Ford Aims To Save Itself By Bringing Small European Cars To U.S.

DEARBORN, Mich. — Ford Motor Co. posted the worst quarterly performance in its history Thursday, losing $8.67 billion in the second quarter.

The company also said it will retool two more North American truck and sport utility vehicle plants to build small, fuel-efficient vehicles, and it announced plans to bring six new small vehicles to North America from Europe by the end of 2012.

The net loss includes $8.03 billion worth of write-offs because the sharp decline in U.S. truck and SUV sales has reduced the value of Ford's North American truck plants and Ford Motor Credit Co.'s lease portfolio. Even excluding those items, Ford lost 62 cents per share, worse than Wall Street expected. Twelve analysts surveyed by Thomson Financial, on average, expected a 27 cent loss per share.

Including the write-downs, Ford lost $3.88 per share in the April-June quarter, compared with net profit of $750 million, or 31 cents per share, in the same quarter a year ago.

The second-quarter loss surpassed Ford's previous record quarterly loss, $6.7 billion in the first quarter of 1992.

Second-quarter revenue was $38.6 billion, down $5.6 billion from the year-ago period. Analysts expected $34.6 billion.

Ford has been successful selling cars in Europe, and the company is banking on the new European models to boost sales and revenue as it deals with a market shift from trucks to cars brought on by high gasoline prices.

The company said it has sufficient liquidity to weather the latest downturn in the U.S. auto market without additional borrowing. Ford borrowed $23.4 billion in 2006 to fund its North American turnaround.

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"We are pleased that we went to the capital markets at the right time," Ford President and CEO Alan Mulally said in a conference call with investors and media. "We have the scale, the expertise and the financing to execute our plan."

Wall Street wasn't impressed, at least initially. Ford shares dropped 58 cents, or 9.6 percent, to $5.45 in morning trading.

The company said it will retool the Michigan Truck plant in suburban Detroit, shifting its products from large SUVs to make global vehicles off the European Focus platform by 2010.

The SUVs made at Michigan Truck _ the Lincoln Navigator and Ford Expedition _ will be shifted to the Kentucky Truck plant in Louisville, which makes Ford Super Duty pickups.

The company also will retool the Louisville Assembly Plant, which now builds the Ford Explorer midsize SUV, to produce vehicles on the European Focus frame, starting in 2011.

The company had previously announced it would retool its pickup truck factory in Cuautitlan, Mexico, to build the Fiesta subcompact for North America starting in 2010.

Ford also said its Twin Cities Assembly Plant in St. Paul, Minn., will continue producing the Ranger small pickup through 2011. The plant was scheduled to close next year, but Ranger sales are down just 4 percent in the first half of this year, versus 18 percent for the U.S. light truck market as a whole.

The company also plans to revamp the body shops in nearly all its North American assembly plants so that they will be more flexible and able to respond more quickly to changes in market demands. Chief Financial Officer Don Leclair said it costs about $250 million per plant to make those changes.

Leclair said Ford's capital expenditures will reach $6 billion annually between now and 2010 because of the cost of revamping plants and introducing new products and engines. Ford plans to upgrade or replace all of its engines by 2010.

"What you're seeing is kind of a bubble that we're going to go through ... but early on we're going to see cost savings because of the economies of scale that we're getting as we develop more and more vehicles off of fewer platforms," he said.

Cost cuts also will come from employee layoffs. Ford said 4,000 U.S. hourly workers took buyouts in the second quarter, and the company will continue offering buyouts at targeted U.S. plants. Ford also has announced plans to cut its salaried costs by Aug. 1 through voluntary and involuntary layoffs.

The company said its write-offs included $5.3 billion in North American auto operations and $2.1 billion for Ford Credit because of the drop in the value of the plants and equipment that make trucks and SUVs, and the lower price Ford Credit can fetch for them at auction when leases expire. Leclair said 85 percent of the Ford Credit write-down was triggered by the drop in truck and SUV values.

Ford reported a pretax loss of $1.3 billion in North America because of the deteriorating U.S. market and the shift away from trucks. U.S. sales overall were down 10 percent in the first half of the year, with Ford's sales down 14 percent.

The company, though, continued to be profitable overseas, posting a $582 million profit in Europe and $388 million in South America. The company also made $50 million at its Asia-Pacific-Africa division.

"The second half will continue to be challenging, but we have absolutely the right plan to respond to the changing business environment and begin to grow again for the long term," Mulally said in a statement.

Ford said it does not expect a U.S. economic recovery to start until early 2010.

The company identified only three of the European small vehicles it will bring to North America: the Transit Connect small van, the European Focus and the subcompact Fiesta. Most will be built in North America, and Leclair said some might be exported. Ford already has announced that the Transit Connect will be imported from Turkey.

Ford said the other three vehicles would be identified later, including one that is unique within its segment.

Other possible vehicles are the Kuga small crossover, the C-Max small van and the Mondeo midsize car.

Ford also announced that the next-generation Ford Explorer midsize SUV will come out in 2010 and be built on car underpinnings, making it more fuel efficient than the current truck-based model. And it announced it will build a seven-passenger car-based crossover vehicle for Lincoln in mid-2009.

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On the Net:

http://www.ford.com

Comments

[MyTake]

Ford first should just make a public apology for their treasonous founder, Henry Ford. That Vichy truck plant in France was selling trucks to the Nazi's throughout the war.

But that aside, they should just hire some hydrogen fuel cell engineers away from Honda and BMW and switch over to the Hydrogen economy.

[therealredstateblues]

Give it a rest - Ford's Willow Run plant cranked out B-24 liberators by the thousands. Ford helped willys design the Jeep - by all accounts a huge part of WWII victory. Ford also helped the Russians design the t-64 tank. All the industrialists of the day were doing business with prewar Germany. Ford was not unique in this regard.

[BillN]

How 'bout bringing in small cars from Brazil? You know.. the ones that run on ALCOHOL???

[robbor]

Going back 40 years I remember seeing Ford cars built for europe and thinking the cars were so modern looking in comparison to the "tanks" Ford was selling here in the states. Why they thought the 2 continents were so different in terms of tastes for design I do not know but obviously Ford now thinks the US is ready for something new that our european neighbors have been getting for nearly a half century. Better late than never. Good luck , Ford.

[texastrixie]

I remember at the time there was gas rationing, all the people who were trashing the Detroit automakers. I would tell them when all the auto-workers are standing in the unemployment line, the rest of us would be right behind them.
I hope Ford gets this right. It is galling that while you have to stand in line (for months) to even take a test drive in a Honda Fit, that Ford/GM etc. cannot produce a great, high quality small car. I refuse to believe that this country cannot accomplish this.
And as for SUV's and trucks, Ford sold them because that's what we (the consumers) wanted. This is a country built on suburban living. How we are going to retool this country to eliminate driving is going to be the real challenge of the next generation. People raising children in New York City have Central Park. But many big cities have no real park land in them. Where do you have children play if there is nothing but concrete outside your home? Yes I know, stickball in the street, scooters on the sidwalks, recreation halls, etc. But some of us grew up with front lawns, porches and GRASS (the kind you roll around on, not the kind up roll up and smoke).

[Annette]

Some may have wanted big, SUVs or may have wanted big trucks. I personally never understood it. There was no rational reason for 80% of the purchasers to buy something that could carry a half ton. Then in 2000 we went shopping, We went to dealers for all three American car manufacturers. Every salesman tried to appeal to my husband as being more of a man with a big truck. One actually said to my husband "Think how all the women will look at you driving this big boy" This was to a 57 year old married man who isn't insecure in his masculinity. My husband just gave him a look. All the way over to the Toyota dealer he fumed about not needing to waste money to prove his masculinity. When the Ford dealer called us a week later after we had bought a Toyota and my husband told him nope we bought the Toyota. The dealer muttered p**** whipped. Ford lost 2 purchasers for life. But we both realized that the big 3 were pushing many American's buttons to sell cars. The secret is to not allow the buttons to be pushed. Why would Americans want to waste insane amounts of money because Detroit had a shoddy bit of a product to sell. The average suburban household no more needed a huge SUV or a big truck than they needed a bulldozer. The europeans seem to have more sense.

[therealredstateblues]

Compared to US branded trucks the Toyota is far inferior - the Tacomas use thin sheet metal you can not lean against without creasing, don't dare put anything heavy in the bed it wil crinkle and they still have rust problems. And the MPG of the Tundra is worse than a comparably equipped Chevy Truck

The best MPG from a compact trcuk - the Ford Ranger still leads that category as well. Toyota has done the Detroit thing with their compact truck - increased its size and weight power accessories and creature comforts in response to market demand.

I don't know why so may of you folks are so down on trucks anyway - they are very useful vehicels, many of us need them for our jobs, and they sure are handy for do it yourself homeowners - hauling loads of mulch, lumber, swingset for the kids. My Ranger sure gets workout every weekend - shows in the scars in the bed and dings in the side

[therealredstateblues]

Perhaps your husband might have actually liked to have a truck? a good salesman can pick up on those things - perhpas he recognized that your husband could have used a little "manning up?, poor guy - I feel for a guy whose wife won't let him buy the car he really wants

As they say about shoes and how they fit - a toyota is the ultimate in p-whipped vehicles - LOL

[BillN]

Having grown up and lived around Detroit for most of my life, most people don't realize that the US auto makers and their suppliers spent millions of dollars dismantling public transportation in this country as a means of forcing he public into their automobiles. The "acceptance" of SUVs in this country was driven by crafty marketing technique that convinced us that owning one was the "safe" bet. Automotive executives had a direct hand in taking the US auto industry where it is today, and were bent on pleasing their oil company corporate masters.

One more time, as a country we've learned nothing from past experience. Now, not only are the Japanese waiting in the wings to eat our lunch (once again), they are joined by the Koreans and the other 800 pound gorilla in the room - the Chinese.

Another thing to ponder: US auto makers say they can't compete globally because their foreign competition do not have the "legacy costs" of providing healthcare benefits to their employees and retirees. With this in mind, why haven't these US companies lobbied Congress for a single-payer national healthcare system?

[08politicaljunkie]

Ford should bring back Th!nk.

[Robespierre]

They sold Think several years ago when they were not thinking about the future!

[bob5701]

Ford and GM are in a union busting mode. It's the reason for not build the small cars in the US.

[EinChicago]

I'm usually a fan of unions, but in the case of the UAw, something has to be done to level the playing field. You have toyota and honda literally working their workers to death for minimum wage and the US companies are saddled with massive legacy costs. Something has to be done, whether its a tarrif on companies likle Toyota or a release of the legacy costs, it's absurd to continue to handicap the US companies like this.

[therealredstateblues]

The Japanese are definitely paying more than minimum wage, and acutally autoworkers make comparable wages to US autoworkers

[Podewumun]

What total, unmitigated crap, Einchicago. I currently have relatives who work for both of the companies you cite and I can assure you they are not being worked "to death for minimum wage".
You either work for one of the "Big Three" or you're a hedge funder. Either way, you're full of it.

[Annette]

National health care would remove one of the largest of Legacy costs. All the big three, Walmart, and quite a few other employers have noted pointedly that these costs are making American workers less competative.

However Toyota,and Nisses making cars in the US do not pay minimum wages. They pay pretty close to the American car manufacturers. what is saving them is much fewer legacy costs. Especially retired worker health care.

What is interesting is that the big three make cars in Europe, for Europeans, sell them and are profitable there.

[feo]

Oil companies might like to remember that without automobiles there would be nearly no need of gasoline; therefore, knock off the price manipulation.

[therealredstateblues]

While there is certainly enough blame to be leveled at Detroit's shortsightedness and bad management decisions, one must not discount the bigger picture - the role that bad economic and trade policies have had on US manufacturings woes.

Huge deficits and the too cheap and easy credit policies of the Fed have caused inflation and dollar devaluation, and congress reduced the regulation and allowed in specualtion to the oil industry, as well as allowed these mega oil mergers that reduced competition - these are the primary culprits in the run up in oil prices, if oil prices had remained relatively low and stable we wouldn't even be talking about this.

Bad trade policy has shipped jobs and technology overseas - stagnating wages and eroding our technological and innovative edge to create more efficient vehicles and alternative energies

Voodoo economics, and the housing bust has reduced consumers buying power and confiedence to buy big ticket items like autos, not to mention huge consumer debt, negative savings and fears of job loss.

[LiberalForever]

The US auto industry gave the American public what it wanted. Big, rude SUV's that hogged the road and dwarfed the average car...huge pickup trucks driving around with absolutely nothing to haul, and guzzling gas to the tune of 12 miles per gallon. Bigger, bigger, bigger. We want to either scare the crap out of everyone else on the road, or just kill them if we have a collision with them. The industry made what the people wanted. The war in Iraq did the rest.

[Annette]

Americans may have been that stupid, I don't know. Or were they stupid in that they let Detroit tell them they wanted this and believed it. Either way sometimes it seem like many of my fellow Americans are not too bright. What is even weirder is that so many Americans revel in their ignorance. A pretty good sized percentage seem to believe that using their, wants, feelings, and preconseptions is better than using their brains. Weird.

[FoShizzle]

About time - the senior leadership of the American auto industry represents the epitome of ignorance.

WTF. If they were worth their weight in feces they would have realized this two years ago.

[Maanu]

The American Auto Industry Crisis is of their own making entirely, and BTW has greatly contributed to the decline of manufacturing in America.
They've bought patents on more efficient engines and battery storage designs, and sat on them.
They've promoted the use of inflated tires when they could've made solid rubber "non-disposable" tires a long time ago.
Everyone knows how rickety American cars are these days. If they didn't make them disposable, maybe we wouldn't buy more than one. Turns out we didn't even buy the one. So here we are.

[KillTheMessenger]

Now, now. Let's blame them for what they really did. No need to make stuff up. Full rubber tires are something you put on a toy car, not a real vehicle. Not even bikes have full rubber tires. They would make an absolutely horrible ride. Engine efficiency has been increased by all car manufacturers. Sadly, so has the average engine size. The blame for that goes to buyers of manhood enhancers, not the car companies per se. People in the US are always surprised when I tell them that a 420hp engine, like the ones that can be found in some SUVs and trucks in Europe is usually reserved for 38 ton freight trucks (the largest size allowed on European roads) that can tow a container... or two.

As for the electric car myth, that's nonsense. When Toyota came out with the Prius, which is basically a slightly more efficient mainstream car, all but the geeks were laughing. How would an electric vehicle have done in a market that took ten years and $4/gallon gas to accept a mild parallel hybrid?

[therealredstateblues]

Lets not foget the role of Ralph Nader. His noble push for increased safety and emission controls while on balance a good thing, added weight, robbbed power and decreased engine efficiency. You really can't have it both ways - you run up against the laws of physics every time. That is one the big reasons there has been little economy improvements in recent years - weights have been maxed to accomodate safety feautures, and internal cumbustion enginer effciency gains have been offset by increased pollution controls. Consumers demand power and efficiency robbing power accessories

A lot of these stories about 100 mpg carburators and the like are mostly stuff of urban legend

You really don't think that multimillion dollar companies like big auto if they could easily and efficiently and cost effectively dramatically increase fuel mileage right now they wouldn't do it? Thats the problem - they can make 100 mpg cars but no one would buy them - they would be tiny little expensive econo boxes with no power accessories or creature comforts and no power to get up and go - US buyers show time and time again they have no interest in such a vehicle

[JScott]

Ya wonder if US auto execs read any of this, sadly probably not.

[JoeBlough]

They get paid wether they read this or not.

[JScott]

Jeez the US auto industry never seems to learn does it, this has happened at least twice before and then the money blurred their vision. When Ford first built the Taurus it was state of the art but then they just let it hang there gettin old, if they had been paying attention they wouldn't be in this predicament.

[deepintheheartoftejas]

Ha, state of the art? I remember my father bought Ford Taurus the first year they were in production, 1986. At the time, I was driving a Honda Accord I bought new the year before (an '85 Accord SE-i). Whereas the Accord was still running fine 10 years later, that Taurus started having electrical problems within a year. The radio quit working, the blinkers stopped blinking, the windshield wipers even stopped synchronizing when it was only 3 years old, a problem I haven't seen on a car in decades. They would get caught in the middle, wedged into each other. It developed problems with the radiator by 91 or 92, just before he sold it, at some hugely depreciated cost. I kept the Accord until it got wrecked, at around 190,000 miles. I don't remember any more major work than replacing the clutch once, and some work on the fuel injection system.

[JScott]

Per the deepinthe.... comment.
Exactly, they should been working on all those problems you cite to make the car better but instead they went on doing the big truck/suv thingy.....while the Taurus just hung there getting old etc.

[FogBelter]

This is a pathetic, losing game for Ford ... I have an idea, why doesn't Ford try innovation?

Let's be straight here, Japanese engineers are already working in China. It is only a matter of time before the Chinese will be mass producing cheap, well designed, internal combustion engine automobiles at a price and rate of speed that the US, Japan and Europe will simply not be able to compete with ... I'm sure during the Olympic Games some of these little automotive darlings will be introduced to the World.

What Ford, GM, the American Auto Industry has to do is break with tradition and explore far-out alternatives to the Internal Combustion Engine. NOT more Hybrid crap ... a complete break with the Oil Industry ... something completely new.

If Detroit wants to stay stubbornly locked into their symbiotic relationship with Big Oil ... IT IS DOOMED!!

Americans are innovators ... so let's get our engineering talent working overtime to reinvent the wheel, for if Americans don't come up with the next break through technology, the Indians, Russians, Europeans, or Chinese most surely will and Detroit will be the odd man out again.

[adnmoh1]

i actually like th euro fords more than any domestic ford. especially the modeo estate, and fiesta rs. i really wish they could bring back the cossie and the sierra cosworth. awesome cars fast and fun and efficient nothing better than that!

[sco8d]

Ford makes a couple great small cars, did any one notice the ford ad banner at the top of the page for the focus? But the F150 is the top selling vehicle in America and somhow Ford is to blame?

[KillTheMessenger]

I believe the F-150 WAS the top selling car in America. And no, Ford is not to blame. The people who bought this crap on wheels are.

[BillN]

Ford could make a fuel efficient F-150 anytime it wants to. They just need the will to do so.