Quotes of the Day

The Ford Motor Co. likes to boast has been that it led the way in sales of pickup trucks for 30 consecutive years now. But with pickup truck sales sagging under a combination of rising gas prices and higher interest rates, Ford's success is looking very rather brittle these days."It looks as if they rode the pickup wave too long. It's looks as if they should have gotten off before the wave crested,"says Jeff Schuster, an analyst with J.D. Power & Associates office in Troy, Mich.

Indeed with the company foundering, former Treasury Secretary Robert Rubin resigned from the Ford's board of directors Friday, citing possibility of a conflict of interest revolving around the Citigroup's ties to the automaker. Rubin's resignation gave new impetus to speculation that the Ford family was thinking of either taking company private or even preparing for a possible merger or alliance with another auto giant or even selling off parts of the company like Jaguar and Volvo."It suggests that some large changes are happening at the Ford Motor Co. that go way beyond the 'Way Forward' plan,"says John Casesa, a consultant with the CasesaShapiro LLC in New York City, who doesn't rule out the possibility of a merger, an alliance with another automaker or even the injection of private capital.

George Pipas, Ford sales analyst, acknowledges that Ford is more dependent on sales of large pickup trucks than its rivals. Fully 30 % of Ford's sales are in the pickup segment, while pickups account for only 22% of General Motors Corp, sales, 14% of the Chrysler Group sales and only 5% sales at Toyota, which outsold Ford in total vehicle sales for the first time ever in July."It's not that our sales are down more than anybody else's. Actually they're not. But they whole segment is down and it hurts us more,"says Pipas, who notes the decline in April when gasoline went from about $2.50 to $3 per gallon and suburbanites began looking for something less expensive to drive. Pickup sales in the U.S. have fallen 15.7% and Ford's are down 12.2%. Ford's extensive commercial truck has held up fairly well despite rising interest rates and a drop in new housing starts, adds Pipas. But the discretionary buyers are having second thoughts about buying another one, or they are trading the pickups in for mid-sized and even small cars, he says. If the economy continues to slow, even the commercial business, which is closely tied to the construction and housing market, is also likely to soften, Pipas acknowledges.

Thomas LaSorda, Chrysler Group's chief executive officer, also notes that 40% of pickup trucks are sold via big discounts."You can still move the market with incentives. We've protected our share but its become more expensive,"LaSorda says. In addition, the competition in the segment is also about to get tougher as GM launches a new truck this fall and Toyota puts its new truck in showroom floors in January, LaSorda says.

In his resignation letter, Rubin notes that Ford directors are preparing for an upcoming review of strategic options. "Although no conflict currently exists and while I would have liked to remain involved, I have with great regret concluded that I should resign from the Board at this time," he says.

With its key product line in deep trouble, Ford had to take some dramaticaction to salvage the turnaround plan it laid out back in January, which included plans for eliminating as many as 30,000 jobs and 14 plants, Pipas says. Ford now plans to cut its total production in the fourth quarter by more than 21%. Almost half the cuts will be concentrated at four plants where the company builds pickup trucks, says Pipas."We know th is decision will have a dramatic impact on our employees, as well as our suppliers,"William Clay Ford, the company's chairman and CEO, said in a note to employees Aug. 18."This is, however, the right call for our customers, our dealers and our long-term future,"he said.

The sweeping cuts in production also have sparked speculation that Ford, like GM, will offer buyouts and or early retirements to virtually all of its blue-collar workers, providing the United Auto Workers agrees, in a bid to dramatically reduce costs. Paul Krell, a spokesman for the UAW, declined to comment but privately a number of union officials acknowledge that a GM-style deal is in the works.

Until now analysts such as John Murphy at Merrill, Lynch have complained that the Way Forward plan didn't seem to have the urgency required to meet the challenges facing the company, while J.D. Power's Schuster says the company's product portfolio is too thin. Ford had announced July it lost $254 million in the second quarter, and the production cuts are certain to drive the company deeper into the red. Some reports have even suggested that the company could lose anywhere from $5 billion and $7 billion in 2006.

However, Mark Fields, executive vice president and Ford's president of The Americas, insists the production cuts demonstrate the company's seriousness in its efforts turn around North America."We are basing our business plans on the customer, and we are determined to match production and inventories with consumer demand,"says Fields."In doing so, we'll reduce incentive spending and inventory carrying costs for our dealers — with the intent to improve residual values for our customers and stabilize operating patterns for our plants and our suppliers,"he says. Fields also says the new products such as the Ford Edge, due in the next few months, are designed to replace sport utility vehicles that have fallen into disfavor since the post-Katrina energy shock jolted the U.S. economy. In addition, Ford also has announced plans for a large pickup truck, aimed specifically at the commercial truck market, that's equipped with a new cleaner and more efficient diesel engine.

• JOSEPH R. SZCZESNY
• With its key product line in deep trouble, the carmaker has been forced take some dramatic action to salvage its turnaround plan