Report: Ford to Turn a Profit by 2011, Planning EV Sedan
Under Congressional pressure and mounting public demands for a roadmap out of the current fiscal swamp in Detroit, Ford Motor Company will be forced to pin a date on its plans for profitability today. The automaker will submit a plan to Congress today which is said to include the company managing to break even, or see profitability by 2011, as well as introducing an electrically powered sedan that same year.
While Ford is at the table with the other Detroit automakers seeing access to Federal emergency loan money, the company has said that it, "hopes to complete its transformation without accessing the loan should Congress agree to make the funds available." Ford’s slice of the potential $25 billion in loans would likely be around $9 billion dollars should it be needed.
Perhaps hoping to deflect some of the bad press that ensued with auto executives making use of corporate jets on the way to the last round of talks in Washington D.C., Ford has also said that it would sell off its fleet of five private aircraft. CEO Alan Mulally is also reportedly willing to accept a salary of just $1 per year in return for access to the federal money, though terms of his total compensation have yet to be disclosed.
+ Detroit News: Ford expects profit, electric car in 2011
Comments
Mena
2011?! This I have to see.
chartguy
Part of this story came out yesterday: http://tinyurl.com/5wfoxr
There is absolutely no chance that Ford (or any other US automaker with a UAW contract) will make money by 2011.
We should never have bailed out the financial companies. That was a mistake on its own. Even worse, we've opened a Pandora's Box of future bailouts. Each one will make the recession/depression last longer.
According to a paper by two UCLA economics professors, FDR added seven years to the Great Depression with his make-work programs. We seem to be trying to outdo his example now.
chartguy
http://tinyurl.com/5vj2ug
Here's GM's sales numbers. Light vehicle sales were down over 41% year-over-year.
Mena
GM, Ford, Toyota and Honda are all down over 30%. Sales numbers are not really an indicator of poor management in this market. GM's and Ford's problems started a long time ago.
Mark in Maine
Ford 'Hopes to complete its transformation without accessing the loan should Congress agree to make the funds available' - That'd be good; don't know if it'll wind up happening, but it would be nice to see at least one of the Big Three coming through this without automotive experts such as Nancy Pelosi dictating what sort of vehicles that they can build from now on - Ford seems to have a good amount of money on hand already, it is possible that they could pull this off, though not likely . . .
Anonymous
Ford is the only American company with a plan to survive without a handout, but they still want to hedge their bets. GM can't even make a plan to survive without huge taxpayer help. Having owned too many GM vehicles, I object to more of my money going to them. Most automotive analysts I've read think there is no way GM can get though next year without $20-40 billion, and if everything stays at present conditions, they could need as much as $100 billion.
The good news, maybe soon we won't see any more new Pontiacs, GMCs or Saturns.
chartguy
In the end, all three need to get out from under their UAW contracts. They're paying almost twice as much for US labor as the other automakers are.
The UAW is finally offering some concessions, but in the end, those won't be nearly enough. Bankruptcy would allow them to renegotiate their labor deals. There would still be "Pontiacs, GMCs and Saturns" after bankruptcy and reorganization, they just would not cost as much.
Ducati Minor
I'm against you on this one, chartguy. The idealist in me is a devout capitalist, but the pragmatist in me sees the state needing to get involved to prevent the stock market from collapse. I'm telling you straight-out: if the heart of American vehicle manufacturing goes under, you'll see this recession turn into a depression. It's a domino effect: existing American cars will lose all their value; warranties may be voided; dealerships, suppliers, and distributors will fall apart; and American investment and stock values across the board will crumble.
That's what'll happen--I'm telling you.
I detest the treasury bailout, but it had to happen. As sloppy as the execution has been, it's kept the bleeding wounds from turning into full-blown infections. Have we opened Pandora's Box? Yes. It's fair to say our republic is repeating the New Deal socialism. We have little choice. The UAW will have to give up even more turf. Nancy Pelosi did state she'd help relieve the legacy issue and labor costs. That's one good sign. I'm not pleased with the current line of execs (and, now, governors) seeking aid, but we have to settle with what we have...for the moment.
GM has something going on. The mid-size sedans are excellent. The full-size pickups and sport-utes, probably the last of their kind, are still competitive. The upcoming Camaro, Volt, and Cruze look promising. Buick, Pontiac, and Saturn are still concerns, but have improved in quality. GM's superb two-mode hybrid system is now available on the Vue, with good results. Saab is, apparently, for sale--and has been since the start of '08. No one wanted it. GM does have some smart activity. Ford's possible importation of small Euro cars is progress, as is its huge reduction of truck production. Chrysler execs say they have a big restructure ahead, but I see nothing on the horizon just yet.
chartguy
Ducati Minor,
I always pay attention to your posts, and value your opinions.
Where we disagree is that you believe "the state" will be able to avert a stock market collapse. Since you believe they can do it, you think it's pragmatic to go ahead and do it.
I do not believe they can avert the collapse of the financial markets. They can postpone it, and in so doing, make the ultimate outcome worse, but they cannot stop this snowball from rolling down the hill. We're already in deflation, and I've never seen it stopped, once it starts.
http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx
Here's a paper by two UCLA economists that was published last summer. They concluded that FDR's policies extended the Great Depression by seven years. Washington is repeating those mistakes. I don't think making things worse is pragmatic.
Unions are huge political contributors, so Detroit probably will be bailed out.
The domino effect that you describe is going to happen, whether or not Washington bails out Detroit. I'm not saying that the Detroit products aren't good products. The last eight new vehicles that I bought were Detroit products. What I am saying is that they've tied themselves into deals with labor and suppliers that mean that they have to charge too much for their products, much more than the competition. Until those dominoes fall, they will remain locked into their competitive disadvantage.
Ducati Minor
I'm well-aware of the diverse opinions being presented by university economists from California, Michigan, Harvard, and Yale. Like a Supreme Court ruling, the opinions can be eloquently articulated and the data formed in a very supportive manner.
Economists have lined up in opposition to the classical Keynesian trend, but economists (on all sides) have been wrong before, including in their assessments and timing of present economic discourse. Most of the top economists have only recently stated the world market is in recession. The NBER formally announced the country has been in a recessionary mode since December of 2007. The NBER's word is taken as proclamation in the US economic world, despite it being a think-tank.
It isn't wise to just list one set of thinkers as an authority, and their conclusion (well-articulated as it may be) as an establishment of economic law, as opposed to theory. Here is a letter from The Wall Street Journal page a dueling academic view on the matter of the general bailout:
http://blogs.wsj.com/economics/2008/10/01/dueling-economists-experts-voice-support-for-bailout-bill/
This comes down to a battle of economic theory. There's no point is duking that out here. I understand the point you're making, but I will politely disagree on the libertarian state approach to the situation. The effect and impression of core industrial collapse in the Upper Midwest would have severe consequences not just domestically, but abroad. This would fuel the feeling that the US is, in fact, in decline and empower foreign adversaries.
At home, you would have an immediate discouragement of investment activity across the board and mass sell-offs. The stock market is fueled not by the dollar itself, but by motivated pursuit in the hopes of vague profit--profit by number. It is a mentality that one is taking part in growth. The Chapter 11 approach seems tempting for some pundits, but the consumer effect will be severe. A bankrupt company's product is a corrupted one in the buyer's mind. At best, the 11 move would bring short-term recovery--but just keep pushing a walking corpse--funny, since that is fair to say when talking about injecting state funds into the companies in their present condition.
chartguy
A well-articulated response, just what I've come to expect from you.
You brought the debate right where it should be: Keynesian vs. Austrian school (von Mises, Hayek, etc.). I only cited the one paper, but there are numerous economists on both sides of the debate. See http://mises.org/ for many, many more that see the intervention as harmful.
It's almost like religion. You believe in one or the other, free-markets or government stimulation.
We'll have to agree to disagree. When you see the bailout, you see it preventing industrial collapse. I see it preventing the economy from making the adjustments that are needed to progress, paying to preserve the innefficiences.
We'll agree to politely disagree.
GiMa
Late last month the 3 needed $25 billion, now it's $34 billion. Maybe the government should have taken the first offer. If we wait 2 more weeks it could be up to $50 billion.
One thing is for sure, GM will come out of this much different. Probably only 3 brands, maybe less then half the capacity. Chrysler may not come out at all. America's only real hope to compete in the big league is with Ford, and that may be a long shot.
TheStig
Ford is also basing this on projections that car sales will increase to near the same level as the last few years - and that is a long shot at best.
Having said that, I'm most impressed with Ford of the 3. They seem like they have most of a handle on the situation. Like was mentioned, they would use it as a backup, not as a RIGHT NOW survival tool. GM and Chrysler look like fools up there. It seems like they trying to continue with their business-as-usual plan that hasn't worked in thirty years. Also, the money they are asking for is for a loan, not a handout like the finance companies got. I still say let nature run its course on this one. All 3 need RADICAL changing, not just a band aid and a blank check.
chartguy
The irony of this is that it was Bill Ford's failure as CEO that led to his replacement by Mullaley, and to Ford Motor Company's better position today. Mullaley came from Ford of Europe (after Australia, I believe). He inherited a mess, and that forced him to start making cuts and tough decisions before the GM and Chrysler were forced to.
Anonymous
Alan Mulally came from Boeing and had no auto experience before. He did inherit a mess, but he knew it going in, and is paid nicely for it. While Bill Ford was failing, he was smart enough to move aside and get professional help. Rick Wagoner still thinks he is the best person for the job that he has held since 2000 (he was COO and CFO earlier). He has run GM into the ground, but refuses to accept responsibility. Ironically Bill Ford tried to make many of the changes that Alan is now making, but could not convince the rest of the company to go along. His vision wasn't bad, but he evidently could not lead.
chartguy
Thanks for the correction.
The irony still works though. Ford Motors is succeeding today because they faced failure sooner, and did something about it sooner. The bailouts allow the motor companies to postpone those hard decisions just a little longer.
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