Tag Archive | "Ford Motor Co."

Ford Quarterly Profit May Decline Before Negotiations With UAW Commence

Ford Motor Co., poised to begin negotiations with the United Auto Workers, may report lower second-quarter profit tomorrow on rising costs for commodities and developing new vehicles.

Profit excluding some items may have dropped to 61 cents a share, according to the average of 14 analysts’ estimates, from 68 cents a year earlier. Ford formally begins talks this week with the UAW, which says workers should share more in Ford’s turnaround. Last year was Ford’s most profitable since 1999, reported Bloomberg.

Industrywide U.S. vehicle sales slowed in the quarter because of costlier cars and shortages after the March 11 tsunami in Japan. Chief Executive Officer Alan Mulally is raising prices for Fiesta subcompacts and Explorer sport-utility vehicles to offset some of the $4 billion in higher costs for commodities, advertising and new-product development.

“For Ford, the question is can you sustain the price discipline as the Japanese manufacturers come back?” Itay Michaeli, a New York-based analyst at Citigroup Inc., said in a phone interview. Michaeli rates Ford “buy” and predicts second-quarter profit of 60 cents a share.

U.S. auto sales slowed to a seasonally adjusted annual rate of 12.1 million in the second quarter from a 13.1 million pace in the prior three months, according to Autodata Corp., as Toyota Motor Corp. and Honda Motor Co. deliveries tumbled.

Second-quarter profit will be equal or “slightly lower” than in the first quarter, when Ford earned $2.78 billion before taxes, Controller Bob Shanks said last month at an investor conference in Chicago.

Ford has said it wants to further lower labor costs, which it estimates are $8 an hour higher than the mostly non-union factories of foreign automakers and Chrysler Group LLC, which began its labor negotiations with the UAW today.

UAW President Bob King said in a July 22 interview in Southfield, Michigan, that the union will not be granting concessions.

“No way,” King said. “It would be the wrong thing to do to talk about concessions, they’re not needed today. The way that Ford can make up that cost gap really quickly is to grow market share and open up more facilities.”

Hourly workers at Chrysler and General Motors Co., as part of U.S-backed bankruptcies in 2009, agreed not to strike over wages and benefits during this year’s contract talks. Ford didn’t seek a U.S. bailout and UAW members at the automaker rejected the strike ban and arbitration.

King has said workers must be rewarded for the $7,000 to $30,000 in concessions they gave since 2005 to help U.S. automakers survive. The UAW’s contracts expire on Sept. 14.

The cost of developing new models and improving the Ford and Lincoln brand images will add $2 billion to Dearborn, Michigan-based Ford’s structural costs this year, Shanks said. Ford’s commodity costs may rise by another $2 billion.

Earnings from the Ford Credit finance unit this year will be $1.1 billion less because of changes in lease depreciation and credit-loss reserves, Ford said April 26.

Ford forecast a smaller year-over-year production increase in the second quarter than the 14 percent gain through March. North American output in the second quarter may rise 8.7 percent to 710,000 units, and production may fall in all other regions from the year-earlier period, Ford said.

Earnings in Europe may “deteriorate” from the first quarter on a 10 percent sequential drop in production and “competitive” promotional activity in the region, Joseph Amaturo, a New York-based analyst at Buckingham Research Group, said in a July 13 research note. Ford reported an operating profit of $293 million in Europe for the first quarter.

Ford fell 14 cents to $13.17 at 4 p.m. in New York Stock Exchange composite trading. The shares have declined 22 percent this year after a 68 percent gain in 2010.

Investors are concerned that Ford’s “product cadence” is peaking and that pricing may weaken, Peter Nesvold, a Jefferies & Co. analyst in New York, wrote in a July 14 research note.

“We think the new Ford Escape can move the needle meaningfully,” said Nesvold, who has a “buy” rating on Ford. “It seems to us that the stock is ascribing a very low probability on Ford’s ability to continue to get price.”

The average price U.S. buyers paid for Ford’s models rose 6 percent in April and 4 percent in May, George Pipas, Ford’s sales analyst, said on the company’s monthly sales conference calls. Ford’s average transaction price increase exceeded the industry’s in June, Pipas said July 1, without giving specifics.

Ford’s average spending on U.S. discounts and promotions through June declined 14 percent from a year earlier to $2,551, according to Woodcliff Lake, New Jersey-based Autodata. Industrywide incentive spending fell by 11 percent to an average of $2,437 per vehicle sold.

A new labor agreement with the UAW that “does not meaningfully erode” Ford’s financial and operating ability could contribute to an upgrade to the automaker’s credit rating, Fitch Ratings said in July 6 report.

“Although Fitch expects all three Detroit automakers will seek to tie compensation more closely with profitability, the negotiations are likely to be difficult, and labor costs could rise with the ratification of a new agreement,” Stephen Brown, a Chicago-based analyst at Fitch, wrote in the report, which also named labor talks as one of its rating risks.

Ford may achieve investment-grade ratings by 2012, Eric Selle, a JPMorgan Chase & Co. debt analyst in New York, said in May. Ford is rated two levels below investment grade by Moody’s Investors Service and Fitch, and three levels below by Standard & Poor’s.

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Ford Supports Behind-the-Wheel Ban on Hand-Held Cell Phones

Ford Motor Co. said today it is endorsing a federal ban on hand-held cell phone calls by drivers — becoming the first automaker to do so.

The Dearborn automaker said it is supporting a bill introduced last month by Rep. Carolyn McCarthy, D-N.Y.Pete Lawson, Ford’s vice president of government affairs, said the company is backing the bill “because it represents a practical, common sense approach to a national problem.”

Ford has been eager to protect its in-vehicle technologies — such as Sync and MyFord Touch — that allow drivers to make hands-free calls and receive or send some limited text messages orally.

Just nine states and the District of Colombia have barred the use of hand-held cell phones by drivers, reported The Detroit News. The Governors Highway Safety Association last week told states that haven’t banned their use to hold off until further research is completed.

Ford has taken other steps to reduce distracted driving. The automaker has been concerned about efforts by some to crack down on in-vehicle technologies that allow drivers to make and receive hands-free cell phone calls.

“Research conducted in labs and on roads shows that activity drawing drivers’ eyes away from the road — whether text messaging, manually dialing a cell phone or reading maps — substantially increases the risk of an accident or near misses,”Lawson said. “Ford believes hands-free, voice-activated technology significantly reduces that risk by allowing drivers to keep their hands on the wheel and eyes on the road.”

Transportation Secretary Ray LaHood has urged drivers not to use hand-held phones behind the wheel and raised concerns about cognitive distractions from calls. But he won’t recommend any restrictions on hands-free calls until the government completes extensive research.

“When you look at your BlackBerry for four seconds, you are driving the length of a football field without watching the road. And when you talk on your cell phone, you tell your brain it’s OK to devote your primary attention to something other than your driving,” LaHood wrote on a government blog last year.

General Motors Co. bars employees driving company cars from using a hand-held cell phone behind the wheel and has supported Oprah Winfrey’s efforts to crack down on hand-held cell phone use.

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Ford’s June Sales Gain on Small Cars

DETROIT – Ford Motor Co.’s June sales outpaced the industry’s gains on strong sales of small cars and a slight rebound in pickup sales.

Despite falling gasoline prices, the supply of the Fiesta subcompact and the Focus compact remains tight because of “exceptional demand,” said Ken Czubay, Ford’s vice president of U.S. marketing, sales and service.

Ford’s new Fiesta subcompact and redesigned 2012 Focus compact combined for 26,920 in June sales, up 66 percent from the year-earlier period, reported Automotive News.

George Pipas, Ford’s top sales analyst, said both cars ended the month at about a 30-day supply.

Ford enters the second half of 2011 with “cautious optimism,” Czubay said.

“We have a lot of momentum on showroom floors,” he said. “But we’re watching closely the U.S. economy. The economic data is mixed. Our data suggests that many owners are delaying purchases until the Ford model they want becomes available.”

In June, Ford Motor sold 193,415 units, up 10 percent from the year-earlier period, but the results trailed the advances at Chrysler and GM.

The industry finished the month up 7 percent.

For the first six months, Ford Motor sold 1.1 million vehicles, up 9 percent. The industry finished the first half up 13 percent.

In June, Ford sold 49,618 F-series pickups, a 7 percent improvement over the year-earlier period.

“That 49,000 — almost 50,000 — is one of our highest sales months for the F series in the past three years,” Pipas said.

The pickup truck segment made up 9 percent of U.S. retail sales in April and 10 percent in May, Pipas said. It’s now just above 11 percent, he said.

Ford has about a 79-day supply of pickups, Pipas said.

Said Czubay: “The dealers would just as soon keep it at that level.”

“It’s good for their business,” he said, “as long as we can keep a steady flow, which you’ve got to do to keep selling 50,000 pickups a month, and we’re right on line to keep doing that.”

Demand spiked for F-series pickups fitted with the direct-injection turbocharged V-6 EcoBoost engine.

“In May and June, the V-6 outsold the V-8s,” Czubay said of pickup sales. “It’s the first time since the mid-’80s that that happened.”

Among F-series pickup sales, 44 percent were powered by V-8s, 41 percent had Ford’s 3.5-liter EcoBoost V-6s and 15 percent had 3.7-liter V-6s.

Czubay said sales of the redesigned 2011 Explorer crossover have been a “first half surprise to us.”

Through June, Ford’s sold 65,823 Explorers, more than double sales in the year-earlier period. In all of 2010, Ford sold 60,687 Explorers.

Czubay said more than 40 percent of the Explorers sold in the first half have been higher-trim models.

Ford has 426,000 vehicles at dealerships or in transit, Pipas said. Of those, 317,000 are trucks and 109,000 are cars and crossovers. The total gives Ford a 57-day supply. Ford ended May with a 52-day supply.

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‘Aggravating’ MyFord Touch Sends Ford Plummeting in J.D. Power Quality Survey

After steady year-on-year improvement, Ford has plunged from fifth position in 2010 to 23rd in the 2011 Initial Quality Study released by J.D. Power & Associates on Thursday. Lincoln, the luxury subsidiary of the Ford Motor Company, was ranked eighth last year, but fell to 17th this year.

The rankings, however, belie the automaker’s sustained manufacturing quality, the survey authors noted.

Primarily, the steep decline was attributed to consumer complaints about MyFord and MyLincoln Touch, the company’s in-car telematics systems that use a touch screen, dashboard display and voice commands presumably to help drivers operate radio and climate controls, as well as the navigation system.

Many in the automotive press, including The Times, have been critical of the system’s complexity. Consumer Reports said the “aggravating design” was one reason it could not give the Ford Edge its coveted designation of “Recommended.”

The initial quality study by J.D. Power examines vehicles during the first 90 days of ownership. This year, it was based on responses from more than 73,000 owners and lessees of new vehicles from the 2011 model year.

Vehicle owners were asked whether they had any of 228 possible problems, which included mechanical defects and malfunctions as well as design issues like the controls’ ease of use in categories like exterior, engine/transmission and audio/entertainment/navigation.

The study then graded automakers on the number of problems per 100 vehicles — the lower the number the fewer problems and the higher the initial quality rating. Over all, Lexus garnered first place in the study’s brand rankings. Rounding out the top five were Honda, Acura, Mercedes-Benz, and Mazda and Porsche in a tie for fifth.

In the 2010 ranking, when it placed fifth, Ford had 93 problems reported per 100 vehicles. That ratio has increased to 116 problems per 100 vehicles this year.

“They had a really good quality story,” said David Sargent, vice president of global vehicle research at J.D. Power, in a telephone interview. “They were progressing steadily year over year, and everything was going fine.”

“Consumers are looking for these touch technologies in vehicles and Ford took the, let’s say, brave decision to be a leader in this area,” he added.

But no good deed goes unpunished. Consumers complained that the system was not as intuitive to operate as they would have liked, while also airing their displeasure about the hands-free, voice-activated operations.

When asked whether there were other problems that contributed to Ford’s fall, Mr. Sargent said MyFord Touch was the primary driver, but “there were a few other things which together would add up.”

He would not elaborate on what those were, as none of the problems were significant enough to discuss in detail, he said.

There is some good news for Ford, however. In the realm of manufacturing defects and malfunctions, Ford “continues to perform pretty well,” Mr. Sargent said. “What we are witnessing here essentially has nothing to do with manufacturing,” he said.

What befell Ford this year echoes the experience of BMW in the 2006 survey. When J. D. Power redesigned the survey to add more questions about design problems, BMW performed poorly because its new iDrive interface system received significant criticism, yet its manufacturing quality was on a par with that of Toyota.

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Ford Profit to Miss Views

Ford Motor Co. on Wednesday forecast a second-quarter pre-tax profit that would fall below analysts’ estimates as the auto maker spends more on commodities and on expanding its business.

“For the second quarter, we expect the company’s total pre-tax profits excluding special items to be about the same or potentially slightly lower than the first quarter results,” Ford Vice President and Controller Robert Shanks said at an analysts’ conference in Chicago. He said its full-year earnings outlook remains unchanged.

Analysts currently estimate profit for the quarter ended June 30 of 64 cents a share, reported The Wall Street Journal. The Dearborn, Mich., auto maker reported pre-tax profit of $2.8 billion, or 62 cents a share, in its first quarter ended March 31.

A Ford spokesman declined to comment other than to note the company still expects improvement in full-year, pre-tax operating profit and automotive cash flow.

Mr. Shanks said his comments were in line with Ford’s previous guidance other than the second-quarter results to be about flat with first-quarter earnings. Ford generated a profit of $2.55 billion, or 61 cents a share, in the first quarter.

“If you look at the second quarter, it will actually be very close to the first quarter, maybe a little bit lower, but actually very close,” Mr. Shanks said.

“For the second half of the year, we expect the company’s total pre-tax profits excluding special items to be lower than the first half. This is due to higher structural cost largely to support our growth and brand plans, increasing commodity cost and seasonal factors that tend to favor the first half of the year.”

He said the company will spend $2 billion more on commodities this year than it did in 2010.

Auto makers and their parts suppliers are once again beginning to struggle with higher costs for steel, oil and rubber as industry output continues to recover and vehicle demand intensifies. Investors are watching to see if companies can succeed at maneuvering through the higher costs without eroding profits.

Mr. Shanks again raised the possibility of Ford re-starting its dividend. Ford executives made the same remarks during a business update meeting last week. The company stopped paying a stock dividend in 2006.

He offered a road map to paying a dividend, saying it would come, “Once we return to investment grade [debt rating], we maintain a strong business with a strong liquidity keeping our break-even levels low so that we can maintain our investment grade [rating] through a recession similar in severity to the one that we just went through. With these actions, we expect to achieve a competitive cost of capital and provide acceptable returns to our shareholders.”

Ford shares fell 2 percent or 27 cents to $13.15 in 4 p.m. New York Stock Exchange trading on Wednesday. The stock has lost 21 percent year-to-date. Shares fell Monday after a Cleveland judge ordered the company to pay $2 billion in a class-action lawsuit brought by about 3,000 dealers who sold commercial trucks.

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Ford Aims to Breathe Life Into Lincoln

Now that Ford Motor Co. has escaped from the grip of recession and projects a doubling of vehicle sales by mid-decade, the second-largest U.S. auto maker is making a revival of its ailing Lincoln luxury brand its top priority.

Later this year, Ford will begin a sweeping make-over of the 96-year-old brand, to give staid Lincoln a new identity as a producer of high-tech, understated luxury cars, Ford executives said.

The first look at Lincoln’s future will come in November when Ford unveils redesigned versions of its MKS sedan and MKT sport-utility vehicle, the first of seven new or redesigned Lincolns. The MKS will feature a sleeker design, self-tuning suspension system and hands-free controls and entertainment system, reported The Wall Street Journal.

Whizzy technologies that the auto maker is counting on to turn heads: retractable, all-glass roofs and computerized sound-reduction technology, similar to noise-cancelling headphones, to block road noise and make Lincoln interiors ultra quiet.

“Lincoln will give [customers] opportunities to tell a story about what is unique in their vehicle,” said Derrick Kuzak, Ford’s head of global product development, in an interview. “You think of BMW as engaging to drive; you can think of Lexus as refined. Bring them together and it is a new experience no customer has ever had.”

Lincoln will be aimed at technology-loving, upscale consumers that Ford believes make up an increasing portion of the luxury-car market, Mr. Kuzak said. Affluent professionals who tend to value experiences, such as exotic vacations, over the bling of big-name luxury goods can be lured away from other luxury car brands to Lincoln, Mr. Kuzak said.

It won’t be easy. A little more than a decade ago, Lincoln was the top-selling luxury brand in the U.S. Lincoln limousines were preferred by U.S. presidents and Hollywood directors. Every president from Calvin Coolidge through George H.W. Bush rode in a Lincoln limousine.

But as German luxury brands BMW, Audi and Mercedes-Benz expanded their lines and introduced new technologies, Ford chose to stock the Lincoln brand mainly with upgraded versions of the same cars it sells as Fords. The MKS sedan shares many parts with the Ford Taurus, for example. The Lincoln MKX crossover is nearly identical to the Ford Edge.

Tim Sanders, a pharmaceutical sales representative in Cleveland, Ohio, purchased Lincolns in the past but the last car he bought was a BMW. Lincolns “just aren’t exciting to me anymore,” he said.

Last year Ford also killed off its Mercury brand, which used to be paired with Lincoln in dealerships. But without Mercury, many Lincoln stores have seen customer traffic plunge. The brand also struggles to attract young customers. The average age of a Lincoln buyer is 62 years old, compared to just 54 for Lexus and 49 for BMW.

“We are still living with that perception that my grandfather and my grandmother drive a Lincoln,” said Andy Czajkowski, owner of Statewide Ford-Lincoln in Van Wert, Ohio. “They have to bring out products faster.” With Lincoln’s current line, Mr. Czajkowski says he is fighting an uphill battle. In May he sold just three Lincolns.

In the first five months of the year, U.S. auto sales have increased 14 percent over a year ago, but Lincoln’s sales are down 7.5 percent. In May, Lincoln sold just 7,399 vehicles in the U.S., about the same number as Volvo, a brand that Ford sold in 2010. Volvo’s current owner Zhejiang Geely Holding Group Co. is aiming to recast the brand to include luxury cars.

General Motors Co.’s two upscale brands, Cadillac and Buick, did much better, selling 11,623 and 15,579 vehicles, respectively. BMW, the luxury leader, sold more than twice as many cars in the U.S. as Lincoln, 20,651.

A strong luxury brand is a key to most successful car makers. Lexus and Acura help Toyota Motor Corp. and Honda Motor Co. improve economies of scale and earns thicker margins than their mainstream models. GM counts on Cadillac to cast a marketing halo over its other makes. Luxury brands also help attract and retain customers who tend to be more loyal and less price-conscious than mainstream car-buyers.

BMW is actually targeting the very same consumers as Lincoln aspires to in a current marketing campaign that focuses on the joy it believes customers get from driving its vehicles. One print ad uses the tagline “Joy is Maternal,” a departure from past promotions that emphasized handling and acceleration.

Mr. Kuzak concedes the seven new Lincolns in the pipeline will still share parts with Ford models, but he promised they will have unique exterior panels, headlamps and other touches to give them a distinct look.

The new Lincolns also will have some technology that won’t appear in Fords. Most of the seven new vehicles will have computer-controlled steering and suspensions systems that adjust on the fly to provide a sporty or comfy ride, depending on how the car is being driven.

For now, Lincoln enthusiasts will have to have the patience that comes with age. The refreshed MKS and MKT will arrive in the first half of 2012, followed by an all new MKZ in late 2012. The four remaining vehicles won’t be launched until 2013 or 2014.

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