In some ways, Ford is driving past General Motors
Each making changes for long-term benefits
By Sarah A. Webster and Katie Merx
- DETROIT FREE PRESS
Updated: 05/11/08 7:08 AM
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- Alan Mulally, left, president and CEO of Ford, and Rick Wagoner, chairman and CEO of General Motors, face similar challenges.
DETROIT — For most of this decade, it has been institutional knowledge that General Motors Corp. was in the best shape among Detroit’s struggling auto-makers.
Even as GM lost more than $50 billion over the last three years, it staved off Toyota Motor Corp. as the world’s largest automaker and showed signs of a global resurgence.
Meantime, Ford Motor Co. brought in a new CEO with a deceptively simple four-point plan. Now he’s assembled his team, they’ve cut costs tremendously and sparked investor confidence that has boosted Ford’s stock price by more than 60 percent in 6z weeks.
Leading that charge, at least symbolically, is billionaire investor Kirk Kerkorian, who announced recently that he had acquired almost 5 percent of Ford’s common stock — and wanted to buy more.
His automotive adviser, Jerry York— a former member of GM’s board — said he sees tremendous progress at Ford.
“They’re further along in North America than GM — and GM had a two-year head start,” he told the New York Times.
The rivals bring different strengths and weaknesses to the table, but both have made profound structural changes to their businesses to cope with the stagnant economy, global competition and changes in consumer tastes.
Ford Motor Co.
Here’s how they’re doing, starting with Ford:
• CEO Alan Mulally has resurrected confidence in the company’s plan and the management team that must carry it out.
• The company has been celebrating quality gains with a new “Drive One” campaign.
• Kerkorian expressed his faith in Ford’s future, driving up demand for Ford shares.
• The company surprised analysts by reporting a first-quarter profit of $100 million.
That said, the company still faces challenges:
• Getting American consumers to even consider a Ford remains challenging.
• You can’t cost-cut your way to a profitable future. At some point, Ford needs to stabilize market share in the United States and get a bigger slice of the growth overseas.
• Coordinating worldwide engineering and global purchasing is a complicated venture. By all accounts, Ford is behind its rivals in this endeavor.
General Motors
What’s going right at the beginning of GM’s centennial year:
• Profound global integration of vehicle architectures and business processes is beginning to generate significant savings — much of it steered back into making better vehicles.
• An established and growing presence outside of the United States is generating strong profits and growth.
• Leaner North American operations have already helped cut $9 billion annually in fixed costs, and the new UAW contract promises to save GM an additional $5 billion annually by 2011.
• Although it posted a $3.3 billion loss in the first quarter, most of that was due to onetime charges, and the loss on operations totaled only $350 million, less than analysts had expected.
But several factors — largely out of its hands — are holding GM back:
• Former parts division Delphi Corp. has been unable to emerge from bankruptcy after 2z ye 1/2 r 1/3 and is a drain on GM’s bottom line. GM has taken $8.3 billion in Delphi-related charges to date.
• Partly owned financial company GMAC LLC continues to bleed red ink, due primarily to problems in the mortgage industry. GM owns a 49 percent stake in the company and shares in losses.
• Local UAW contract disputes have threatened GM’s ability to shift its production from pickups and SUVs to cars and crossovers.
• The 10-week long strike at supplier American Axle & Manufacturing has crippled production of GM pickup trucks and sport utility vehicles. And on Thursday, GM said it would contribute $200 million to a settlement package to bring the strike to a speedy end. GM said the strike cost it $800 million in the first quarter, and through April, caused it to make about 230,000 fewer vehicles.
A lot alike
But in the big picture, both
automakers are much more alike than different.
It’s not a big surprise: They are similar in size, structure, labor and executive costs, product lineup and geographic reach.
GM ended the first quarter with $23.9 billion in cash and $7 billion in credit facilities. By comparison, Ford ended the quarter with total liquidity of $40.6 billion.
Since 2005, GM and Ford have lost a combined $65 billion and been mired in turnaround plans, closing dozens of plants and shedding more than 60,000 jobs.
Shareholders haven’t enjoyed the ride much, either: Dividends have been trimmed at GM — and eliminated at Ford — and the shares have plunged to historic lows.
But there is hope their fates — as well as those of Chrysler LLC — are poised to improve.
“This housing situation and economic depression is masking how much progress these companies have made,” said Mike Jackson, CEO of Auto- Nation Inc. As soon as the U. S. economy bounces back, he said, “you’ll really be able to see how much.”
