Ford's assembly line strategy intended to rev up the bottom line

The Outlook

March 23, 1997|By Bill Atkinson

Ford Motor Co., the nation's No. 2 auto- maker, has wowed consumers with the Taurus sedan and wagon and its Explorer sports utility vehicle. Yet, last week it said it would close for a week the production line that makes the Taurus and Mercury Sable. It also decided to discontinue four models: Probe, Mercury Cougar, Aerostar minivan and its once-popular muscle car, the Thunderbird.

What's wrong with Ford? Is it simply weakening consumer demand, or are its problems deeper?

David Cole

Director, Office for the Study of Automotive Transportation, University of Michigan

They are really going through a massive reorganization as a company. It is just a huge change for a very, very large company, and it takes time and there is a great deal of pain. This is part of it, sort of realigning their product portfolio.

I would be more concerned about Ford if it didn't do things like this. What they are doing is trying to position themselves to be more profitable, which is absolutely necessary. They are rethinking the whole idea of market share.

The real objective is not necessarily to be No. 1, but to be profitable. It is something General Motors went though a couple of years ago. It might be nice to have the No. 1 best car, but what they are really interested in is shareholder value.

The real challenge to this is the fact that a great many people in the company have felt there is not a reason to do it. The kind of things they are doing, the kind of pain and suffering are the things they need to do to ensure that they are going to be a viable business 10 and 15 years down the road.

James N. Kelleher

Automotive analyst, Argus Research, New York

I downgraded its stock a while ago because I thought Ford might have seen its peak.

Its overseas business has been awful for them, and financial services has been carrying the company. Last year, the company lost a lot of money in its South American operations and they lost even more in Europe. The money earned in U.S. operations was just about canceled out. All the profits came from its financing arm.

If both American and overseas vehicle sales start to weaken, that is going to trend over to Ford Credit.

Another concern is that the Japanese share of the market will go from the mid-to-high 20s to the 30s. It could easily climb if the dollar and yen imbalance remains. Detroit sort of fought back the Japanese by means of the sport utility vehicle and Jeep craze.

At some point in 1994 or 1995, Ford made more light truck vehicles than they made cars. Dropping the Thunderbird and Probe is just going to accelerate the trend. The dealers are going to happy to see a lower number of vehicles. They want vehicles that are selling.

Dave Zoia

Editor, Ward's Automotive Reports, Southfield, Mich.

Ford's decision is part of the business cycle, and it's also reflective of a shift toward trucks. What is going on essentially is a consolidation. Like a lot of the industries, they have too much capacity in passenger cars. They are trying to consolidate production to become more efficient.

They are coming out with a new T-Bird toward the end of the century. There is a replacement for the Cougar that is in the works.

Ford has been considered in decent shape in terms of productivity. Some of its plants are rated the highest with the Big Three, and its quality has been up there, too.

Ford has been pretty successful on the truck side. The Expedition started out well, and the Explorer has done well for some time. But the Ford Contour and Mercury Mystique have not done as well as Ford wanted to, and the Taurus and Sable have not done as well.

I think there is weakness for everybody.

Bruce J. Raabe

Automotive analyst, Collins & Co. Larkspur, Calif.

I wouldn't be too concerned. The Taurus has sold exceptionally well. Its change in design has been a positive, and the shutdown for a week is rather insignificant. This is probably a pretty good strategic move.

The decision to stop production of the Thunderbird was done because they need to rethink it. The styling of the Thunderbird is dated. It gives them the opportunity to reinvent the car. I don't think people are going to forget about the Thunderbird.

We are seeing a different industry than we have seen in the past. Consumers are oftentimes happy to buy a new vehicle with a new name if the vehicle offers what they want. New consumers are less concerned with what their parents drove. Starting fresh hasn't hurt Chrysler.

Overall, Ford is doing pretty well. We are looking for them to earn a little over $4 a share this year. The Ford F-Series truck has probably been the No. 1 selling vehicle in the world. The company's new designs are innovative and have many features the consumers are going to embrace.

The Taurus is going to be fine. Demand is rolling right along and the economy is doing well.

Pub Date: 3/23/97

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