The Way Forward is looking rough. After Ford Motor Co. chopped its dividend in half last week, to 5 cents per share, folks on Wall Street renewed their hand-wringing over the progress of Ford's North American restructuring plan.
Ford's promise to put its North American auto business in the black no later than 2008? "Ambitious and unlikely," Robert Barry of Goldman Sachs said in a report.
Moody's Investor Service cut Ford's rating two notches deeper into junk territory on Friday.
Indeed, in a statement announcing the halving of the dividend and board director compensation, CEO Bill Ford said the headwinds the automaker faced at the beginning of 2006 are only getting stronger. The savings generated by the dividend cut -- estimated by analysts at $375 million to $400 million annually -- will help liquidity and support the turnaround actions, the CEO said.
Meanwhile, Ford is trying to generate enthusiasm among car buyers with a more generous warranty announced last week. The automaker is adding two years of powertrain coverage to 2007 Ford, Lincoln and Mercury vehicles.
Some onlookers called the warranty enhancement a clever way to create a sales incentive in the absence of a major onslaught of new products.
But the extra coverage may prove expensive. Analyst Chris Ceraso of Credit Suisse estimated the initiative may cost Ford close to $1 billion.
Ford executives say quality is improving, and program costs will be manageable.