Ford Back Peddling to Make Ends Meet

December 4, 2001

Sacramento - Ford may have met a fate undeserving of any company this year. True, many of its problems were self inflicted, but if there is any truth to the adage "when it rains it pours," then Ford has met with quite a storm and it is going to take some very savvy maneuvering to get the company back to safe ground.

No one doubts that Ford will emerge as a growing enterprise once it has gotten through the recession, paid for the tire recall, solved all of the quality problems related to the Ford Explorer and now possibly the Focus model, and paid off the legal expenses of the recently filed class action suit. The question is what will be left of Ford Motor after all of this. Unfortunately, what will surely emerge is a far different company than what we saw as recently as a year ago. Ford appears to be facing severe setbacks, not just financially, but in R&D and in marketing.

Less than two weeks ago Ford announced that it was suspending a project aimed at developing a hybrid power plant for its SUV fleet. The company has also decided to can a plan to develop a CVT (constantly variable transmission). This is a perfect case where Ford had an opportunity to lead the competition, now it will trail. Ford established a joint venture with Germany's ZF Friedrichshafen to develop and build CVT's at its Batavia, Ohio plant. And in promises similar to the one it made about developing the most fuel-efficient fleet of SUVs, this one also is being broken. Ford officials won't say what is wrong. All they will admit is that a Ford model won't be running with a CVT until sometime in 2003.

Honda has offered a CVT in its Civic model since 1996. Audi already offers one and Saturn will offer one as well on a 2002 model.

Ford is said to be preparing to announce a cost-cutting plan as early as the middle of this week. There is about as much speculation as to how deeply job cuts will go as there is on who will win the Super Bowl. There have been numbers touted in "the hundreds" and in "the thousands." There is also word that its voluntary retirement plan for salaried employees did not find many volunteers and it is eliminating matching contributions on its 401K plan for employees. One year ago, Ford was giving personal computers to its employees.

William Clay Ford's toughest decision right now is which assets to cut, which to put on hold and which to continue to develop. Decisions made today could affect Ford for a decade into the future.