Sunday, September 17, 2006
Has Anybody Driven a Ford Lately?
...one of the biggest changes I've seen as a result of the Way Forward plan is a new culture of candor and honesty in both our decision-making and our communications. We remain dedicated to honest, open, two-way communications throughout the business even when we have tough news to deliver. And today is no exception.
So began Friday’s conference call held by the Ford Motor bigs charged with turning around the company that Ford family management has done their inadvertent best to drive into the ground.
The “honest, open, two-way communications” did not appear to make Wall Street’s Finest feel any better: Ford’s stock dropped as soon as the market opened midway through the call, and continued dropping, especially when the Q&A session began.
Ford stock finished the day down just over a buck a share on nearly two hundred million shares traded. Now, a buck may not seem like much until you consider there are only eight more of those to go before the stock reaches zero.
“Open” and “honest” management may be, Ford shareholders would probably take “ruthless” and “hard-nosed” any day.
I should make clear that “Way Forward” is the appellation given to the restructuring plan introduced by then-CEO Bill Ford early this year—a clever publication relations means of spinning a large, ugly restructuring plan into a kind of rallying cry.
After all, “Way Forward” certainly sounds more upbeat than other, possibly closer-to-the-truth alternatives, such as, for example, “Failure is Not an Option at This Juncture.” Or my own personal favorite twist on the kind of sappy, eye-rolling motivational slogans you see on posters near the vending machines of cubicle-oppressed drones, which is “If at First You Don’t Succeed, Skydiving is Not for You.”
But I digress.
After noting “a lot has changed since January,” Ford's President of the Americas, Mark Fields, delivered a laundry list of issues leading to Friday's updated “Way Forward” plan, the first being gasoline prices:
In April, gas prices rose $0.40 a gallon to $2.90 and they hit $3.00 a gallon this summer, the first time since Hurricane Katrina. This triggered an acceleration in demand away from less fuel efficient vehicles and it hit the full-size pickups, our bread and butter, particularly hard.
A cynic might note that Hurricane Katrina and $3.00 gas occurred before the first Way Forward plan. Furthermore, our cynic might note gasoline prices have collapsed lately, thanks to the resumption of refinery capacity taken offline for maintenance earlier this year precisely at the same time the summer driving season is winding down.
Nevertheless, Fields moved on to the second burden:
In addition to gas prices commodity costs are up substantially this year. That has put even more pressure on the business. Rhodium and copper are up about 60%. Platinum and palladium are up about 30%. And steel has risen another 15%.
Our cynic might note here that prices for rhodium and copper, as well platinum, palladium and steel, have presumably risen for every car maker, not just Ford.
Nevertheless, so far, it all seemed clear to this listener until Mr. Fields put forth an analysis of changing automobile demand patterns supposedly being caused by the aging of us Baby Boomers.
See if you can spot the non-sequitur in Mr. Fields' speech:
Added to this are the demographic changes that will accelerate over the next decade and dramatically affect the types of vehicles we produce.
Just as the largest buying groups, baby boomers, are downsizing every other aspect of their lives, including their homes, they are moving to smaller cars, crossovers, small SUVs and small premium utilities.
Does anybody out there besides Mr. Fields see baby boomers “downsizing every other aspect of their lives, including their homes”?
I see tiny 2,000 square-foot Colonials on half-acre lots being bulldozed and replaced with 6,000 square-foot McMansions, cathedral-ceilinged and three-car-garaged to boot. I see boomers whose parents rented beach cottages by the day buying, leveling and supersizing those cottages for their weekend getaways. I see Starbucks serving espresso drinks in twenty-ounce "Vente" cups instead of Greek diners serving plain old coffee in six-ounce cups.
And I see zero evidence that Baby Boomers are practicing anything remotely close to the ascetic behavior Ford Motor puts forth in order to justify doing what they should have been doing when oil prices broke above the $40-a-barrel all-time-record a few years back: which was building quality, fuel-efficient cars instead of bigger trucks.
Still, the hands-down strangest part of the conference call came at the end of the company's presentation and before the Q&A, after Mr. Fields had tried to impart to Wall Street’s Finest the company’s sense of urgency:
Now, to be clear, a lot has changed since January. And it's required us to take another look at the industry and our business in light of the significant changes we've seen externally. The conclusion has been very clear -- we need to go further and faster and accelerate our pace.
Yet after the company’s presentation a Ford Investor Relations came on to announce the following:
“We’ll now take a short break for 10 minutes and then will begin the Q&A session.”
A ten minute break in the middle of a crisis-induced conference call! I am not making that up.
Maybe they needed a vente espresso to get through the Q&A.
I Am Not Making This Up
© 2006 Jeff Matthews
The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.
Posted by Jeff Matthews at 9:10 PM