Even with a good contract with the UAW nearly in hand, Ford Motor (NYSE: F) is warning that with its falling sales a better union contract may not be enough to balance costs with revenue.
The deal with the union calls for Ford to operate six plants it was going to close. That will cost a lot of money, but it was a necessary concession to get the contract signed.
Ford is warning that overall US car sales may drop next year. Mark Fields, head of the company in the Americas was quoted by The New York Times as saying, "If you look at all the indicators out there, there is more risk than opportunity," And Ford will have to put up more than $13 billion in cash to start a new UAW fund to cover worker health costs.
That leaves Ford in a bit of a bind. Its monthly sales figures in the US have been down 13 months in a row. On a good day it has about 15% of the US vehicle market. US and Japanese competitors are unlikely to give it a break. Auto parts suppliers have probably been pushed to the limit in terms of giving Ford better prices. Some of them have been driven into bankruptcy.
So, Ford can cut more of its white collar work force and fire most of its temporary work force. But once that is done, there is very little left. Which means, if Ford cannot hold its current market share, it has a really big problem.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
11-06-2007 @ 10:10AM
jpdr1100 said...
The pity is that this happens now, when Ford actually has a decent vehicle line-up, and seems to finally be "getting it." But the bill must be paid for years of being non-competitive, and fleeing to the truck market to avoid offering cars that will sell. Ford might not be able to afford that bill.
1-08-2008 @ 8:25PM
O.T. said...
Ford builds an awesome product and spends a fortune getting buyers on the lots to buy cars. Have you tried to buy a FORD lately? Have you spoke to FORD LATELY? I have and I purchase Four Fords in 6 years and I love the company but will not deal with the dealers or Ford ever again. They lost me for life the marriage is over. If Ford can learn to Love it's clientele Ford would not be losing to Toyota. Ford will continue to slip since Ford is about Ford Lately.