Savings Experiment: Snow Removal
The Money Man Behind Rick Santorum: Who Is Foster S. Friess?Ford (NYSE: F) delayed the new version of its flagship F-150 pick-up yesterday. It is giving up the ghost on light trucks and SUVs. No one will buy them. Sales are running off as much as 30% compared to last year. The company also cut all of its forecasts. This year Ford will lose money. Next year does not look much better.
All of this news and concerns that Ford may have to raise cash caused Moody's to say it was cutting its outlook on the company's debt, according to MarketWatch.
The news is telling, but not as telling as one of the details buried in the Ford comments on its forecasts. The company said total US vehicles sales for all car companies in the U.S. market would be between 14.7 million and 15.2 million this year. That is down about 300,000 from Ford's last estimates.
But, some analysts think the market may only produce sales of 14 million cars and trucks. Bloomberg reports that Citigroup believes "June auto sales in the U.S. may drop to 12.5 million, their lowest annualized rate in 15 years."
Ford is not set up for a marketplace which only produces 13 million to 14 million units a year. Its share of that market is about 15%. Ford's cost base is set to make money when U.S. consumers buy 15 million vehicles or more.
Can Ford take enough out of costs to make money at much lower levels of sales? Perhaps not. The UAW will have to take a hard stand at some point. Product design costs and factory operations can only be cut so much. The same holds true with marketing budgets.
Ford may have hit a point where it simply cannot structure the company to be profitable in its home market.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
6-21-2008 @ 8:36AM
darrin said...
Ford should try something really "crazy" like selling the fuel efficient cars it sells in Europe, like the 40mpg Focus TDI, in America...
6-21-2008 @ 10:15AM
Highly Polished said...
To cry now would be a sin ! Lets remember for example use only, where all of this milking started. Lets look at many moons ago.. at the Mahwah NJ Ford plant. It was a haven for money. Who was punching who.. in and out, who was receiving OT and not even being there. The toughest moments there was,,, how long will it take me to buy a boat and a home at the Jersey shore off the milk monies received! Don't blame the competition blame the slobs during the 1970's who milked it dry all over the Ford plants in the U.S.A. !!
6-25-2008 @ 11:54AM
jpdr1100 said...
I've long lobbied for Detroit to sell us the same small fuel efficient cars they sell in Europe. But it's not that easy. Beyond adapting them to American tastes, the real problem is cost. To bring the Euro-Focus into the US and sell it here, the price would be roughly twice what the current US Focus sells for. With economics like that, few Americans would bite.
And their smallest of engines probably wouldn't mate well with automatic transmissions, meaning we'd get the larger, less thrifty combos.
And the cost of diesels barely make sense anymore now that the fuel is 25% higher than gas.
7-01-2008 @ 1:30PM
BW022 said...
I remember in the 70s when gas prices went high and US automakers lost sales to smaller Japanese cars. In the 1980s when gas prices went high the US automakers lobbied for import quotas on smaller Japanese and Korean cars. Through the last 1990s and early 2000s, the US makers come out with bigger SUVs. And surprise... gas prices go up again and no one wants 14mpg vehicles.
In 30 years they have learned nothing. Could have gone electric, hybrid, or at least smaller vehicles. Nope... big SUVs and trucks and now they'll just go out of business. Anyone with a brain could look around and see every other country on the planet with gas prices nearly double that of the US and how their consumers reacted -- smaller, more fuel efficient cars.