Weak bottom line leaves Ford eyeing cuts, partners
Investors wary about firm’s plans for future
DEARBORN, Mich. — When Ford Motor was celebrating the 100th anniversary of its Rouge industrial complex last week, its chairman, William C. Ford Jr., offered an optimistic outlook for the years ahead.
The company is still solidly profitable, he said, and while it is losing money overseas, it is working on a solution. Furthermore, he praised the ability and leadership of Ford’s chief executive, Jim Hackett, who he said was doing “a really good job.”
“I don’t think it’s even close to a crisis,” he said.
Not everyone shares his confidence.
The automaker’s bottom line is weakening despite record sales of its pickup trucks and SUVs. In August, its credit rating was cut to one level above junk status. And Ford’s stock price has fallen to its lowest point since 2009, when the U.S. economy was in a deep recession.
“The foundation of Ford — the trucks — is still healthy, but there are concerns about whether Ford has prepared for tomorrow and the future,” said Karl Brauer, executive publisher of the auto information providers Autotrader and Kelley Blue Book. “Ford hasn’t been effective enough in convincing investors that they are.”
In the latest move to cut costs, Ford is reorganizing its worldwide salaried workforce of 70,000 with the goal of having a leaner staff by the second quarter of 2019. The move, outlined to employees Thursday, is likely to eliminate several thousand jobs, said Karen Hampton, a company spokeswoman.
“We believe there will be reductions as part of it, but we don’t have specific targets,” Hampton said. She said the reorganization was meant to speed decisionmaking and cut the time it takes to develop new vehicles, two points Hackett has emphasized.
The effort was first reported by The Detroit Free Press.
Part of the frustration among those sizing up the company stems from Hackett’s slow rollout of a recovery plan. Since taking the helm in May 2017, Hackett has outlined broad cost-reduction goals, but has stopped short of explaining how they will be achieved. Ford once planned a daylong meeting with Wall Street analysts on Sept. 25, but canceled it in July, saying it needed more time.
Elements of the plan are emerging bit by bit. Beyond the reduction in the salaried workforce, another initiative involves partnerships.
Ford is in talks with Volkswagen about a broad alliance that could help turn around its ailing operations in Europe and South America. It is also discussing ways to expand cooperation with Mahindra, the Indian automaker. India is another market where Ford is struggling.
Analysts said a partnership with Volkswagen could help both companies. Ford makes money on delivery vans and other small trucks, an area where Volkswagen struggles. The cooperation could involve helping Volkswagen produce small pickups like the Ford Ranger and sharing the cost of developing electric vehicles and other technologies to meet more stringent emissions regulations in Europe.
“Volkswagen is definitely intriguing,” said Brian Johnson of Barclays Capital
Today, Ford must again find ways to cut costs. In July, Hackett said his restructuring plan could involve charges of $11 billion over the next three to five years. That news arrived as Ford reported net income declined by nearly half to $1.1 billion in the second quarter.