minivan and truck markets. Even recently, in all seriousness, which domestic cars have made you say "Wow"?? Very, very few no doubt. I can name several from the Japanese. I mean for crying out loud, Hyundai's Tiburon is sexier than any Ford product( for the most part)!!! The domestics haven't done much, if anything, to their car lines. Nope..the cars were forgotten about in favor of trucks. Well new car buyers don't usually buy trucks as a first vehicle. The domestics have only themselves to blame for being in this mess...

RE: How long can Ford do this?

Can't really argue. I mean, Ford's got their trucks, which is the only thing keeping them alive right now. The fucus is a good little car, but it has had way too many recalls, and the SVT version should have a frickin' turbo. The Marauder fell on it's face because an accord can beat it in the 1/4. Ford needs to focus on quality and exciting product.

8 years ago GM had fewer exciting cars than Ford, but they realized it and brought in Lutz. Now they have the solstice on teh way, they have the XLR and the CTS-V, the GTO, and i'm sure more on the way.

RE: How long can Ford do this?

As long as the American people keep buying foreign products, the value of American companies will diminish until...

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The domestics have only themselves to blame for being in this mess...

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THere is one factor which the US Car companies have no control over. Foregn producers are able to manfacture things without labor unions and many american regulations acting as monkeys on their backs. US Labor isnt cheap by any means, which is why so many companies have moved operations overseas.

These companies, such as Honda, also realized selling a car is only one profit center, and not necessarily the main one. Try repairing a honda. You HAVE to get the parts from honda. I remember about 10 years ago needing an alternator for a prelude. HAD to get it from the dealer.... Cost --- over $400.00 JUST for the part. It may be different now, but back then you were totally screwed on repairs.

RE: How long can Ford do this?

I heard a frightening statistic this week. For every active worker employed by the big american car companies, there are 2.5 collecting their pension (still with health benefits). That is a HUGE cost for a manufacturer.

The manufacturers that aren't moving production overseas sure as hell aren't building factories up north. They're all going to the southern states, with "right to work" laws, and almost no UAW presence.

RE: How long can Ford do this?

I remember reading somewhere that there is $7000+ worth of labor and labor related costs attached to a car built in detroit.

RE: How long can Ford do this?

What I dont understand is, in this day and age, consumers are fully aware of the old "planned obsolescence" gimmick that ruled the Domestic auto manufacturers market. For those that dont understand, its real simple. To save costs on parts manufacturing for application on new vehicles, and for the replacement parts to follow, manufacturers subscribe to the theory that if you make a part that doesnt last, or becomes obsolete, the consumer will then have to invest in replacement, or upgraded parts to resume to normal "life" of a car. In english... make them so they dont last, then sell them new parts, or make them buy "improved" parts. i.e. suspension components that lack a czerk(grease) fitting, therefore, the part fatigues/wears out, and must be replaced.
Now that consumers are wise to this gimmick, why do manufacturers continue to do this?
I know several people who simply refuse to purchase a "domestic" vehicle because they are tired of having to replace parts that only seemed to last just beyond the warranty expiration.
It doesnt matter how much the people like the new car. If they dont think it will "last", they simply wont buy it. That is how the whole "lease" concept came about. If people could lease(rent) a car for 3 years, pay almost no maintence costs, and then trade it in for another lease(rent) car, they will always have, in their mind, a new car.
Today's manufacturers have the technology to build an affordable($15k) car that will last for 300k miles, come with a 100k warranty, and need nothing more than gas/tires/oil/fluids/brakes. They CAN build it, and they can sell it for $15k, and it will sell. They chose not to. They chose to fluff them up with gadgetry that is almost totally useless to the $15k car buyer.
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RE: How long can Ford do this?

As far as I know, the american division's of Toyota and Honda are paying their employees the same as the big 3. Its always quick and easy to blame the union for high wages. I suspect the problems are elsewhere. I think Ford has been very lucky. My father does quite a bit of business with them. He was telling me that the general attitude among executives who do business with them is that they are only in business because of their name. If they were a unknown name company, nobody would trade their stock or give them loans. It is only name recognition that is keeping them alive.

RE: How long can Ford do this?

Since we are collecting opinions here - here's my take:

I think the North American car business problem is a bit more complicated than "turncoat" Americans buying imports. You really can't train your children to be wise shoppers - and then fault them for buying wisely.

If the physical difference between North American cars and imports was purely "image" then JD Powers wouldn't keep finding huge lists of "things gone wrong" in N.A. cars - and significantly shorter lists in imports. The difference is so great - that JD Powers literally had to create two lists - because the domestic cars would have never made the top ten brands if all brands were judged equally. The same case was made for Motor Trend's "Car of the Year" award. They had to create an IMPORT car of the year and a "CAR" of the year award so that the domestic brands could "win". Thus, we have the "Varsity" team creating imports and the "Reserves" creating domstic cars.

Consumers are not stupid - if you build a higher quality car - that is priced the same or less - people will figure it out. It's not their job to care WHY the car is better - just find the best car and buy it.

Now the question is WHY is the quality lower in domestic brands:

1.) Being a publicly held company is no picnic. Now days domestic companies have to make decisions that are counterproductive to the best interests of their products - just to keep the stock value up. Ford spends more hours preparing for their annual stock holders meeting than they do to launch a model year at the Detroit auto show.

2.) The management at domestic car companies is so thick - that nobody can get anything done. I've personally seen great decisions and efforts get sunk down in the muck - until each one just dies. It's like an aircraft carrier... lots of power but trying to change course takes huge effort.

3.) Domestic labor. It costs SO much to build a car in North America that domestics can not afford to spend as much creating the components then be competitive. I'm not anti-union - but when I see the UAW headquarters building here in Detroit looking bigger and in better shape than the Ford World Headquarters building - I wonder what's going on.

Specific to Ford - they have all but given up trying to compete in the "car" end of the business. Three out of Four vehicles coming off Ford lines are now trucks. That's 75%.

There's nothing left of the Lincoln and Mercury line to rave about and the L-M dealers are now nearly all dual line - taking on an import nameplate to fill in their offerings and try to get someone in the showroom under retirement age.

It's not pretty and the domestics are giving up a yard at a time of market share to those that can get cheap labor, quicker internal response, and higher quality components hung on their chassis. Did I just read that Toyoa is now the second biggest car company in the world?

And a reminder --- the domestics have been trying to fix this problem for over 25 years now - and the market share continues to go east.

I agree and continue to shop domestic - but as my '98 Mark VIII ages - I can't find a domestic replacement - so what do I do? Is my only selling point to stay domestic patriotism and guilt?

RE: How long can Ford do this?

As far as I know, the american division's of Toyota and Honda are paying their employees the same as the big 3. ...

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See my post above. It's not the wages that are the problem, but the pensions and benefits.

Say, for example, that the japanese companies pay ALL the same benefits, pensions, salaries, and wages as the big 3. They have to do most of that to keep their workforce from unionizing, so they are. Keep in mind that the Japanese companies brought their manufacturing operations to the US in the '80s and mostly in the '90s, in order to avoid tariffs and sell more "made in america" cars to americans.

GM has been producing cars in the US since the 20's, at least. The UAW first got them in the '30's (http://www.uaw.org/solidarity/03/0103/feature07.html). So since the '30's and '40's , the Big 3 have been dealing with unions, having to pay steadily increasing wages, and retirement benefits.

So GM has half a centuries worth of retirees to take care of. These employees (rightfully, for the most part) demanded adequate compensation to allow them to raise a family and retire at some point, and that's what they did. The asian automakers now making cars down south are going to have to deal with the same problems (costs), whether they have unions or not. If they don't want the unions to come in, they have to pay benefits comparable (or nearly so) to union benefits. If they don't do this, their emplyees will unionize within 10 years. Either way, they will eventually have to deal with the same pension and benefit obligations to their employees that the big 3 have to deal with, and their competitive advantage will diminish if not disappear.

In the meantime, American automakers need to step up the quality, and stop telling their suppliers that they've decided to pay less for the same part (why don't they understand that they cost difference will invariably come out of QC?). They also need to focus on excitement, to listen to the consumer more. They need to realize that for THE most captive audience, automotive enthusiasts, performance matters most (HP, torque, handling, etc.) with value as a close second, and that anyone who knows an enthusiast, asks him (or her) what to buy whent it comes time to buy.

RE: How long can Ford do this?

I agree and continue to shop domestic - but as my '98 Mark VIII ages - I can't find a domestic replacement - so what do I do? Is my only selling point to stay domestic patriotism and guilt?

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The CTS-V is the only one in the pipeline that stirs my emotions, and that's probably what's going to replace this mark, in 4-5 more years (a used one, of course).

It doesn't help that the UAW keeps demanding more and more, despite the falling economy. The manufacturers seem to have done okay this year with the contract, allowing them to reduce jobs quite a bit. The unions need to realize that what's best for the company is usually what's best for the employees, and all the benefits and wage increases that they demand don't necesarily help them in the end.

RE: How long can Ford do this?

wages, pensions and benefits are a big part of the problem, no question. Especially the 50 years worth of retirees us makers have to support and the foriegn makers dont.

Yes, unions keep pushing for higher wages and better benefits. But thats a union's job. If a CEO of a company cant bring more money for his shareholders, he's booted. The unions work the same. Unions have to justify their dues...and do so by always trying to get higher wages. It isnt just the car company unions, but all unions. Every year here in chicago there are several stickes of schoolteachers. Avg teacher her I think makes 50-60k. Not bad for 9 months work, but they still strike every year. There are 2 strikes of teachers as you read this. It is never ending.

There is something else though. Where do you think the profits honda makes are spent? back in japan and not in our economy. How many american parts make up a honda? Even the american car companies find it cheaper to buy some parts elsewhere then to build them here.

All of this means to be competitive, american car companies ahve to cut costs somewhere...

RE: How long can Ford do this?

Wait till we see the ramifications of the China agreement that Ford, GM, and Chrysler signed this week to "export" cars to China.

We'll be exporting technology and jobs - but I doubt that we'll see many cars built here going into that market.

So, the upshot is - we can't afford to use our own employees and compete with the imports - and if we send the assembly jobs over there so we CAN compete - there's no one left here that can afford to buy our own cars.

Maybe it's time for a decent trade agreement - one where we only import what we don't produce here.

Personally I don't care if I spend $100,000 for a car - so long as I have a good job to support the purchase. Right now I don't see too many Detroiters moving up the ladder -- some are standing still - and most or falling down.

RE: How long can Ford do this?

Maybe it's time for a decent trade agreement - one where we only import what we don't produce here.

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I think so too, but as soon as we do that, the other countries involved get all pissed off and jack up tariffs on goods produced here. i say do it anyway, considering we import so much more than we export.

I wonder what bush is going to do on that steel issue he's dealing with. The steel industry likes the tariffs (keeps 'em working) while those that use steel don't like them (the tariffs raise their costs). Both sides are powerful blocks of voters.

RE: How long can Ford do this?

I work closely in the automotive manufacturing biz. Here's what drains ALOT of the money from domestic to Big 2 as far as car costs go.

On a Japanese line, if something is worng with the product, they do no hesitate to stop the line to fix it. The line is stopped, the problem is fixed, then the line is restarted. It's rare that a car has to be sent for "repair" after it comes off the line. They are VERY diligent about making sure the car comes off the line correct. Weekends shifts happen less frequently, and are usually reserved for meeting quotas in busy times.

On a domestic line, when there is something wrong, people are NOT encouraged to stop the line. Stopping the line is a REAL cause of concern for the domestics. Usually a line stoppage brings out the plant managers, engineers, cell leaders, etc...If you have several line stoppages in a day, you get chewed out, and they actually move you off the line to another job to prevent line stoppage. So workers begin to fear a line stoppage...so they say "good enough". (it's not worth the trouble getting your butt reamed for that little defective part.) But here's the good part. Instead of stopping the line, they affix a repair sticker to the vehicle. Fair enough. BUT...they bring in shifts on the WEEKEND to do the repairs. Time and a half and double time all weekend to do REPAIRS that should have been fixed before the vehicle came off the line.

And we all know about the incentives. (Ask Sandy..he could devote several pages to the subject). The Japanese rarely give out incentives. (although more recently, I've seen a few doing so.) The domestics can't seem to sell a car WITHOUT incentives. They kinda shot themselves in the foot with this technique, as the new car buyer simply won't buy a car without huge incentives. (Again..ask Sandy!! ) Recently, the news was going bonkers because Daimler had increased vehicle sales of it's Pacifica by over 12% !!! But what they didn't say is that 12% equalled almost nil for profit because the sales were so heavily incentive laden, along with the 0% financing.

Again..the domestics are to blame for their woes. At least there are a couple of future cars that interest me from the domestics. I particularly like the Dodge Magnum SRT8. I'm not sure why. It just appeals to me. But I'm sure the cost will scare me away. Or it will stray too far from the concept (like loosing the 430HP engine.) Someone said they've already dummied down the engine to 340HP, and it can only muster 0-60 in 6.5 seconds. SIGH. They had a winner..and now?? The American public loves HP. Give it to us.

http://auto.consumerguide.com/images/auto/editorial/gallery/SRT8_lrg.jpg

RE: How long can Ford do this?

I agree with almost everything said except those that thinking that buying only american is helping anything. Buying american is making little profit for the big 3 and they are just putting your money into labor and other excessive management costs.

I, for one, will buy the best car out there for my $, i dont care where it comes from or what company makes it.

Why delay the inevitalbe, the US automakers have to restructure somehow, everyone should just buy the better car and force the Big 3 into making changes sooner. I would rather see a plan that works for the long run and not the cut-throat price slashing just to gain sales.

Case in point,
I went to an SAE dinner meeting for the new Pontiac GTO, i got to talk with engineers that worked on it and hear about almost everything done with the vehilce. After sitting in the car, there is no way you could make me give 35k for it, sure its the fastest car in its segment but its still overweight, the fit and finish is the same level as a cavalier and it looks like one too.

Now, soon i will be buying a new vehicle from that class but it sure wont be the GTO, who needs an overpriced cavalier with a V8? I will be buying an Infiniti G35, with amazing fit and finish and quite a value for a car of this magnitude. It has 2 less cylinders than the GTO and is only two tenths or so behind the GTO at the end of the 1/4.

I used to think that i wanted to only buy american, but i have changed my mind, the american companies are doomed unless they change so why do i have to pay more for an inferior product??? If people keep "settling" for americnan made vehicles, do you think they will ever "want" to make somthing better???

RE: How long can Ford do this?

OK, I'll chime in.

Back in the early 80's, I bought a Subaru. This was when I was young and dumb, and Subaru(along with other Japanese cars) were making headways into US market share. The prime selling points(to me anyway) were price, value and gas mileage.

Over 20 years later I see them as just another overpriced ... errr, car. Maybe not a good example, but a personal observation.

Ford trucks? I love 'em. But a loaner I had a while back was a 2004 F250 Powerstroke Diesel - King Ranch. Nice. Sticker $47,750! Come on, it's a pickup, not a limo.