Ford Flags: Flogs Jags

June 13, 2007


Ford’s survival strategy is becoming clearer. It is back to basics. Not quite ‘any color but black’, but also no distractions from the luxury sector of auto manufacturing. So Jaguar is up for sale. As in the recent Chrysler battles, equity capitalists are on the alert.

Ford needs an injection of cash big time, short-term. In the UK, attention is focused on the much loved Jaguar marque, and the original Chelsea tractor that is Land Rover. At the moment both products are losing money, contributing to Ford’s short-term cash crisis. The break-up and sale of its luxury subsidiary, Premier Automotive Group (PAG) is widely anticipated.

Land-Rover has made admirable productivity gains after a confrontational ‘last chance’ warning for its Solihull plant by PAG chief Mark Field, three years ago. It is currently in better shape than Jaguar and moving towards profitability. In the US the Jaguar marketing has been spectacularly unsuccessful, and is seen as too obviously a Mondeo in disguise.

Jaguar and Land Rover would have attraction as stand-alone acquisitions, but disentaglement would be difficult. PAG also has the profitable Volvo operation, which is more distinct, and more profitable. In strategy terms, the likely outcome is for Ford to move quickly for short-term cash reasons to divest itself of the various bits of PAG.
According to The BBC,

Under chief executive Alan Mulally, it is all hands to the pumps in the US, where Ford is focusing all its resources on rebuilding the Blue Oval as a brand after losing more than $12bn in 2006 …

One industry insider has suggested that the Renault Nissan alliance headed by Carlos Ghosn is likely to be interested. However, if as seems likely, the sales go through, Private Equity Partnerships will most likely be involved. Magna, the Canadian automotive components firm, which recently failed in its efforts to buy Chrysler, has already been mentioned.

Like real-life vultures, these raptors have a useful function in the Darwinian scheme of global survival of the economically fittest.


Chrysler Chills: Is this Thermal Denial?

February 18, 2007

Ford and GM have shed nearly eighty thousand jobs. Chrysler now announces another 13,000 job cuts in North America. Chrysler/Daimler faces a tricky future as its head, Dieter Zetsche, weighs up all options for the ailing partnership. Against the growing reality of the job-cuts we ask: is there still thermal denial in the American auto-industry?

The overall story is now well-established. The mighty auto-industry in America is in a tailspin. There is a sense of the decline and fall of the Fordist Empire. Some of us learned that was caused by enemies within, as much as enemies from outside. Which translated points to the fiendish plot by Foreign-owned auto-companies to metamorphose into American companies.

Sales and sales projections say that big is not as beautiful as it was. It seems likely that the invaders such as Toyota can probably scale upwards in the new midi- or cross-over utility vehicle market more easily than the American auto-giants can scale down into the market.

Meanwhile at the Detroit Show

Meanwhile, the Detroit show recently indicated the approach to the market from the ailing giants. Chrysler could claim to have played a big part in creating the market for the rather large People Carriers. Tom LaSorda, head of the American Chrysler division of the partnership said as much at the show. He also indicated that the future product the company was backing was …The Grand Caravan, another people carrier.

In a sideshow, the Corporation’s chief economist was offering another interesting take on its thinking. Van Jolissaint described a gulf between views he found prevalent in Europe, and those in the States. He was dismissive of the Stern report and suggested that climate change was “way, way in the future, with a high degree of uncertainty”. He added for good measure that the Europeans appeared to be suffering from a quasi-hysterical condition producing Chicken Little behavior, running around saying the sky was falling in. The audience from within the auto-industry seemed to find both solace and confirmation of the correctness of its own views from his argument.

It may have escaped the notice of the audience that the Chrysler part of the partnership was performing particularly weakly, with strongest performance from the European Mercedes-Benz car and truck operations.

After the Show was over …

After the Show was over the auto-makers returned to their beleaguered manufacturing bases, and economists to wherever economists return to (Platonia? Milton Freedonia? Maynardsville?).

Then on Valentine’s day (of all days), Chrysler announces 13,000 job losses. The Chrysler Chief (sounds like part of a music group) is pressed about the future of the American side of the partnership. Dieter Zetsche, for it is he, indicated that he would be exploring all options with new partners.

But Mr Zetsche who used to run Chrysler, has also been engaged in a little denying. According to the BBC:
Mr Zetsche denies any plans to sell the company and pointed out that its problems could be temporary and cyclical .. “No one knows if there is a long-term shift in trends”

So what’s going on?

From a leadership perspective, who would wish to be in change of a global car operation at present? There are a very small number of names who are frequently mentioned as today’s super-leaders, and inheritors of the mantle of earlier greats. Am I right in thinking that the names are largely non-American? If so, is that not puzzling? And who will be in change of whatever is left of Chrysler a few years down the line? Probably not Mr. LaSorda, and that’s not at all because he bears an uncommon resemblance to another once powerful leader. I will leave that as a little challenge to anyone interested.

And why do I think the current crop of successful Auto-chiefs are not American? I hesitate even to offer the most tentative of hypotheses. I am still trying to work out why there are have been so few great English football managers, and such a statistical surfeit of Scottish ones. Or am I wrong about that as well?

Poor Leadership slammed at Ford and GM

January 11, 2007

Leadership at Ford and General Motors has been identified as a key factor in their decline against Toyota and other competitors. As Ford plugs its innovative link with Bill Gates, industry experts predict a further decline in its fortunes. It is possible that the industry has developed mechanisms that are protecting it from acknowledging the extent of its decline.

In a recent post we asked whether Toyotaoism is replacing Fordism. The debate following that post has continued. This week’s news from the US Motor Show is accompanied by further press reports on the competitive challenges facing US car manufacturing, that bell-weather of the economy. The battle for commercial success seems to be favouring the more philosophical arguments for Toyotaoism.

BBC reporter Steve Schifferes was at Detroit for the motor show. He interviewed its North American head Mark Fields, but interestingly, the Company’s new overall leader, Alan Mulally is not giving press interviews at the Show. The company has retained its high profile stance at the show, emphasizing its continued innovation, majoring on a link with Bill Gates and Microsoft which will produce a new in-car audio system (‘Sync’) in an exclusive one-year tie up.

Industry insiders remain unconvinced

Industry insiders remain unconvinced of Ford’s prospects. Ford lost $ 17 Billion last year and its factories are in hock to its $20 Billion bank borrowings. Its voluntary redundancy plans are proceeding apace.

Professor James Levinsohn of the University of Michigan said the US companies have only themselves to blame.

Ford and GM regularly round up the usual suspects when searching for a reason for their troubles but the real culprit is the obvious one. These firms are not making products that people want to buy. The responsibility for that lies with what passes for leadership at these firms.”

Blanking out the bad news

Levinsohn claims that he has been unable to find a placing for his analysis in auto-industry publications. He believes that the publishers are concerned that such the magazines are worried that such bad news stories would put a magazine under pressure from its advertisers.

State of denial

It is not unknown for academics to claim that their work has been rejected on non-academic grounds. Independent evidence to assess such a claim is hard to obtain. However, the brave face of the industry at Detroit is itself some evidence of the industry’s need to talk itself up. Yet, Ford’s main claim for innovation as the Microsoft link seems peripheral to its commercial problems. We may be witnessing what Chris Argyris has called covering up the cover-up. That is to say, a state of denial

Tundra vanilla with cherries?
The show also signalled the continuing advance of the Totota brand. Its Toyota Tundra is marketed as an American pick-up, designed and manufactured in the good ‘ol US of A.

The Asian automakers have cornered the market on vanilla,” says Global Insight automotive analyst Rebecca Lindland “..Now they’re adding the hot fudge chocolate with cherries on top, which is what they have to do to progress in the US market .. They are going after a new segment with its truck – heartland America, NASCAR drivers, who are more patriotic [and] not Toyota drivers typically”

The story is not completely bleak. The Economist has been following the auto-industry for some years, and commented (January 13th 2007) that prospects for GM ‘have dramatically improved’. Even this more positive view suggests that the company seems to have been galvanized by stake holder Kirk Kerkorian’s decision to pull his 10% stake last year, and that recovery and rationalisation if it works ‘will achieve economies of scale that only Toyota can match’, and that GM’s core North American operations are still only ‘heading in the right direction’.

Questions to ponder

In which case there are further questions to ponder. Are we witnessing leaders operating with a clear vision for the future at Ford and GM? Are the companies putting on a brave face? Or are they operating in a state of denial?