Ford Motor Co. may be in better shape than General Motors or Chrysler LLC, but it is still losing money and burning cash. Amid the industry's sales plunge, Ford's struggling North American unit lost $637 million before taxes in the first quarter, compared with a loss of $45 million in the year-ago quarter.
Mark Fields, 48, Ford's president of the Americas, discussed collapsing industry sales and the potential for Chrysler and GM bankruptcies with Editor David Sedgwick and Staff Reporter Amy Wilson on April 24.
There will be aftershocks from a Chrysler or GM bankruptcy. Toyota is stockpiling parts. Are you doing anything similar?
We're monitoring the situation daily. The most important thing for us is having a viable supplier network. So we're making sure we understand which suppliers we share with General Motors and Chrysler, the health of those suppliers and which parts we procure from them.
We're going to work with the suppliers to help get us collectively through this period, and we'll provide support when it makes sense for us to do so.
Are you stockpiling parts?
What types of support are you providing?
It runs the gamut, from technical support and working with suppliers on throughput or quality, to financial support where it makes sense for us.
How many suppliers are getting financial support?
I'm not going to share that.
Let's assume GM and Chrysler emerge from bankruptcy with a reasonably clean balance sheet. Are you concerned that a pared-down GM will provide tough competition because it has shed all those legacy costs you still have?
We've been proactive in working with our stakeholders, whether they be the bondholders or the UAW, to ensure that our business remains competitive. I'm not going to speculate on what may happen to GM or Chrysler, but we are committed to making sure that Ford remains competitive and is not disadvantaged.
In the event of a competitor's bankruptcy, will Ford gain share? What advantage do you expect with consumers?
We're gaining retail share because of our products. But there's no question we're in a different position from our competitors. We hear anecdotally from our dealers that customers are coming in because they're attracted by the product but also are giving us kudos for not taking taxpayer assistance. The combination is helping to drive our market share.
How close will you be to the minimum cash level you need to operate day to day by the end of the year? Analysts say you need about $8.5 billion to $10 billion just to keep going. Is that a good estimate?
Based on our assumptions, we have sufficient liquidity through this year.
You have told your dealers the goal is to reduce dealer-related sales and marketing costs by $300 per vehicle over the next five years. Are there other plans to reduce dealer costs beyond that?
Our discussions with our dealers are private. We're not going to share externally the dollar figure we're going after. We're not going to mandate everything, and it's not going to be a one-way discussion.
Will dealers have to contribute as much as the other stakeholders?
We haven't concluded our discussions yet, but it needs to be noted that the dealers have sacrificed a lot over the last couple of years in terms of overall profitability. It is important for all of our constituencies to kind of give at the office. All of them have done that in a collaborative fashion, and that's the approach we're taking with the dealers.
How many dealerships has Ford lost this year?
The rate of attrition has gone up a step in '09 on a year-over-year basis. When you look at it on a sequential basis [compared with the final quarter of 2008], it has come down a bit.
Dealers and dealer consultants speculate that the reason for the slowdown in closures compared with the fourth quarter is that you've stopped putting money into deals. Is that why?
We have always said we will provide financial support where it makes sense. It's on a case-by-case basis.
Does Ford need dealership consolidation to accelerate, given the way the industry has changed?
With the toughness in the marketplace, there's probably a bit more immediacy on some dealers' parts.
Are you willing to relax your requirements on separate showrooms, either for dealers merging Ford, Lincoln and Mercury stores or those merging with a competitive brand?
You have to look at each individual market. Would we relax our requirements on sharing with competitive dealerships, particularly in rural areas? It's important that our dealers focus on the Ford business. Our responsibility is to make sure we provide them the cars and trucks that allow them to make a good return. At the same time, it's important for us to have appropriate representation that focuses on the Ford brand.
Is dealership profitability getting worse or better this year?
It's a tough time right now. Some dealers are making money, and some are losing money. [Those who are losing money is] a larger percentage than we would like. It's a sign of the times.
When the industry recovers from this recession, what kind of annual U.S. sales will be normal?
The 15 to 15.5 million area is probably a good estimate of what will be considered healthy in the first half of the next decade.
We've been able to keep our product plan generally intact. We've had some selective deferrals, nothing earth-shattering. I'm pleased with what we have coming in the pipeline over the next couple of years.
We all have scars on our back from when the industry got into trouble. Then we took a hatchet to the product plan, and two or three years later we were kicking ourselves. So as much as we need to focus on the cost side, we always have to keep an eye on the revenue side.
Are you going to sell the global Ranger in North America?
No decision yet. We're still evaluating what's the best way to satisfy those customers.
Will the global full-sized Transit eventually replace the Econoline?
Nothing is concrete. We're trying to understand full-sized-van owners, what their requirements are. It leaves us open to the opportunity to bring a vehicle like Transit over. We're actively considering that.
How hard will it be to persuade consumers to pay a premium for your EcoBoost engines when gasoline costs $2 to $2.25 a gallon?
Consumers are smart enough to know that gas prices are ultimately going to go up. The pitch for our EcoBoost engines is that you can have your cake and eat it, too: V-8 performance but V-6 fuel economy. If you look at consumer purchase criteria, fuel economy is still in the top three.
With the way the corporate average fuel economy program is structured now and with $2-a-gallon gasoline, there are no market forces to make customers play along with the way you must plan your product line. How do you hope to influence the Obama administration? Are you willing to support a gasoline tax as a way to change behavior?
CAFE is the construct in which we need to operate. We're supportive of higher fuel economy. We want to make sure that the rules are written so that it bends us but doesn't break the industry. Our approach is to make sure every vehicle we introduce, no matter what segment, is the leader in fuel economy or right near the top.