Ford Motor Co. (NYSE: F) has decided to take even more costs out if its operations. Where it will find the people and extra expenses is almost impossible to imagine. According to The Wall Street Journal (subscription required), "with more than half of Ford's plant saddled with excess capacity, Ford officials believe the push to control overtime is paramount."
The car company is also sending signals that it will have to take out more people.
Ford has almost certainly reached the fork in the road. At some point, the company will not have the capacity to rebuild its business when the domestic market begins to come back. The real competitors in the market, Toyota (NYSE: TM)and Honda (NYSE: HMC) will keep investing in new development and marketing, and will keep their abilities to manufacture new products at reasonable levels.
Ford may be able to save its present by sacrificing its future. And, if things go badly, it will not matter how much the company cuts. The U.S. car market is that bad.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
6-14-2008 @ 2:02PM
Alp said...
Ford cutting people, what a concept. They have cut most of the senior people who had the knowledge but may have been mired in the "old" culture. The new culture is to NOT be an engineer, marketing analyst, purchasing agent, IT professional, but the new culture is to be an accountant. Look for more pennies to pinch, more nickels to squeeze, more and more paperwork to do your job. Ford drowns in paperwork, it takes a VP to approve $5 items (like pagers). How about the concept of making people accountable and if they don't hit their budget (below or above) let them take the hit. How about stopping those outrageous bonuses when you are bleeding cash. How about making executives get their vehicles serviced at a dealer and really experience what a customer goes through. How about all those people responsible for "predicting" gas prices or market trends ot the price of steel, let them go since they predict just about as well as the loca Weather forecaster. Makem people responsible and accountable and if they are not, those are the ones to go.
6-14-2008 @ 11:08PM
whtm said...
In the face of 2.8 bln per qtr loss from wall street banks . I think you should be saying the folly of the fed's and wall street they have lost more money in the last year than than Ford ,GM.and Chrysler has in the last 5 years...
6-18-2008 @ 4:45PM
Alisa said...
So many companies are being affected by our current economic situation and appears that things may get worse before they get better. Decision makers have tough decisions to make. They must maintain an operation that benefits the stockholders; unfortunately this may not always results in initiatives that help the employees; who are needed to run the business by the way. I agree with Alp that it is important to hold people accountable to hitting goals and objectives. This is going to be more and more important as our economic climate worsens.
From an investment persective, is it profitable to invest in the automotive industry? I just started my jouney into the stock market and I find myself leaning towards the principles of value investing.
From that prospective, I think that the automotive industry may not be a strong and consistent performer to have in a portfolio. I can imagine that losses can be high, expenses (cost of re-tooling, replacing, udating equipment can be high, and of course... the competition fierce). All of which will ultimately impact earnings negatively.
I will keep my eye on the industry just out of curiousity.
You can visit me on my journey at: http://www.ourstockmarketjourney.blogspot.com/
Be well!