Ford reports “good” news with its bad earnings release

January 24, 2008

Today Ford reported a 2007 full-year net loss of $2.7 billion, which translates to $1.35 per share. That’s the bad news. The good news is that this isn’t nearly as dreadful as 2006’s full-year net $6.72 per share loss of $12.6 billion.

The best news was that Ford didn’t evoke the economy as the source of all its problems. (Expect to see one or two automakers blame the economy, yet forget that the same economy allowed many rivals to pull significant profits.) Instead, CEO Mulally simply pointed to the decrease in losses as signs that the company’s rebound strategies are working. Key to these strategies is a push to accelerate new and better products to the market.

If there was one statistic in the earnings release that was humorous, it was that Ford’s Premier Automotive Group actually made a $504 million profit. You remember the much-maligned PAG, with Land Rover, Jaguar and Volvo. As it turns out, as Ford is in the final moments of Land Rover and Jaguar ownership, Land Rover actually pulled a profit. Volvo, the marque Ford wants to keep, accounted for an undisclosed loss.

Ford also predicted equal or better results for 2008. We certainly hope for better…no, for the sake of the company employees, make that “much, much, much better”

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NAIAS Press Release Strategies: Quantity vs. Quality

January 14, 2008

It’s time for the Auto Show in Detroit, which means our email server here is hotter than a Chrysler turbocharged four cylinder engine with a plugged radiator. It seems that every five minutes a new press release from an automaker hits the screen.

When it comes to PR, companies take approaches that are as different as pralines and lint. While some go for a targeted, minimalist effort, others take a “quantity over quality” strategy. And this PR blitzkrieg is exactly what Ford chose.

The Ford brand alone sent out nine press releases on Saturday night. It’s like the PR and marketing teams figured that by shooting out enough press releases, the media and financial analysts will somehow forget the Blue Oval’s woes.

Among Ford’s “important” news:

  • “FORD ADDS GLASS ROOF OPTION TO MUSTANG LINEUP, MEETING CUSTOMER DESIRE FOR MORE NATURAL LIGHT.” (Correct us if we’re wrong, but hasn’t the Mustang been available as a convertible for over twenty years?)
  • “NEW 2009 FORD F-150: MOST CAPABLE” (Which we can only assume is “most capable being bought by consumers”, especially compared to the Focus, or even a glass-roofed Mustang.)
  • “NEW 2009 FORD F-150: MOST CHOICE” (Evidently, putting out two releases on the same model is Ford’s tactic du jour. This one simply states that the Ford F-150 will offer three cab styles, four box options and seven unique trim levels for 35 different configurations. We can hear Ford’s television ads already: “F-150 for Pro-Choice Americans.”
  • “EXPLORER AMERICA CONCEPT HIGHLIGHTS FORD’S VEHICLE SUSTAINABILITY STRATEGY” (We were surprised to see that “not killing drivers with cheap suspension, top-heavy bodies and OEM tires prone to separating” was not included, only better fuel economy.)
  • “FORD REVEALS SMALL-CAR VISION FOR NORTH AMERICA” (All we know is that it involves a model called the Verve…and we’re guessing the rest of the vision includes praying to any god that will listen that people buy three or four hundred thousand of them.)

Then there are some other releases about the Sync feature (which responds to driver commands, with the exception of “make my Ford a Toyota.”) And as we were writing this section, Ford sent us another press release indicating that the Edge will go on sale in Brazil.

So to summarize Ford’s main message seems to be business as usual – lots of product teams going nuts, but nobody seems to be on the same page.

The Ford brand’s machine gun PR approach is also being used by Mazda, which sent seven press releases. Three were to announce that there will be three concepts at the show (but two releases covered single concepts, while the additional release discussed one in another release with the RX8 concept.) The last release we got from Mazda was to indicate that the Mazda CX-9 won the 2008 North American Truck of the Year Award, which would seem important enough to reduce the other messages coming from the company to elevate the impact of this one.

Whereas it seems Ford did everything wrong, GM did it right. Two releases:

  • General Motors North American International Auto Show Vehicles Are Driven By Design, Technology And Lower Environmental Impact

  • Chevrolet Malibu named 2008 North American Car of the Year

    No confusion here. Good job GM!

    Here are some other NAIAS press releases from this week:

    • “AUDI R8 V12 TDI CONCEPT: DETROIT 2008 Audi is presenting a revolution in the top class at the Detroit Auto Show 2008 – the first 12-cylinder diesel engine in a high-performance roadgoing sports car. The V12 TDI with a displacement of six liters powers a concept car based on the Audi R8. This unit generates a huge 500 hp and 1,000 Newton-meters (737.56 lb-ft) of torque.” (24 mpg is projected)
    • “LINCOLN UNVEILS ULTIMATE TOURING VEHICLE CONCEPT; PREMIUM UTILITY FEATURES ELEGANCE, SPACE, EFFICIENCY (Our ultimate touring vehicle probably would have a Porsche, Ferrari, Aston Martin, BMW or Bentley emblem, but we’re sure that some 75 year old somewhere who will look at Lincoln’s concept and get weak in the knees.)
    • “Bentley sets new global sales record in 2007” Strong growth in both emerging and traditional markets takes Bentley above 10,000 units for the first time. (We’ve seen more new Bentleys on the road in the last year than we did cumulatively during the previous decade.)
    • “BMW ANNOUNCES PRICING FOR THE ALL-NEW BMW M3 COUPE AND SEDAN AT THE 2008 NORTH AMERICAN INTERNATIONAL AUTO SHOW IN DETROIT” hen the vehicles go on sale in March, the Coupe will be priced at $57,275 and the Sedan at $54,575. (Watch out Corvette, there’s a more-elegant, better-built competitor with a V8 coming to your price range soon!)
    • “Lexus Announces Pricing for All-New 2008 IS F” It’s a base MSRP of $56,000. (But if it’s anything like the sticker prices we’ve seen for ES350 examples sitting on lots, you’ll have a better chance of scoring a date with a Victoria’s Secret model than finding an IS F for under $70,000.)

  • Barrett-Jackson and “The Judge” Settle

    January 9, 2008

    I vowed to myself that I would never write about this again, but in the interest of making sure automotive enthusiasts know the facts, I felt it was important to report that according to Sports Car Market, Barrett-Jackson and the seller of the Ramchargers Hemicuda have settled.

    SCM reports that the settlement was mediated on Jan 7, 2008, and that David Clabuesch (“the Judge”) issued a written, notarized statement that reads:

    “Upon review of auction video footage and further consideration of the relevant facts, I, David L. Clabuesch, have concluded that with respect to the January 20, 2007, auction of my vehicle – a 1970 Plymouth Hemi-Cuda – conducted by Barrett-Jackson that I can no longer pursue any action alleging auction irregularities, including the claim that the car was short hammered while on the block. I have also determined that there was no relationship between Barrett-Jackson and the buyer of my vehicle, nor was there any conspiracy between Barrett-Jackson and the buyer of my vehicle, or any other person, to short hammer the sale of the car. I no longer believe that Barrett-Jackson violated the terms of the consignment agreement in conducting the auction sale or otherwise breached any duties to me as a consignor.”

    Personally, I am happy that the sides have found common ground and settled.  I wish all sides the best of luck, success, health, and happiness in the future.    


    Cutting through the automakers’ sales results sales pitch

    January 8, 2008

    While the rest of the country is busy crunching numbers to predict who will be the next President, at the Four Wheel Drift, we’re up to our eyes in auto manufacturers’ reports for 2007 deliveries and sales.  If we could predict in politics the way we forecasted sales for this year, we’d be making much more money working in D.C.

     The fact of the matter is that we don’t always believe the spin handed to us with the results, so we like to see what really mattered in the companies’ 2007 reports…and which allows us to predict what will happen in 2008 and beyond. 

    Like we expected, it was a brutal year in the car business for the usual suspects.  And to no surprise, the savvy European and Asian brands not only weathered 2007, but outright excelled.  

    Ford
    First let’s look at the Blue Oval boys’ 2007:
     

    • Ford’s 2007 sales totaled 2.57 million, which was down 12 percent from 2006. 
      • Retail sales were down 10 percent and fleet sales were down 18 percent (including a 32 percent reduction in daily rental sales). 
      • More than two thirds of Ford’s sales decline reflected discontinued products.

    FoMoCo Brand Sales              
       Ford         2,101,244 2,433,086 -13.6
       Mercury         168,422 180,848 -6.9
       Lincoln         131,487 120,476  9.1
       Jaguar         15,683 20,683 -24.2
       Volvo         106,213 115,807 -8.3
       Land Rover         49,550 47,774 3.7
          Total Ford Motor Company         2,572,599 2,918,674 -11.9
      Mustang          134,626 166,530 -19.2
    F-Series         690,589 796,039 -13.2
                   

                   

                   

                   

      

    Since Ford put all of its eggs in the truck basket, it shouldn’t come as a shock that a 13.2 percent decline in F-Series trucks didn’t help overall brand performance.  And once again, those who predicted that the retro look would reinvigorate the Mustang (as well as told us we didn’t know you-know-what from Shinola when we emphatically disagreed with selling-out the brand for any short-term image gain with Baby Boomers) were proved totally wrong.  Mustang deliveries in 2007 fell 19.2 percent from 166,530 to 134,626 – and many of those are still sitting on dealer lots despite low APR financing. 

    Selling Jaguar and Land Rover to Tata was obviously a great move.  If Ford can’t do something quickly to revive Volvo’s tired product line, it will be looking to send away its favorite Swedes, as well.    

    Volvo’s reputation for electrical gremlins, expensive maintenance (not to mention often inept dealer service centers), and not so amazing fuel economy might be credited with steep declines in S60 (down 28.1 percent to 18,511 cars), V70 (down 32.7 percent to 3769), XC70 (down 3.8 percent to 12,628), and XC90 (down 5.6 percent to 31,336).   

    General MotorsThere are two bright spots at GM. 

    First is GMC, which actually saw 5.1 percent growth in the face of a market shunning domestic trucks.  Credit for GMC’s performance goes directly to the Arcadia, which sold 72, 765 units in its first full year of production. 

    The second star at GM is Saturn with 6 percent growth.  Unfortunately, the percentage growth isn’t nearly as great as it should be.  Even with all its accolades, the Aura fell just short of 60,000 units – not even good enough to crack into the leaders in the midsize segment.  The true Saturn surprise looks to be the Sky, which while not outselling its Pontiac Solstice sister, did manage to see a 30 percent increase against the Solstice’s 15 percent decline. 

    Buick’s performance reflects the company’s decision to focus on well-built soft, boring crossover Utes, instead of soft, boring, and poorly-executed sedans during a time when people are slow to buy either. 

    As for Hummer, all we can say is that the only people more shortsighted than Hummer consumers are the yutzes who felt that investing in free-standing Hummer dealerships was a good business decision. 

    Speaking of bad business decisions, the Chevy brand is busting at the seams with them.  When the lone bright spots in the Bowtie group are the long-term declining Suburban (which pulled-off a stunning 8.4-percent increase to 83,673) and the Aveo (up 15.1 percent to 67,028 units), an also-ran in the growing sub-compact segment, there’s not much about which to be happy.  Okay, we’ll throw-in the Corvette, because every year the car gets better and units always sell, but niche products aren’t enough to save GM.  Like at Buick, Cadillac, Pontiac, (and Ford, for that matter), Chevy needs top-quality products in the core segments: large sedan, midsize sedan, small sedan, and sub-compact fuel sipper.  Until then GM fans should get comfortable with results like these: 

    Buick 185,791 240,657 -22.8
    Cadillac 214,726 227,014 -5.4
    Chevrolet 2,265,641 2,415,428 -6.2
    GMC 505,746 481,222 5.1
    HUMMER 55,986 71,524 -21.7
    Pontiac 358,022 410,229 -12.7
    Saab 32,711 36,349 -10.0
    Saturn 240,091 226,375 6.

      

    Chrysler

    The board room at Daimler-Benz has to be breathing much easier this year with Chrysler as someone else’s nightmare.  

    CHRYSLER BRAND 543,011 604,874 -10%
    JEEP BRAND 475,237 460,052 3%
    DODGE BRAND 1,058,402 1,077,579 -2%

     

    Chrysler could only manage a 10 percent decline in sales, with brand image leaders 300 and PT Cruiser slipping 16 percent (to 120,636) and a whopping 28 percent (to 99,585) respectively.  We’re actually surprised that it took this long for the PT Cruiser to fall under 100,000 annual units, but evidently there are still many older Baby Boomers trying to look “cool” by driving a Neon-sized bucket of rattles…come to think of it, maybe the extended run can be attributed to these buyers replacing PT Cruisers every few years as they fall apart.

     One might call Jeep’s 3-percent increase a big win, but with all the new products in the brand’s lineup, it’s actually a big disappointment. 

    Similarly, Dodge managed its 2-percent decrease in deliveries with a whole host of new products…most of which replaced poorly-built coupes and sedans with nicely-powered ugly crossovers that while built better, are aplomb with cheap materials.  

    Furthermore, Chrysler has been running plenty of zero-down, zero-percent financing deals to move existing inventory.  And to top off the carnage, even the “lifetime” powertrain warranty doesn’t seem to be helping.  

    Toyota

    Best-ever year-end sales of 1,313,651 units, up 2.7 percent 

    The fact that Toyota had record sales is proof that offering solid products in core segments is the winning strategy.  When Toyota sees a product not fairing well, it makes it better, as proven by the Tundra, which helped Toyota light trucks deliver best-ever sales of 977,997, an increase of 3.2 percent. 

    Unlike the domestic companies, which always maintained an “in-the-now” product philosophy, Toyota is now reaping the benefits of developing fuel efficient small cars like the iconic Prius (up a huge 68.9 percent to 181,221 units) and underwhelming, but still fast-selling Yaris (up 20.2 percent to 84,799.) 

    Lexus witnessed its cars jump 9.1 percent to 200,334 units, but light trucks (meaning SUVs) slipped 7.9 percent to 128,843.  Anyone who doubted the sanity of offering a hybrid powertrain in the flagship LS need only look at the near 80-percent jump to 35,226. 

    Let’s not forget to mention Scion, which is actually considered a part of the Toyota brand for sales purposes.  In general, Scion stunk it up in ’07, with the xB dropping over 25 percent (to 45,834) and the tC falling just short of 20 percent to 63,852. 

    Honda

    Ford, Chrysler and GM can cry all they want about how horrible the market is and we still won’t shed a tear, because Honda saw record total vehicle sales of 1,371,438 (up 4.5 percent) in 2007.  Just for the record, this is the 11th consecutive yearly sales record and 14th consecutive year-over-year sales increase for the company.  As for the complaint about lagging SUV sales from the Domestics, Honda responds with record light-truck sales across Honda and Acura brands of 669,327 (up 0.3 percent), representing 43 percent of total vehicle sales. 

    Acura

    Honda’s entry-level luxury brand did falter by 10.8 percent to 180,104 vehicles.  But it wasn’t all bad, as Acura showed its SUVs are still very desirable by posting record year-end sales, eclipsing 2006 by 29.1 percent. 

    Audi

    Audi dealers sold 93,506 new vehicles during 2007, up 3.8% over 2006.  This is especially impressive, considering that this is actually sales to customers, as opposed to other manufacturers quoting deliveries to dealers, which still often need huge incentives to get customers to buy the cars off the lot. 

    Subaru

    187,208 total units for the year -7% 2007 

    Nissan

    Nissan saw sales of 76,900 units, a 2.2 percent decrease compared with last year’s 78,663 units sold.  If it weren’t for the great performance of the Altima (284,762 – an increase of 22.1 percent), though, things would have looked much worse.  Things look up for the manufacturer, too, since the GTR supercar gives a much needed halo image, while a new (and much more competitive) Maxima isn’t too far off on the horizon. 

    Infiniti

    On the other hand, Infiniti was an overall winner.   Its great G-series helped the company to increase car sales by 7.6 percent to 93,718. The 33,320 units of SUVs, however, were 3.3 less than 2006.   

    The BMW

    BMW and MINI combined for best-ever annual sales in America for both its brands of 335,840 vehicles, an increase of 7.1 percent over the 313,603 vehicles sold in 2006.    BMW seems to be the blueprint for success, with the 3-series showing an 18.6-percent increase to 142,490 (and the factory simply can’t keep up with 335 coupe and retractable-hardtop convertible orders!)  

    And even though it ain’t the most fuel efficient thing on the planet, the X5’s quality and performance led it to a 31.4-percent increase to 35,202 units. 

    Mazda

    The forgotten Japanese automaker (at least the one not named Mitsubishi or Isuzu) had its best year since 1994.  Mazda sold 296,110 vehicles in America, an increase of 10.2 percent.   The vehicle leading the revolution at Mazda isn’t wielding a Wankel, nor is it a British-inspired roadster, rather the fun, comfortable, well-built 3 compact.  It increased its sales by 27.4 percent to 120,921. 

    Speaking of Wankel rotary engines, the RX8 was off 38.3 percent to a “kill me now” 5,767 units. 

    VW

    Volkswagen sold 230,572 total units in 2007, a decrease of 1.9 percent.  We can simply attribute this to another 5000 or so people realizing that despite the great packaging, nice steering, available diesel engines, and wonderful seat heaters, the cars are statistically more likely to break down than anything short of a Land Rover. 

    Hyundai

    Hyundai increased total annual sales from 455,520 in 2006 to 467,009 in 2007.  The performance was its ninth consecutive gain, courtesy of consistently improved products.  

    Kia

    Kia’s bang-for-the-buck products were the key for a 14th consecutive year of record sales with 305,473 units sold, a 3.8-percent increase from 2006. Like Hyundai, Kia didn’t have a single silver bullet, rather just a good overall lineup representing most of the core product segments. 

    Porsche

    Porsche Cars North America delivered 34,693 units in the US, which exceeded 2006’s record-breaking sales of 34,227.  If you’re a naysayer who hates the Cayenne, and it is not enough that Porsche’s SUV helped the company to its fourth consecutive annual sales increase, then just put this statistic into your pipe and smoke it:  in 2007 Porsche sold 9,649 Boxsters and Caymans, 12,493 911s…and 12,547 Cayennes!


    Automotive New Year’s Resoltions

    January 1, 2008

    Forget about exercise, losing weight or getting out of debt, because there are many other New Year’s resolutions that are of much greater importance to you and your car. Here are some that I have made:

    I will change the oil in my daily driver every 5,000 miles!
    Let’s face it – the easiest and least costly way of ensuring a car runs forever is to change the oil. Most cars running on modern non-synthetic oils can do just fine when the sump is drained and filter replaced every 5,000 miles. If we can brush our teeth twice per day, we can change the oil in the car we drive the most once per 5,000 miles.


    I will change the oil in my classic cars once per year and brake fluid every three!

    Even if the car only covers 250 miles in a year, the oil still attracts carbon and moisture, which reduces efficacy. DOT 3 brake fluid also absorbs water, which can cause brake cylinder pistons to seize.

    I will rotate the tires on my daily driver at least once per year!
    Why am I surprised when my 21,000 mile Toyota Avalon has almost no tread on the front tires? I put off rotating the tires for two years, for god’s sake. Rotating the fronts to the rear (and vice versa) can immediately improve traction and improve tire tread life. Additionally, rotating left to right can improve ride by removing tread imperfections created by suspension geometry and weight characteristics. Even though Chevy dealers send reminders to rotate Corvette tires, Corvettes (like many performance cars) have directional tread and different sizes, making rotating impossible (or at least, really, really, really unsafe.)

    I will check tire pressure once per month!
    Every ten degrees of ambient temperature change results in a variation of one psi of tire pressure. This means that if you last checked your tire pressure at 70 degrees, the reading at 30 degrees will be lower by at least four psi. Valve stem leaks and moisture changes can create additional loss, which means faster tire wear, worse fuel economy and sloppier handling.

    I will drive my classics once every six weeks!
    Why own a car if you’re not going to drive it? Every collector says they’ll drive their cars, only to get lazy. Sure, if the weather is nasty, it’s okay not to drive classics that are as topless as a Vegas showgirl. Just remember to get out for a ride (with the car, not the showgirl) once the weather permits. If you can’t find the time or desire to drive the car, sell it to someone who will use and enjoy it, because the car will simply deteriorate and be a money pit the more it sits.

    I will wax my cars every six months!
    Wax not only makes a car shine, it protects the paint against chips, contaminants and small scratches. Waxing doesn’t take that long, plus it prevents the need for multi-stage polishing later. Also, products like those from Griot’s Garage make waxing (and polishing) easy and fun…not to mention they smell like topical drinks.

    I will help more children to appreciate cars!
    By appreciate, I mean many different aspects. For teens, it means understanding vehicle dynamics and limitations. For kids it means finding cars, both old and new, as cool and fun. For all it means caring for current family cars and desiring vehicles that they currently cannot afford or justify. It also means understanding that ownership of any car is a responsibility, as well as a wonderful privilege – automobiles increase our level of freedom and ability to pursue our dreams.

    I will learn more about how to fix my cars myself!
    The more we know about our cars, the less it costs to maintain them. Additionally, the more we understand how all the parts work, the more we respect them.

    I will take steps every month to achieve owning (or simply driving) my dream cars!
    We only go around once in this life. Just because we can’t afford a brand new supercar doesn’t mean enjoyment of these fine automobiles should escape us forever. Personally, I plan to drive or own dozens of cars that others dream about without coming at the expense of retirement or my kids’ education. By buying low, selling high, saving, waiting, and being smart, we can all drive vehicles usually associated with only the rich and famous.