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Musing on Toyota's Financials


RichardJensen

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You have not a clue what the American auto industry was like in the late 70's.

Where do you get this info on the history of Chryslers? As I remember Chrysler was not at all in financial trouble when they were bought out by Daimler. And Chrysler management did sell out. The financial problems at Chrysler came after the Germans had control.

 

Of course the real target of Daimler was Ford Motor Company. The Ford family would not sell out, preferring to run the company into the ground themselves.

The American auto industry in the late 70s and early 80s? Not from first hand experience.

 

However, I do know that both Chrysler and Ford were lucky to escape. That Ford did not need to borrow from the government because their product lineup (and financial position) was stronger than Chrysler's (essentially Ford's trucks and commercial line, along with a few cars like the Town Car kept them going).

 

Moreover, I am well aware that Chrysler was not in what would be considered, by automotive industry standards, poor health when they were acquired by Daimler.

 

But they were a scant three-four years later. As they had been in '91-93.

 

Do you see a pattern emerging here?

 

I, for my part, consider the cyclical nature of the domestic auto industry to be so well established as to be beyond disputing. Perhaps you would care to disprove this theory with the name of a domestic auto manufacturer that has steadily grown revenue and profits over the last 40 years.

 

A company that is positioned (through a diversity of revenue streams) to take advantage of cyclical downturns at its competitors will gradually displace them in the market. Every time any of the Big three falter, Toyota, Honda, and the other imports gain a bit more ground. Maybe this time from Chrysler, that time from GM, the other time from Ford; but they steadily and relentlessly pickup ground.

 

And once more, I ask you, what is wrong with Ford diversifying their revenue sources? I mean, profit margins are up to 20% in the financial services industry. What's wrong with expanding that line of business?

 

Seriously.

 

What objections do you have that are founded on solid business principles (as in: this would be illegal, it would be a conflict of interest, it would divert resources, insufficient ROI, etc.), not on references to Chrysler or Lee Iacocca?

 

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The American auto industry in the late 70s and early 80s? Not from first hand experience.

 

However, I do know that both Chrysler and Ford were lucky to escape. That Ford did not need to borrow from the government because their product lineup (and financial position) was stronger than Chrysler's (essentially Ford's trucks and commercial line, along with a few cars like the Town Car kept them going).

 

Moreover, I am well aware that Chrysler was not in what would be considered, by automotive industry standards, poor health when they were acquired by Daimler.

 

But they were a scant three-four years later. As they had been in '91-93.

 

Do you see a pattern emerging here?

 

I, for my part, consider the cyclical nature of the domestic auto industry to be so well established as to be beyond disputing. Perhaps you would care to disprove this theory with the name of a domestic auto manufacturer that has steadily grown revenue and profits over the last 40 years.

 

A company that is positioned (through a diversity of revenue streams) to take advantage of cyclical downturns at its competitors will gradually displace them in the market. Every time any of the Big three falter, Toyota, Honda, and the other imports gain a bit more ground. Maybe this time from Chrysler, that time from GM, the other time from Ford; but they steadily and relentlessly pickup ground.

 

And once more, I ask you, what is wrong with Ford diversifying their revenue sources? I mean, profit margins are up to 20% in the financial services industry. What's wrong with expanding that line of business?

 

Seriously.

 

What objections do you have that are founded on solid business principles (as in: this would be illegal, it would be a conflict of interest, it would divert resources, insufficient ROI, etc.), not on references to Chrysler or Lee Iacocca?

 

...

 

Ok. No more talk about Chryco. (Note:Chrysler market share increasing Ford Dropping)

Now use your cockeyed logic to explain the great success of BMW.

 

I really know nothing about Ford Credit. I know about building automobiles.

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Ok. No more talk about Chryco. (Note:Chrysler market share increasing Ford Dropping)

Now use your cockeyed logic to explain the great success of BMW.

 

I really know nothing about Ford Credit. I know about building automobiles.

tut tut. I asked for an example of a domestic (U.S. based, with predominantly U.S./Canadian labor) auto manufacturer that has been consistently successful.

 

As far as 'knowing nothing' about Ford Credit goes, it's worthwhile to learn more about that side of your employer's business. Because that's the side with the greatest amount of growth potential in this country.

 

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tut tut. I asked for an example of a domestic (U.S. based, with predominantly U.S./Canadian labor) auto manufacturer that has been consistently successful.

 

As far as 'knowing nothing' about Ford Credit goes, it's worthwhile to learn more about that side of your employer's business. Because that's the side with the greatest amount of growth potential in this country.

 

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Ford needs to start producing new product now to survive.

I would be surprised if Ford and GM do not declare bankruptdy in 2006.

Ford is not my employer.

 

If Ford cannot produce cars at a profit(their area of expertise) how can they succeed in the financial business?

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Ford needs to start producing new product now to survive.

I would be surprised if Ford and GM do not declare bankruptdy in 2006.

Ford is not my employer.

 

If Ford cannot produce cars at a profit(their area of expertise) how can they succeed in the financial business?

Ford will not declare bankruptcy in 2006, and neither will GM. GM will get guaranteed loans from the gov't and assumed pension liabilities before it would ever file Ch. 11, and Ford (as in the 80s) is strong enough to go it alone.

 

You know very little about Ford's global operations, and their financing arm. For that reason, your comments about Ford's likelihood of filing ch. 11 this year are based solely on your assessment of their NA automotive operations, an important aspect of Ford's business, to be sure, but one that generates less than half of their automotive revenue, and even operating at peak capacity, offers only a single digit profit margin.

 

That's right. Toyota makes an 8% profit margin on their entire operations. That means, give or take, about 6% on the automotive manufacturing. Ford during the best of times will maybe be able to match that profit margin; and that's not enough to salt away capital for a 'rainy day'. Especially when you consider that Toyota's margins are much higher in Japan, allowing them to cut margins painfully in the markets where their competition is dominant. They can bleed in the U.S. longer than Ford and GM can, and they can take advantage of any 'slips' by GM and Ford (and Chrysler, Mercedes, BMW, etc.). Unless Ford and GM develop means to counteract the advantage Toyota gets from having a solid lock on the Japanese market, they will continue to fight one-handed against Toyota.

 

If they intend to be pig-headed and try to take on Toyota on a car to car basis, they will--in essence--be bringing a knife to a gunfight, they will be using a muzzle load rifle against a company with breech loaders, etc. I happen to think that Ford's best chance to neutralize the home-market advantage Toyota has in Japan involves developing Ford Credit.

 

You obviously disagree, but I haven't seen an alternative proposal; except the insistence that Ford build cars that have a higher profit margin than similar cars from Toyota. It ain't gonna happen.

 

Moreover, this is also about looking at the old Alfred Sloan line that GM was in the business of making money. That's another area. If Ford defines itself exclusively as an auto manufacturer, they're finished. It's all over. Buy the tombstone and write the eulogy. Ford needs to be in the business of making money, and they need to be alert to opportunities to grow their revenue stream. It's not about Ford's "area of expertise" as though they have only one, it's about developing a business model that preserves existing revenue streams (i.e. automotive operations) while developing new ones.

 

In otherwords, it's looking at the examples set by GE and IBM and emulating them.

 

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Edited by RichardJensen
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I just said this in another thread, but it seems to me, if Japanese cars have became so popular and that is all people really want to buy anymore, why does Ford even try to produce cars? Why don't they just build pickups and SUV's and take all that money they have been spending in car engineering and send it over the ocean to Mazda. Mazda would do A LOT more with that cash then the US engineers can. Sell the divisions like Jaguar that are not making any money and take that money to buy a bigger stake in Mazda. Cancel Lincoln and give those dealers Volvo and again whatever money is being spent on Lincoln/Mercury can now be spent on Volvo. In the end you would have Ford trucks and SUV's, Mazda cars and crossovers, and Volvo luxury vehicles. In the future this might make a lot more business sense then to keep putting a blue oval on a car when nobody will buy it no matter how good it is. If you can't beat the Japanese why not join them? Mazda given those kinds of resources and a much larger dealer network would take off like wildfire. They would give Toyota, Honda and Nissan a run for their money.

 

Ford might still be a good brand name on a pickup or a BOF SUV, but most people just won't consider a Ford for a passenger car anymore. Also, the media would welcome a much stronger Mazda to take on the other big Japanese brands, where a good Ford car like the Fusion won't even get a second look. The Ford brand just does not sell well anymore.

 

Oh and the Mustang. Well the Mustang could be marketed as a Mustang at the Ford-Mazda dealers. Everyone knows what it is. It is a brand name in it's own.

Edited by 2005Explorer
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Cause you can't do that. You can't just close out Lincoln and Mercury and expect all the people running these dealerships to walk away without so much as a squeak. You can't sell just trucks and sports cars that get 20-25mpg at best to the public. I agree though, brands like "Ford" just don't sell anymore. But you can't just close down the factory and expect everyone to be happy, a lot of people work at plants making cars and a lot of people work at selling them, even if they're not selling as much as 'yotas.

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Cause you can't do that. You can't just close out Lincoln and Mercury and expect all the people running these dealerships to walk away without so much as a squeak. You can't sell just trucks and sports cars that get 20-25mpg at best to the public. I agree though, brands like "Ford" just don't sell anymore. But you can't just close down the factory and expect everyone to be happy, a lot of people work at plants making cars and a lot of people work at selling them, even if they're not selling as much as 'yotas.

 

If there was no F-series there would be no Ford. I don't think many people would even miss Ford cars anymore. I know I would and I would take it pretty hard, but I suppose in the end when it came time to replace my vehicle, I would just have to do what everyone else is doing and buy a Toyota. The US might blink for a second or two if Ford and GM went out of business, but not for very long. The Asians would just buy up most of what was left as far as facilities go and expand their production.

 

Just like you said, brands like "Ford" don't sell anymore. If you are building something that does not sell what is the point? I am a firm believer that Ford could build something hands down that was the best and no one would even give it a look anymore. The younger generation has really turned against domestic automobiles in general.

 

I was reading a piece that was written in the media about Ford's November sales and they have already declared the Fusion to be a flop and of course we all know what kind of a flop they have called the Five-Hundred and it's siblings. Those are pretty good cars, could they be a little better? Sure, if Ford had billions more to plow into them, but in the end they would loose even more money, because even if they were better, they still would not sell.

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The younger generation has really turned against domestic automobiles in general.

That's a myth being propagated by analysts who want to be hired by the domestics to help them 'reconnect' with alienated consumers.

 

The 300C and CTS are very persuasive arguments against the idea that the 'younger' generation has turned against domestic automobiles.

 

The 300C and CTS are being purveyed by the brands that have been more recently known for the LHS rental queen special and the Deville hearse. Neither Chrysler nor Cadillac had an ounce of "street cred" before these models came out.

 

My own opinion is that they are ugly vehicles with short shelf lives, built by companies that have no idea why they succeeded or how to build off that success.

 

But they have attracted attention and younger buyers to brands that were as stale as a day old donut left out on the counter.

 

And that's worth noting. It's not like Chrysler and Cadillac are fairly new brands, or ones that are not widely known. They're brands with a lot of baggage.

 

So I for one don't buy into the idea that the American consumer is openly hostile or firmly resolved against American car companies.

 

What these analysts read as disaffection with the domestics is in reality much closer to disappointment. Many buyers are disappointed that Ford (for one) doesn't build better cars. If better cars are built by Ford, people will buy them, and I think they'll buy them in surprising numbers.

 

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What these analysts read as disaffection with the domestics is in reality much closer to disappointment. Many buyers are disappointed that Ford (for one) doesn't build better cars. If better cars are built by Ford, people will buy them, and I think they'll buy them in surprising numbers.

 

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I don't know, I guess we will see. I will give Ford credit on the Fusion, Milan and Zephyr however. They are pretty attractive cars that seem to perform well, are built pretty well and priced right. The same can be said about the Five-Hundred and Montego. Of course, the Mustang is successful and so is the F-Series. SUV wise the Escape/Mariner are still doing pretty well. Explorer would still be at the top of it's game if fuel was still a $1.50 a gallon, but that is not the case anymore. The rest of their line-up needs help...a lot of it. But, I will give them credit for what they have done in the last couple of years. It is more then GM is doing.

 

Oh yeah...and get the Edge and it's siblings and the new Sport Trac out...like yesterday!!! Ford usually has a lot more success in the SUV and SUT area then it does in the passenger car game. If any magazine or newspaper rates the Honda Ridgeline over the all new 2007 Explorer Sport Trac V8 when it comes out I think I will puke.

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Ford will not declare bankruptcy in 2006, and neither will GM. GM will get guaranteed loans from the gov't and assumed pension liabilities before it would ever file Ch. 11, and Ford (as in the 80s) is strong enough to go it alone.

 

Probable scenario--

The Delphi bankruptcy will eventually force GM to file ch 11 and leave Ford no choice but to match GM.

 

What might prevent this is the changes in the bankruptcy laws. It apparently is more difficult to declare bankruptcy? (anybody know the details)

 

 

You know very little about Ford's global operations, and their financing arm. For that reason, your comments about Ford's likelihood of filing ch. 11 this year are based solely on your assessment of their NA automotive operations, an important aspect of Ford's business, to be sure, but one that generates less than half of their automotive revenue, and even operating at peak capacity, offers only a single digit profit margin.

 

 

Is Ford making lots of money in Europe or some other overseas region?

The Germans I have worked with have no respect for the Ford cars in Germany.(and actually continually deride them)

In Germany FORD= Fix Or Repair Daily. One time I was returning from Germany and placed my Ford Keys in the basket so I could pass thru the metal detector at a smaller German airport. 4 security guards were watching and one spotted the Ford keys. They all started laughing. Apparently 1 of the 4 had purchased a Ford product and it was nothing but problems. Fords' reputation in Germany is worse than NA. And you are right about the rest of the world, I have no first hand knowledge.

 

Cause you can't do that. You can't just close out Lincoln and Mercury and expect all the people running these dealerships to walk away without so much as a squeak. You can't sell just trucks and sports cars that get 20-25mpg at best to the public. I agree though, brands like "Ford" just don't sell anymore. But you can't just close down the factory and expect everyone to be happy, a lot of people work at plants making cars and a lot of people work at selling them, even if they're not selling as much as 'yotas.

 

You ever hear of American Motors, Hudson , Rambler, Nash, Tucker, Plymouth, etc. There are more than a thousand auto companies that have dissappeared from NA. Ford can be saved? They just need the right products and probably lots of consolidation and changes as 2005 Explorer suggested. It wont be easy and time is short. Look at what Nissan has done.

 

 

In otherwords, it's looking at the examples set by GE and IBM and emulating them.

 

Wasn't Six Sigma At GE all about product and hasn't IBM been successful by changing their product to meet the demand of the marketplace?

 

Reposted with some explanation

 

"Ford will not declare bankruptcy in 2006, and neither will GM. GM will get guaranteed loans from the gov't and assumed pension liabilities before it would ever file Ch. 11, and Ford (as in the 80s) is strong enough to go it alone." Quoted from Richard Jenson

 

Probable scenario--

The Delphi bankruptcy will eventually force GM to file ch 11 and leave Ford no choice but to match GM.

 

What might prevent this is the changes in the bankruptcy laws. It apparently is more difficult to declare bankruptcy? (anybody know the details)

 

"You know very little about Ford's global operations, and their financing arm. For that reason, your comments about Ford's likelihood of filing ch. 11 this year are based solely on your assessment of their NA automotive operations, an important aspect of Ford's business, to be sure, but one that generates less than half of their automotive revenue, and even operating at peak capacity, offers only a single digit profit margin." Quoted from Richard Jenson

 

Is Ford making lots of money in Europe or some other overseas region?

The Germans I have worked with have no respect for the Ford cars in Germany.(and actually continually deride them)

In Germany FORD= Fix Or Repair Daily. One time I was returning from Germany and placed my Ford Keys in the basket so I could pass thru the metal detector at a smaller German airport. 4 security guards were watching and one spotted the Ford keys. They all started laughing. Apparently 1 of the 4 had purchased a Ford product and it was nothing but problems. Fords' reputation in Germany is worse than NA. And you are right about the rest of the world, I have no first hand knowledge.

 

"Cause you can't do that. You can't just close out Lincoln and Mercury and expect all the people running these dealerships to walk away without so much as a squeak. You can't sell just trucks and sports cars that get 20-25mpg at best to the public. I agree though, brands like "Ford" just don't sell anymore. But you can't just close down the factory and expect everyone to be happy, a lot of people work at plants making cars and a lot of people work at selling them, even if they're not selling as much as 'yotas."Quoted from Marco

 

 

You ever hear of American Motors, Hudson , Rambler, Nash, Tucker, Plymouth, etc. There are more than a thousand auto companies that have dissappeared from NA. Ford can be saved? They just need the right products and probably lots of consolidation and changes as 2005 Explorer suggested. It wont be easy and time is short. Look at what Nissan has done. The people at these Ford plants think the plant exists to provide them with a job. It doesn't--It is there to produce product.

 

"In otherwords, it's looking at the examples set by GE and IBM and emulating them."Quoted from Richard Jenson

 

 

Wasn't Six Sigma At GE all about product and hasn't IBM been successful by changing their product to meet the demand of the marketplace?

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Cause you can't do that. You can't just close out Lincoln and Mercury and expect all the people running these dealerships to walk away without so much as a squeak. You can't sell just trucks and sports cars that get 20-25mpg at best to the public. I agree though, brands like "Ford" just don't sell anymore. But you can't just close down the factory and expect everyone to be happy, a lot of people work at plants making cars and a lot of people work at selling them, even if they're not selling as much as 'yotas.

 

Well this was not really my thinking. My thoughts were that you push Mazda out to Ford dealerships to fill in for a discontinued car line. Sure many current Ford factories would have to pick up production of Mazda's, but I don't think they care if they are building a car that was engineered in Japan or the US as long as they have a product rolling down the assembly line. Mazda does not compete well with the other larger Japanese brands because they have such a limited dealer network. My thinking is the same with Volvo. There is not even a Volvo dealer in South Dakota and I am sure Volvo dealers are hit and miss all over the country. If Lincoln and Mercury are not selling, why not start to move Volvo's into them?

 

Like I said before, I think Ford does have some very improved products that just came out, but I just think if Ford is limited in resources they might need to make cuts in overlapping product lines to save money. Imagine if all the money that is going around the company right now was focused in these 3 areas...Ford trucks/SUV's, Mazda cars and crossovers, and Volvo luxury vehicles. I just think we could see some awesome things come out of it. If the Japanese are so successful at engineering cars let Mazda take it over the same with Volvo on the luxury side. Last Ford can focus here in the US at what they do best and that is make excellent pickups and BOF SUV's. Sure some overlapping dealers would have to be closed and it would take some time for this to work, but I think in the end the products that we would get would be amazing.

 

Many might disagree and that is fine. I don't think Ford will do this, BUT I think Ford needs to at least shed Jaguar, LR, and AM and (possibly Lincoln/Mercury). Those brands just don't fit into what they need to do. Ford, Mazda and Volvo is where they should be focused. The others take more then what they give back. Mazda and Volvo have been used well and are great resources for platform sharing. The other 3 are just money pits. If someone wants them, I would be selling tomorrow if I was Ford. As far as Lincoln/Mercury goes, if you can make them sell without putting that much into them, fine keep it. If it becomes a money pit then let it go as well. What to do with Lincoln/Mercury dealers if you close the division? Well many of them could be used to expand Volvo and Mazda in this country. I can tell you there is a LOT more value in those name plates then Lincoln and Mercury anymore. Sure some overlapping dealers would have to close, but if GM was able to pull if off with Oldsmobile, Ford could do it with Lincoln/Mercury.

 

There are a lot of ways to trim the fat and offer better products. I am not saying these are the answers, BUT these kinds of re-alignments should be discussed. Company's that are successful re-align their product mix as the market directs them. Sure the auto industry is different from the consumer products industry, but it might be time that Ford gives this stuff a look if they still want the oval driving down the road.

Edited by 2005Explorer
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In case you're Canadian, and aren't aware of how U.S. bankruptcy laws work, it goes something like this. The company that files Chapter 11 is liquidated. That means that pensions and union contracts are torn up. Replaced (maybe) by new ones. A new company is created with a portion of the assets of the old company; other assets having been sold off to satisfy creditors, etc.

 

What that means to Uncle Sam is several hundred thousand people that now no longer have pensions, or healthcare. Meaning hundreds of millions, if not billions in additonal healthcare costs (their Medicare supplement healthcare will now be provided by the state & federal gov'ts through Medicaid).

 

Then you've got the potential elimination of millions of dollars in payroll taxes (with pay cuts), and potentially hundreds of millions of dollars in long term unemployment benefits (let's say $30k for 40k employees for 1 year: that's $1.2B); because a Chapter 11 GM will shed far more jobs than a restructured GM.

 

And we haven't even talked about the auto dealers out there. The new car dealers are a very powerful lobby at the state level in almost every single state in the union. They can pull strings to get the local Congressional delegation to intervene in the interests of local economies, if not the economies in the rustbelt.

 

So, if it comes down to loaning (or guaranteeing loans) to GM, the Gov't WILL intervene.

 

I mean, I'm guessing that you're not aware of all that Chapter 11 filing involves.

 

So, for all practical purposes, a GM chapter 11 filing is off the table. They're headed down that road, but they'll get a gov't bailout before they get to that point. Most likely.

 

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Ford lost money last quarter in Europe, but are profitable there for the year. They are also profitable in every other segment. Ford's global sales have grown year over year, and Ford's picked up marketshare in Europe this year on the strength of the C1 products.

 

As far as German opinions on Ford are concerned, if the entire continent were German (or French, as a pair of megalomaniacs would've had it), you might have something. But as it is, Ford's the top seller in Britain, and I think Spain, and they're more than competitive in the East European countries, and if they're below VW and MB in Germany in total sales, well, you can't win them all.

 

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Nissan is a much much smaller company than Ford, with a smaller product portfolio (and much lower expectations--Ford could not shrink the F150 down into a creditable replacement for the Explorer, but the previous Pathfinder was so lousy that anything is an improvement, not to mention that they get to ride Honda's and Toyota's reputations, while doing comparatively little themselves).

 

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In 1990, IBM's hardware revenue (from the sale of actual products) was roughly $36B; their software and services revenue was about $30B. In 2004, IBM's hardware revenue was $30B; and their software and services revenue was about $66B.

 

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Roughly half GE's profits come from GE Capital.

 

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Why have GE and IBM been able to maintain leadership in manufacturing and product development? Because they have the luxury of viewing these divisions as long term investments, and not as short term profit generators. Here's an example:

 

Have you heard of DRIPs? They're "Dividend ReInvestment Programs"; the idea is that you use your dividends to purchase more stock in the company. It's a great way to increase your holdings without lifting a finger. But if you need that dividend income to pay bills, you can't participate.

 

Ford is in a position where their ability to reinvest in their automotive operations is somewhat hampered by their own dividend obligations, legacy costs, etc.

 

Ford is also hampered by the fact that Toyota, their strongest competitor, has a very stable source of profits from their home market. Ford has no similar source of profit, and they must muddle along, best they can, knowing that their two biggest markets (NA and EU), their two "home" markets, are the most competitive in the world.

 

Long term, they need to diversify. It will strengthen their automotive operations.

 

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Edited by RichardJensen
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BUT I think Ford needs to at least shed Jaguar, LR, and AM. Those 3 brands just don't fit into what they need to do

LR, AM, and Volvo are profitable.

 

I think the phrase "you can't shrink your way to success" is oversimplistic and hackneyed.

 

But I do believe in keeping and even expanding your established dealership network. I think shrinking your sales base is foolish.

 

Any major rejiggering of Ford brands would reduce dealer presence (as an example that you're quite familiar with: What happens to Sioux Falls Ford and Billion Mazda if Ford drops their passenger car lineup and replaces it with Mazdas? How much will Ford have to pay Sioux Falls Ford? Now multiply that by about 1000--for all the Mazda dealers that overlap Ford dealer territories).

 

Ford is actually starting to encourage LM dealers to pick up the Mazda franchise. Problem with this for Mazda is that when you're trying to build your dealer network, you don't have a lot of bargaining power when it comes to setting the terms of the franchise agreement.

 

I'm also with you on the Volvo dealership thing. I think a Volvo dealership in SF would be a success. The only problem is that it would cost a small fortune (my personal preference would be if Randy Naehring--SF Ford--bought the old Dan Nelson Isuzu lot, and set up a Volvo franchise there; one of the biggests costs, land acquisition would be reduced a bit).

 

Ford's dealership network is sustaining their marketshare. They have (with the Ford brand) the largest dealership network in the country. They need to retain that as is, and put product on the showroom floor. Moreover, the Nasser era saw a determined effort to drive Mercury out, and the LM dealer base shrunk along with LM product, the expected result, declining sales figures are a result of, not an argument for, reducing the dealer network.

 

I guess I disagree with the idea of doing a major restructuring of the dealership network. Ford's SSI scores are good, but not great. Lincoln and Jaguar have great SSI scores, and Mercury is somewhere between. I don't think there's much needed on the dealer end. Also, it does not cost as much as you might think to maintain three brands; especially when so much content is shared between them.

 

Oh, and one final thing (and this is more of an ethical objection than a business one), I think the idea of cutting Jaguar loose, when odds are they won't find a better new owner is unconscionable. Coventry executives did not put Jaguar in the mess they're in today. Dearborn executives did. To totally screw up a division, and then cast it off as being unsalvageable seems unethical.

 

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Edited by RichardJensen
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In case you're Canadian, and aren't aware of how U.S. bankruptcy laws work, it goes something like this. The company that files Chapter 11 is liquidated. That means that pensions and union contracts are torn up. Replaced (maybe) by new ones. A new company is created with a portion of the assets of the old company; other assets having been sold off to satisfy creditors, etc.

 

What that means to Uncle Sam is several hundred thousand people that now no longer have pensions, or healthcare. Meaning hundreds of millions, if not billions in additonal healthcare costs (their Medicare supplement healthcare will now be provided by the state & federal gov'ts through Medicaid).

 

Then you've got the potential elimination of millions of dollars in payroll taxes (with pay cuts), and potentially hundreds of millions of dollars in long term unemployment benefits (let's say $30k for 40k employees for 1 year: that's $1.2B); because a Chapter 11 GM will shed far more jobs than a restructured GM.

 

And we haven't even talked about the auto dealers out there. The new car dealers are a very powerful lobby at the state level in almost every single state in the union. They can pull strings to get the local Congressional delegation to intervene in the interests of local economies, if not the economies in the rustbelt.

 

So, if it comes down to loaning (or guaranteeing loans) to GM, the Gov't WILL intervene.

 

I mean, I'm guessing that you're not aware of all that Chapter 11 filing involves.

 

So, for all practical purposes, a GM chapter 11 filing is off the table. They're headed down that road, but they'll get a gov't bailout before they get to that point. Most likely.

 

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Ford lost money last quarter in Europe, but are profitable there for the year. They are also profitable in every other segment. Ford's global sales have grown year over year, and Ford's picked up marketshare in Europe this year on the strength of the C1 products.

 

As far as German opinions on Ford are concerned, if the entire continent were German (or French, as a pair of megalomaniacs would've had it), you might have something. But as it is, Ford's the top seller in Britain, and I think Spain, and they're more than competitive in the East European countries, and if they're below VW and MB in Germany in total sales, well, you can't win them all.

 

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Nissan is a much much smaller company than Ford, with a smaller product portfolio (and much lower expectations--Ford could not shrink the F150 down into a creditable replacement for the Explorer, but the previous Pathfinder was so lousy that anything is an improvement, not to mention that they get to ride Honda's and Toyota's reputations, while doing comparatively little themselves).

 

----------------------------------

 

In 1990, IBM's hardware revenue (from the sale of actual products) was roughly $36B; their software and services revenue was about $30B. In 2004, IBM's hardware revenue was $30B; and their software and services revenue was about $66B.

 

-----------------------------------

 

Roughly half GE's profits come from GE Capital.

 

-----------------------------------

 

Why have GE and IBM been able to maintain leadership in manufacturing and product development? Because they have the luxury of viewing these divisions as long term investments, and not as short term profit generators. Here's an example:

 

Have you heard of DRIPs? They're "Dividend ReInvestment Programs"; the idea is that you use your dividends to purchase more stock in the company. It's a great way to increase your holdings without lifting a finger. But if you need that dividend income to pay bills, you can't participate.

 

Ford is in a position where their ability to reinvest in their automotive operations is somewhat hampered by their own dividend obligations, legacy costs, etc.

 

Ford is also hampered by the fact that Toyota, their strongest competitor, has a very stable source of profits from their home market. Ford has no similar source of profit, and they must muddle along, best they can, knowing that their two biggest markets (NA and EU), their two "home" markets, are the most competitive in the world.

 

Long term, they need to diversify. It will strengthen their automotive operations.

 

...

 

Delphi is isn CH11 right. So you say they are not paying pensions and the union contract has been torn up?

The week after Delphi declared bankruptcy the bankruptcy laws were changed. Does anybody actually know what difference the changes will make? That was largely the reason Delphi declared the bankruptcy when they did.

 

I can never remember one recent year that Ford has made a sustantial profit in Europe. In the last ten years I am sure they have lost more often than they have made money.

 

Software is not product?

 

Ford is over 100hundred yaers old. That should have given them time to come up with a long term strategy.

 

What is the secret to BMWs' success?

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Delphi is isn CH11 right. So you say they are not paying pensions and the union contract has been torn up?

The week after Delphi declared bankruptcy the bankruptcy laws were changed. Does anybody actually know what difference the changes will make? That was largely the reason Delphi declared the bankruptcy when they did.

 

I can never remember one recent year that Ford has made a sustantial profit in Europe. In the last ten years I am sure they have lost more often than they have made money.

 

Software is not product?

 

Ford is over 100hundred yaers old. That should have given them time to come up with a long term strategy.

 

What is the secret to BMWs' success?

That bankruptcy law change was for personal bankruptcy filing under Chapter 7, not Chapter 11, of the U.S. bankruptcy code. The change was lobbied for by credit card companies, in order to make it more difficult for distressed debtors to get relief through bankruptcy proceedings.

 

And what happens to the pensions and UAW contracts at Delphi is in the hands of Delphi's creditors, Delphi itself, the court appointed bankruptcy trustee and the Federal court judge. The UAW has, at this point in time, very little say over what happens (the UAW is not a Delphi creditor). The best they can hope for is a sympathetic judge.

 

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Software is not "product" because there is almost zero production costs. It is licensed intellectual property (like music). You can download copies of IBM's premiere database server over the internet. Try downloading a car over the internet :D

 

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The secret to BMW's success is steady evolution of (and in fact definition of) a market niche. Impossible to transfer to FoMoCo. Also, I believe they are family owned, and therefore we don't exactly know from one year to the next how well they're doing. I've never really tried to dig up their financials.

 

---------------------------

 

Ford's last 'sustainable' strategy was in the 70s. Neither Ford, nor GM, nor Chrysler found a successful long term strategy for coping with the unique challenges the Japanese imports brought to business in the NA market. For all three companies the last two and a half decades have been little more than a bouncing from one strategy to the next. None of them, however, have addressed the fundamental disparity in operating conditions between the domestics and the Japanese car companies. Moreover, the "not invented here" syndrome prevented all three domestics from adopting proven methods for improving product that Toyota and Honda have been using for years.

 

...

Edited by RichardJensen
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"Software is not product?" Quote Bluecon

 

"Software is not "product" because there is almost zero production costs. It is licensed intellectual property (like music). You can download copies of IBM's premiere database server over the internet. Try downloading a car over the internet" Quote RichardJensen

 

Websters Dictionary--definition of

 

a:product--a thing produced by nature, industry or art

b:production--the act of producing

 

You should drop these Webster dictionary guys a note and straighten them out

 

Now explain the success of the Detroit Lions as compared to say the Dallas Cowboys.

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"Software is not product?" Quote Bluecon

 

"Software is not "product" because there is almost zero production costs. It is licensed intellectual property (like music). You can download copies of IBM's premiere database server over the internet. Try downloading a car over the internet" Quote RichardJensen

 

Websters Dictionary--definition of

 

a:product--a thing produced by nature, industry or art

b:production--the act of producing

 

You should drop these Webster dictionary guys a note and straighten them out

 

Now explain the success of the Detroit Lions as compared to say the Dallas Cowboys.

Okay smarty pants.

 

How much of the development budget of the new version of DB/2 went to buying the new tooling to assemble it?

 

Nyah.

 

Most economists do not consider software to be a 'product' in the traditional sense of manufactured goods. The bulk of the cost of introducing a new software 'product' is writing it. Once it has been written the production costs are a fraction of the price of the product (e.g. pennies on the dollar).

 

...

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Okay smarty pants.

 

How much of the development budget of the new version of DB/2 went to buying the new tooling to assemble it?

 

Nyah.

 

Most economists do not consider software to be a 'product' in the traditional sense of manufactured goods. The bulk of the cost of introducing a new software 'product' is writing it. Once it has been written the production costs are a fraction of the price of the product (e.g. pennies on the dollar).

 

...

 

Definition of most economists=RichardJensen?

 

Note: this definition not from Websters

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Definition of most economists=RichardJensen?

 

Note: this definition not from Websters

http://www2.umassd.edu/swpi/costmodeling/papers.html

 

Have fun finding a single article in that Bibliography that treats the reproduction of software on physical media (CDs, etc.) as anything other than a trivial matter. Heck. Have fun trying to find an article in that bibliography that discusses the cost of reproducing software at all.

 

For a project I'm currently managing, I'll just say this: the cost of producing the physical media will, when all's said and done, be less than .1% of the total cost of the project. And our development budget is actually pretty small for a software project. For Microsoft Windows XP, I'd be surprised if the cost of physical media is even .001% of the cost of the product.

 

...

Edited by RichardJensen
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http://www2.umassd.edu/swpi/costmodeling/papers.html

 

Have fun finding a single article in that Bibliography that treats the reproduction of software on physical media (CDs, etc.) as anything other than a trivial matter. Heck. Have fun trying to find an article in that bibliography that discusses the cost of reproducing software at all.

 

For a project I'm currently managing, I'll just say this: the cost of producing the physical media will, when all's said and done, be less than .1% of the total cost of the project. And our development budget is actually pretty small for a software project. For Microsoft Windows XP, I'd be surprised if the cost of physical media is even .001% of the cost of the product.

 

...

 

Then Microsoft would be a company with no product?

 

Then Microsoft would be a company with no product?

 

Briand99] Briand, L.C., Langley, T., Wieczorek, I. (1999) A replicated Assessment and Comparison of Common Software Cost Modeling Techniques . IESE-Report 073.99/E, November 1999.

Abstract:

 

Delivering a soware product on time, within budget, and to an agreed level of quality is a critical concern for many software organizations.

 

 

This is a quote from this paper that was referenced. "software product" or as they call it a "soware product"

 

You're beating a dead horse

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