Ford Motor Company (NYSE: F)

Over the decades of the 20^th Century, could there be a prouder or more venerable name in American manufacturing and consumer mass marketing than “Ford?”  One of the automotive giant’s long-running advertisements of the post-WW II era (the 1950s) was headlined, “There is a Ford in Your Future!”  In the early years of the 21^st Century the question is, will there be a Ford at all in our nation’s future?  The once-mighty industrial empire founded in 1903 by the brilliant inventor, Henry Ford, has fallen on very hard times.  And a lot is at stake in its survival and prospects (many hope) for a return to prosperity.

Today, Ford Motor Company is a global operation with activities in 200 markets on six continents; 300,000 employees work in 100+ plants turning out vehicles bearing such well-known marques as Ford, Jaguar, Lincoln, Mazda, Volvo, Mercury, Aston-Martin (calling James Bond!), and Land Rover (calling suburban soccer moms).

Just how far has Ford fallen?  It couldn’t last forever, alas, but at one point in the early 1920s one of two – maybe 50 percent! – of all the automobiles on the road worldwide were said to have been built by Ford.  Half of all cars rolling down country roads, city streets and highways bore the familiar cursive script logo of the Ford Motor Company.  (Interestingly, and perhaps eerily, another 19^th Century-founded icon bears the same familiar Spencerian script style as the Ford radiator or wheel cover ornament:  The Coca-Cola Company, Inc. See bottom note.)    

Beginning in 1908 as the revolutionary, low-priced Ford “Model T” was introduced, “T-Mania” swept America and many other countries. Not only did the “T” revolutionize American farm life, and put American families in their first cars, but stripped down versions were even used by polo players instead of horses.  The Mexican bandito, Pancho Villa, bounced around in one while pursued by the U.S. Army in other Ts! Two out of three U.S. cars on the road were Ford Model T’s by the early 1920s. 

But wait – the excitement was not over for Ford; in 1927, when the classic “Model A” was being introduced, news reports of the day say that the biggest news stories of the last two months of that year was about Ford’s new car.  (This was the year in which young Charles Lindbergh would fly nonstop, NY to Paris in May and capture the imagination of the nation.) Thousands lined up to peek in showroom windows; the cars flew out of dealer lots as fast as they arrived from the factory.  Where there were no “A’s” available, gawkers were accommodated in special viewing “salons” in key cities.  More than 100,000 orders were in hand before the “A’ hit the streets (the equivalent today would be closer to a half-million given our population growth and consumer ability to purchase). (Source: the very readable “Wheels of the World,” by historian Douglas Brinkley.)

Fast-forward 80 years: Ford Motor Company in 2006 was challenged by a Perfect Storm of issues and market and societal forces. Mr. Ford’s great-grandson, William Clay “Bill” Ford, Jr., is in the corner office as Executive Chairman (named January 1, 1999). He joined the family firm in 1979, became CEO in October 2001 and stepped aside in September 2006 to yield the CEO-ship to Boeing’s Alan Mullaly, who headed the giant aircraft manufacturer’s commercial a/c division.

Morningstar analysts (September 6, 2006) saw the Mullaly appointment as positive given the new CEO’s “spectacular” turnaround of Boeing business; still the challenge is “daunting,” including the need to stop the slide in market share and meet global competition.  (And yes, to once again turn out vehicles that consumers want to buy.)

Other elements of the Perfect Storm buffeting Ford:  lagging vehicles sales in North America, pending layoffs, enormous restructuring costs, potential asset sales, increased competition, and the increasing cost of capital.

More than 30,000 jobs (10% of workforce) could be cut over the next five years; the cost of this restructuring will be huge for Ford Motor Company. First, Ford was first trying a 30% cut in white-collar worker costs, according to The Wall Street Journal (September 12, 2006). The WSJ reported that Ford would try to cut back on white collar staffing, benefits and costs (managers and supervisors are 35,000 of its workforce.)

In September 2006 the two major credit risk rating agencies downgraded Ford debt – “Ford Driven Deeper into the Junkyard” read the CFO.com headline. Moody’s Investors lowered Ford to B3 and Standard & Poor’s Rating Services rated the Company debt “B,” five levels down from investment grade. (Still seeing Green: Moody’s called attention to Ford’s cash stash of $23 billion and access to bank credit of $6 billion more.)

Toyota passed Ford in sales in summer 2006 to become #2 in U.S. sales (behind GM); Ford is not alone here; Honda outsold Chrysler in July 2006 as well. The Big Three (or two-and-a-half as some wags say, with Germany’s Daimler-Chrysler owning one of the three Detroit companies) are moving downward toward 50% of vehicles sales (lowest in history).

Dark days of summer:  In July 2006 Ford best-selling pickup (The “F” series) suffered a 40% drop in sales while Explorer SUVs were down 50%. 

Activists are on Ford’s tail as well – Rainforest Action Network (RAN) has had Ford in its crosshairs for a while, believing that the manufacturer is causing global warming because of its reliance on sales of trucks and SUVs with poor fuel-economy track records. It’s the worst of the automakers, says RAN Executive Director Michael Brune.  (Follow the RAN’s “”Jumpstart Ford” campaign details here in Accountability Central.) Web Link: http://www.accountability-central.com/single-view-default/article/jumpstart-ford-campaign/?tx_ttnews%5BbackPid%5D=1314&cHash=e35e4a2be6

Good news on the activist front:  The Interfaith Center on Corporate Responsibility (ICCR), a coalition of institutional investors representing $100 billion in direct investments and influencing $1 trillion or more in equity investments of its allied institutions, praised Ford Motor Company in December 2006 for collaborating on an initiative to improve workplace conditions in its supply chain.  The “Automotive Industry Action Group” has established workplace standards and plans to train suppliers in key markets.

“As investors in automotive companies, we applaud this important initiative to address workplace human rights in the supply chain,” said Sister Patricia Daly, OP, Executive Director of the Tri-State Coalition for Responsible Investment (40 NY-NJ-CT investors).   ICCR members have been working with Ford for five years on the initiative and Ford is now joined by GM, Johnson Controls, DaimlerChrysler, Exel, and Honda America; Toyota is not part of the collaboration. Web Link: http://www.accountability-central.com/single-view-default/browse/1/article/faith-based-investors-applaud-the-auto-industrys-collaborative-project-to-advance-workplace-human/?tx_ttnews%5BbackPid%5D=1318&cHash=c3e5895383

(More Information ICCR EthVest: http://orig.accountability-central.com/

Moving into 2007, the new continued to be downbeat. In January 2007 the 2006 financial results were in: Ford Motor Company lost $12.7 billion in 2006 ($6.79 per share), $5.8 in the last quarter alone.  Sales were $160 billion – vs. $180 billion the prior year.  Shares hovered below $10.00.

Ford Motor Company has set out an ambitious restructuring plan, including:

• Return to profitability by 2009.
• Reduce $5 billion in costs.
• Update Ford, Lincoln and Mercury (marques) vehicles by 2008.
• Structure agreement with United Auto Workers for 38,000 employee buyouts.
• Close 16 facilities including 7 plants.
• Launch new products.

Web Link: http://www.accountability-central.com/single-view-default/article/ford-motor-company-reports-2006-fourth-quarter-and-full-year-results/?tx_ttnews%5BbackPid%5D=1318&cHash=b797c5a90c

Perhaps there won’t be as many people watching this turnaround as were (as a percentage of the population) driving Ford-marque autos in the early years of the last century, or as many lined up to see the new Model A’s when they debuted.  The world has changed too much.  (Japan’s manufacturers have captured huge shares of the U.S. vehicle market, for one thing.)

But the stakes are just high for Ford shareowners, employees, suppliers, the communities in which the Company operates, and the American economy as well.  (The “A” saved Ford’s lagging fortunes as GM’s Chevrolet reached 1 million annual sales in 1927 and the new Chrysler company vehicles were favorably received.)

Bill Ford, Jr. posed the key question to author Douglas Brinkley in August 2002:  “We found ourselves in a hole.  How did we get here, and how do we pull ourselves out?”  (Speaking of the Ford-Firestone debacle.)  Many will be watching for the answers in the months ahead as Ford Motor Company, Chairman Bill and CEO Alan Mullaly put the ladder in place to climb out.

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Ford Chairman Bill’s father is William Clay Ford, Sr., now Director Emeritus, retiring in May 2005 after 57 years of service to Ford Motor Company.  His grandfather was founder Henry Ford and his father was Edsel Bryant Ford, Henry’s son.  The Ford Family still controls more than 40% of the votes in this two voting class stock company.

Good / bad news:  The Ford brand is still a familiar and respected icon. But, there is tarnish on the marque. In Business Week’s “The 100 Top Brands” annual feature, Ford Motor Company ranks #30 (as determined by Interbrand methodology).

Web Link: http://bwnt.businessweek.com/brand/2006/ )  

“The iconic auto brand has declined in every measure.  Weak marketing, bad press, shallow product portfolio, and bottomed-out U.S. stock price hurt value,” observed the magazine editors. Ouch! (Rankings in BW issue of August 7, 2006. Rival Toyota ranks #7 now; Mercedes-Benz, #10; BMW, #15; Honda, #19; lower than Ford are VW at #56; Audi, #74; Hyundai #75; Porsche #80; and Nissan #90; Lexus #92, rank lower than Ford.)

Oh, and by the way – James Bond, the Ian Fleming-created fictional master spy, drove the Aston-Martin DB-5 in “Goldfinger.” Another Englishman -- Sir John RH Bond, thought to be not a relation of James -- is a Ford Motor Company director; Sir John is the former Chairman of HSBC Holdings PLC in the United Kingdom.

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Note:  The “Spencerian” script style used by The Coca-Cola Company and Ford Motor Company was popular from the 1850s to the 1920s; the originator was Platt Rogers Spencer. Spencerian Script was the standard schoolhouse script for penmanship until the typewriter emerged and another more popular style was introduced – the Palmer (method) of penmanship.  (See www.wikipedia.org/wiki/SpencerianUScript for details.)

 

Also, take a look at our profile on Ford: http://www.accountability-central.com/single-view-default/article/ford-motor-company/?tx_ttnews%5BbackPid%5D=1314&cHash=88af72bbb3

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