Ford Motor Company's Plan for Recovery

With Ford's market share in the U.S. slip-sliding away, president of the Americas Mark Fields has said the company has to "change or die." But his long-awaited "Way Forward" plan, announced amid much hype on January 23, fell short of the radical turnaround plan many analysts expected.

Fields said Ford plans to close 14 plants and reduce its workforce by 30,000 over the next six years. The closures are designed to raise Ford's North American plant utilization to 100 percent by cutting capacity by 1.2 million units, or 26 percent, by 2008.

But not all the plants to be closed were identified, leaving some analysts worried about the effect on the morale on the workforce. The plan was also criticized as soft on detail in other areas, including product plans (Fields vowed to start making vehicles), cash flow, and earnings guidance.

Ford's North American operations lost $1.6 billion last year, and its share of the U.S. market slumped to 17.4 percent, down from 24.1 percent in 2000.

Product Is The Key
Ford's overreliance on trucks and SUVs (in the five years to 2003, the company launched just one new car in the U.S., the Focus, which was designed in Europe anyway) has backfired badly; sales of the Explorer have almost halved since 2000. The Blue Oval badly needs a new hero vehicle.

After a slowish start, Fusion sales are steadily picking up, and the good-looking Edge (above) crossover has hit written all over it. There's a lot of talk about a new B-segment (smaller than Focus) subcompact in 2008. But might be better off upgrading the current Focus to the higher-quality European version, built on the same platform as the Volvo S40 and available with fuel-efficient powertrains, as the market for B-segment cars in North America is unproven. Ford will depend on the component set developed for the new Volvo S80 for key new vehicles, including the Lincoln MKS sedan (right), which will replace the LS. Hybrids will be a headline technology, with 250,000 a year promised by 2010, including Five Hundred and Mercury Montego, plus Edge and its Lincoln clone, the MKX.

The Way Forward?
• Factories: Seven plants, including Wixom assembly (Lincoln LS, ex-T-Bird), St. Louis (Explorer/Mountaineer/Aviator), Atlanta (Taurus, Sable), and seven additional facilities.
• Jobs: 25,000 to 30,000 plant workers by 2012; 4000 white-collar workers; 12 percent of company officers.
• Costs: Material cost reductions of at least $6 billion by 2010.
• Prices: "We'll bring sticker prices more in line with actual transaction prices and cap 'cash on the hood' rebates as we introduce new cars and trucks into the marketplace."