Post by TonyV on Jan 30, 2010 1:31:23 GMT -5
Posted: Jan. 29, 2010
Challenges remain for Ford
UAW issues, debt are key concerns
BY BRENT SNAVELY
FREE PRESS BUSINESS WRITER
Ford has turned the corner and is strongly positioned to win sales from embattled Toyota, analysts said Thursday, after the rejuvenated American icon reported a profit of $2.7 billion for 2009 and said it expects a healthy profit this year.
It's a stunning reversal from $30 billion in losses from 2005 to 2008.
Ford even restored profit sharing -- about $450 for hourly workers.
The news comes at an opportune time. Standard & Poor's analyst Efraim Levy said Thursday that Toyota's trouble "is going to add fuel to Ford's fire because it is already getting more favorable perceptions from customers."
Toyota, the world's No. 1 automaker, has recalled millions of vehicles and frozen sales of eight models over the acceleration issues. Congress said Thursday it would investigate.
"Ford has found its way, and Toyota has lost its way," said UAW Vice President Bob King.
But the company still faces challeges.
They include: A large amount of debt, difficulties with the UAW, a slowly recovering economy, and the possibility of rising gas and commodity prices.
Ford reported a $2.7-billion profit for 2009 -- its first profit since 2005 and a $17.5-billion improvement from 2008 -- and announced it would reinstate profit sharing for hourly workers for the first time since 2004.
"It really is pivotal and historic that during the worst economic recession in 30 or 40 years ... we are not only able to survive ... but were able to deliver profitable growth," said Ford President and CEO Alan Mulally.
But Ford has more than $34.3 billion in debt.
"We are not kidding ourselves ... we still have a huge amount of debt on our balance sheet," Ford CFO Lewis Booth said. "We are still working on that."
Sean McAlinden, senior economist for the Center for Automotive Research in Ann Arbor, also pointed out that some parts of Ford's reorganization plan are incomplete.
"They still have plants to shut down," McAlinden said.
Ford has said it plans to close assembly plants in Wayne, Minnesota and Ontario over the next three years.
Meanwhile, Ford is in the midst of spending more than $1 billion to convert its Michigan Assembly Plant in Wayne and Louisville Assembly Plant in Kentucky to car plants.
McAlinden also said Ford continues to have higher labor costs than Asian automakers in the U.S.
On Thursday, Mulally estimated that Ford's average total cost for its hourly workers is about $55 per hour compared with about $50 per hour for Asian transplants.
And even though Ford announced this week that it plans to add 1,200 jobs at its Chicago Assembly Plant this year, Booth told the Free Press the number of new hourly workers Ford plans to hire isn't going to have a major impact on the company's total labor costs anytime soon.
Ford also had difficulties with the UAW in 2009 that have continued this year. More than 70% of Ford's UAW workers voted against proposed contract changes in October, and the UAW has initiated a nationwide petition drive to file grievances over the reinstatement of merit pay for salaried workers.
UAW Vice President Bob King said Thursday the union plans to continue with that process despite the reinstatement of profit sharing for hourly workers.
Ford is required under its labor contract to share any profit it makes with hourly workers, King said, and the $450 that hourly workers will receive isn't comparable to salaried workers' merit increases.
Despite those challenges, analysts say Ford is heading into 2010 in its best shape in years.
Over the next 15 months, Ford plans to launch seven new vehicles, including the redesigned Ford Edge and Lincoln MKX crossovers, a redesigned Super Duty pickup, a Mustang GT, the Ford Fiesta subcompact, an all-new Ford Explorer SUV and the Ford Focus compact car.
That is more new cars and trucks than either Chrysler or General Motors has coming over a similar period, McAlinden said.
Those new cars and trucks give Ford the best chance of any domestic automaker to snare market share from any automaker, including Toyota as it struggles with multiple recalls and issues a sales freeze on eight of its most popular models, McAlinden said.
"Ford is just marching ... with this wonderful product plan," McAlinden said.
Efraim Levy, equity analyst for Standard & Poor's, said Ford already proved in 2009 when Chrysler and GM filed for bankruptcy that it knows how to gain market share when its competitors falter.
"So I think that helps them take advantage of anybody else who is stumbling, like Toyota," Levy said.
Ford has announced that it is offering $1,000 to any customer who wants to trade in a Toyota, Lexus, Scion, Honda or Acura vehicle for a Ford.
On Thursday, Mulally downplayed Ford's plans to go after Toyota customers but acknowledged the opportunity.
"Clearly, with the void right now, and people needing vehicles, I'm sure that there is going to be even more interest in Ford," Mulally said.
Contact BRENT SNAVELY: 313-222-6512 or bsnavely@freepress.com
Challenges remain for Ford
UAW issues, debt are key concerns
BY BRENT SNAVELY
FREE PRESS BUSINESS WRITER
Ford has turned the corner and is strongly positioned to win sales from embattled Toyota, analysts said Thursday, after the rejuvenated American icon reported a profit of $2.7 billion for 2009 and said it expects a healthy profit this year.
It's a stunning reversal from $30 billion in losses from 2005 to 2008.
Ford even restored profit sharing -- about $450 for hourly workers.
The news comes at an opportune time. Standard & Poor's analyst Efraim Levy said Thursday that Toyota's trouble "is going to add fuel to Ford's fire because it is already getting more favorable perceptions from customers."
Toyota, the world's No. 1 automaker, has recalled millions of vehicles and frozen sales of eight models over the acceleration issues. Congress said Thursday it would investigate.
"Ford has found its way, and Toyota has lost its way," said UAW Vice President Bob King.
But the company still faces challeges.
They include: A large amount of debt, difficulties with the UAW, a slowly recovering economy, and the possibility of rising gas and commodity prices.
Ford reported a $2.7-billion profit for 2009 -- its first profit since 2005 and a $17.5-billion improvement from 2008 -- and announced it would reinstate profit sharing for hourly workers for the first time since 2004.
"It really is pivotal and historic that during the worst economic recession in 30 or 40 years ... we are not only able to survive ... but were able to deliver profitable growth," said Ford President and CEO Alan Mulally.
But Ford has more than $34.3 billion in debt.
"We are not kidding ourselves ... we still have a huge amount of debt on our balance sheet," Ford CFO Lewis Booth said. "We are still working on that."
Sean McAlinden, senior economist for the Center for Automotive Research in Ann Arbor, also pointed out that some parts of Ford's reorganization plan are incomplete.
"They still have plants to shut down," McAlinden said.
Ford has said it plans to close assembly plants in Wayne, Minnesota and Ontario over the next three years.
Meanwhile, Ford is in the midst of spending more than $1 billion to convert its Michigan Assembly Plant in Wayne and Louisville Assembly Plant in Kentucky to car plants.
McAlinden also said Ford continues to have higher labor costs than Asian automakers in the U.S.
On Thursday, Mulally estimated that Ford's average total cost for its hourly workers is about $55 per hour compared with about $50 per hour for Asian transplants.
And even though Ford announced this week that it plans to add 1,200 jobs at its Chicago Assembly Plant this year, Booth told the Free Press the number of new hourly workers Ford plans to hire isn't going to have a major impact on the company's total labor costs anytime soon.
Ford also had difficulties with the UAW in 2009 that have continued this year. More than 70% of Ford's UAW workers voted against proposed contract changes in October, and the UAW has initiated a nationwide petition drive to file grievances over the reinstatement of merit pay for salaried workers.
UAW Vice President Bob King said Thursday the union plans to continue with that process despite the reinstatement of profit sharing for hourly workers.
Ford is required under its labor contract to share any profit it makes with hourly workers, King said, and the $450 that hourly workers will receive isn't comparable to salaried workers' merit increases.
Despite those challenges, analysts say Ford is heading into 2010 in its best shape in years.
Over the next 15 months, Ford plans to launch seven new vehicles, including the redesigned Ford Edge and Lincoln MKX crossovers, a redesigned Super Duty pickup, a Mustang GT, the Ford Fiesta subcompact, an all-new Ford Explorer SUV and the Ford Focus compact car.
That is more new cars and trucks than either Chrysler or General Motors has coming over a similar period, McAlinden said.
Those new cars and trucks give Ford the best chance of any domestic automaker to snare market share from any automaker, including Toyota as it struggles with multiple recalls and issues a sales freeze on eight of its most popular models, McAlinden said.
"Ford is just marching ... with this wonderful product plan," McAlinden said.
Efraim Levy, equity analyst for Standard & Poor's, said Ford already proved in 2009 when Chrysler and GM filed for bankruptcy that it knows how to gain market share when its competitors falter.
"So I think that helps them take advantage of anybody else who is stumbling, like Toyota," Levy said.
Ford has announced that it is offering $1,000 to any customer who wants to trade in a Toyota, Lexus, Scion, Honda or Acura vehicle for a Ford.
On Thursday, Mulally downplayed Ford's plans to go after Toyota customers but acknowledged the opportunity.
"Clearly, with the void right now, and people needing vehicles, I'm sure that there is going to be even more interest in Ford," Mulally said.
Contact BRENT SNAVELY: 313-222-6512 or bsnavely@freepress.com