One On One With Rebecca Lindland, Senior Auto Analyst at Global Insight
Thursday, July 20, 2006
|
|
|
|
SUSIE GHARIB: An unexpected and unwanted surprise from Ford Motor today: the company posted a huge second quarter loss. The auto maker lost $0.03 a share in the quarter. Analysts had been expecting a profit of $0.14. Sales of large sport utility vehicles are part of the problem, since they have been hit hard by rising gas prices. In response to the poor profit picture, Ford said today it is accelerating its turnaround efforts. Ford says it will reveal more cost-cutting measures within the next two months and is committed to making its North American operations profitable again by the year 2008. The auto maker has already announced plans to close 14 plants and cut 30,000 jobs. Last week, Ford cut its dividend in half, as well as the fees that it pays its board members. A short while ago, I talked with Rebecca Lindland, senior auto analyst at Global Insight. It`s an economic research and consulting firm. We began by discussing what factors derailed Ford in the quarter.
REBECCA LINDLAND, SR. MARKET ANALYST-AUTOS, GLOBAL INSIGHT: Well, basically they`re just not pulling in enough revenue is really the essential problem and they`re not selling enough vehicles. Specifically the F-150, the Ford "F" series pickup truck is really where they make their money. And sales are down about 2 percentage points year over year, but they`ve got to start pulling in revenue from other vehicles.
GHARIB: Rebecca, on the conference call with analysts today, Bill Ford, the chairman of Ford, said that his way forward turnaround strategy is on track and that he`s forecasting profits in the year 2008. Do you think the restructuring plan is really working, and what happens to Ford between now and 2008?
LINDLAND: Well, he also said that once they get North America back on track which, of course, implies that North America`s not yet there, it`s going to be a very long wait. You know, in the meantime, in 2007 they have the collective bargaining agreement expiration with the UAW. So that`s going to be really weighing on them as well. And we don`t expect to see much of an improvement until 2008, at the very earliest. It`s a very long time to wait, both on a Wall Street standpoint and from an analyst like myself who looks at their future product plans.
GHARIB: Do you think that Ford has the right vehicles in its portfolio, especially in a marketplace where there`s so many options and such tough competition from foreign brands?
LINDLAND: Well, you bring up a really good point, Susie. Where they compete are some of the most aggressive segments right now. The entry crossover segment where the Ford Escape is slotted is the fastest-growing segment in the U.S. and the most competitive. Toyota Rav 4 was just redesigned. The Honda CRV is coming out later on this year. The Ford Escape is still the best selling vehicle, but the next version is only planned on being a refresh. It`s not -- they don`t have in their cycle a completely new vehicle with new power trains and upgrades in technology and such. So we`re very concerned about a vehicle like the Ford Escape that`s in the right segment. It`s a very good segment, but we don`t see Ford really keeping that masterful position that they have right now. And that`s a lot of concern for us.
GHARIB: There are other analysts who are also very concerned and they point to, that Ford`s market share has been falling, its sales are down, its stock is down something like 75 percent in the past 52 weeks. Its debt has been downgraded to junk status. Do you think that Bill Ford`s days are numbered as CEO and chairman?
LINDLAND: I think that they are going to be looking at the potential for management changes in the next 60 days. You know, they had indicated they`re coming out with new details for us on their turn around plan. The last five years, from 2001 to 2005, Ford lost over a million units of volume in the U.S. That`s twice as much as what GM has lost in that same time period. So something has to change. They don`t really have... GHARIB: Do you think the board of Ford will ask Bill Ford to step down?
LINDLAND: It`s hard to say. You know, that`s a very delicate question and when you -- when you look at his situation both from a personal and professional standpoint, that`s a big step for the board to take. I think it`s something they may consider, though. They may look at it. When you`re in the situation they`re in, they have to look at all options.
GHARIB: Real quickly, switching gears over to GM, it`s in talks with Nissan and Renault, as you know. Do you think that that alliance makes sense for GM?
LINDLAND: I don`t think it really is the best option. I don`t think that the alliance can necessarily strengthen GM to the point that it gets itself completely out of trouble. GM by itself is turning itself around pretty well. They do have a good product plan. We do like what Rick Wagoner is doing. So that alliance, we don`t want all three companies to weaken and that`s a distinct possibility there.
GHARIB: All right, Rebecca, thank you so much for coming and giving us your thoughts; we appreciate it.
LINDLAND: Thank you.
