Tag Archive | "Ford Motor Co."

Ford Quality Tumbles as Japanese Win in Study

Ford Motor Co.’s reliability ranking in the Consumer Reports annual auto survey tumbled as its namesake brand slid to 20th from 10th last year among 28 brands while Japanese automakers captured nine of the top 10 spots.

Ford’s ranking suffered because the new Explorer SUV, Focus compact and Fiesta subcompact all scored below average for reliability, the Yonkers, New York-based publication said in a statement. Buyers reported problems with dashboard touch-screens used to control entertainment functions in some Ford vehicles. Chrysler Group LLC’s three rated brands all improved, reported Bloomberg.

Ford and General Motors Co. have shown profit and market- share gains, built in part on the perception of improved quality. Today’s results may damage that reputation, said David Champion, senior director of Consumer Reports’ Automotive Test Center.

“Ford took a big drop with their new cars,” Champion said in a telephone interview before the study was released. “They have been on a roll over the past five years. They need to get a handle on some of their new technologies.”

This year’s results are similar to last year’s when Toyota Motor Corp. and Honda Motor Co. tied with the most models with top scores, and Ford was the only U.S. automaker receiving top marks. Toyota’s youth-oriented Scion brand was No. 1, Lexus placed second and the Toyota brand ranked sixth. Honda’s luxury marque Acura ranked third, while its namesake brand finished fifth. Mazda Motor Corp.’s Mazda was fourth.

Consumer Reports surveyed 5 million of its subscribers and received feedback on 1.3 million vehicles for the study.

Fiat SpA-controlled Chrysler made improvements. Its Jeep brand placed 13th and was the highest-ranking U.S. brand. The Chrysler brand moved up 12 spots to 15th and Dodge ranked 21st.

Chrysler’s newest models were ranked average or above average for reliability, Champion said. That bodes well for future model years because automakers typically make improvements after a new model goes on sale, he said.

“This is good news for Chrysler,” Champion said. “It shows that they are starting with a good basis for improvement.”

For Ford, the chief complaints were related to the company’s MyFord Touch and MyLincoln Touch audio, entertainment and navigation systems and a new fuel-saving transmission, Champion said. Malfunctioning touch screens had led to a plunge in Ford’s ranking in J.D. Power & Associates study of new-car quality earlier this year.

The Consumer Reports survey is “a lagging indicator,” Wes Sherwood, a Ford spokesman, said in an interview. “We’ve been working through these issues and we’re seeing improvement.”

In the Consumer Reports study results released today, GM’s top-selling Chevrolet brand held its ranking at 17th. Buick and Cadillac each fell six places to 24th and 25th, respectively. GMC finished 22nd.

The Chevrolet Volt plug-in hybrid was GM’s most reliable car in the survey, Champion said. This is the first year the Volt was reviewed by Consumers Reports.

Toyota, which was plagued by recalls of millions of U.S. autos in 2009 and 2010 related to unintended acceleration claims, had good results in the Consumer Reports survey, Champion said.

The top 10 included Nissan Motor Co.’s Infiniti brand in seventh, Fuji Heavy Industries Ltd.’s Subaru eighth and the Nissan brand ninth. Zhejiang Geely Holding Group Co.’s Volvo ranked 10th. The namesake brands of Hyundai Motor Co. and its affiliate Kia Motors Corp. were 11th and 12th.

Other than Volvo, all European brands finished in the bottom half of the survey.

Volkswagen AG’s namesake brand placed 16th while its Audi luxury brand finished 26th. Daimler AG’s Mercedes-Benz ranked 18th. Bayerische Motoren Werke AG’s BMW was 19th and its Mini brand came in at No. 23. Porsche SE’s Porsche plunged from second last year to 27th and Tata Motors Ltd.’s Jaguar was last.

“The Europeans have been doing poorly for the last four or five years,” Champion said at a press briefing in Detroit. “The Europeans have a different sense of the market. In the U.S., cars are more like appliances and people expect to turn it on and everything should work. In Europe, cars are more an extension of your personality.”

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Ford Says Wage Gains to Be Small

Ford Motor Co. said its total annual labor expenses will increase less than 1 percent over the four-year term of its new contract with members of the United Auto Workers union.

The contract’s lump-sum payments to workers, including a $6,000 bonus to be paid to each of Ford’s 41,000 UAW workers for ratifying the contract, will cost Ford $280 million this year, company officials said on Thursday in a presentation to analysts. The bottom-line impact of lump-sum payments will be $80 million this year and about $80 a year in each of the next four years, the company said. Other changes and benefits in the contract will lower Ford’s labor costs by $10 million this year and $20 million next, Ford said.

Costs of the contract will “be more than offset by improvements in manufacturing flexibility,” said Mark Fields, president of the Americas for Ford.

Changes include adding flexibility to plants and other steps to increase productivity, according to The Wall Street Journal. Structural costs are not anticipated to increase materially over the period of the contract, said Lewis Booth, the chief financial officer.

Ford plans to hire 12,000 new workers over the course of the contract. If U.S. sales of vehicles stays at current levels or increases slightly, Ford said it still plans to hire most if not all of the workers based on the current need, Mr. Fields said. Ford’s 41,000 hourly workers ratified a new four-year contract this week with 63 percent vote in favor of the contract.

Ford was the most vulnerable of the three Detroit auto makers because its previous contract didn’t have a “no strike” clause that was included in contracts held by General Motors Co. and Chrysler Group LLC.

Ford said it will invest a total of $16 billion in the U.S.—$6.2 billion directly in plants—through 2015. It also raised the entry-level and top-end wage for newly hired workers, a key goal of the UAW to begin to close the gap in wages between long-time employees and new ones.

Ford is planning to buy out skilled tradesmen for as much as $100,000 a worker. Ford said it would like to reduce the number of tradesmen by between 900 and 1,000 from the 9,000 it now has, said John Fleming, group vice president of manufacturing and labor affairs.

Mr. Fleming told analysts that by the end of 2015, Ford’s U.S. work force would be composed of around 8 percednt of so-called “second-tier” workers who make a lower starting wage.

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Fitch Upgrades Ford After Contract Ratification

Fitch Ratings on Thursday upgraded its rating of Ford Motor Co. to “BB+” from “BB” with a positive outlook to achieve the last notch below investment-grade status in the wake of successful ratification of a new labor agreement.

“The upgrades to Ford’s ratings reflect the automaker’s strong financial performance and continued debt reduction through the first nine months of 2011, as well as the recent completion of the United Auto Workers labor agreement,” the ratings agency said in a report.

Auto sales are still slow to recover, but Fitch cites Ford’s “continued net pricing strength” and a lower cost structure. That should allow the automaker to generate strong margins and free cash flow in a weak market while continuing efforts to reduce its debt load to $10 billion by 2015, reported The Detroit News.

The move does not come as a surprise as rating agencies in recent months said they would look at upgrading Ford’s credit status upon successful completion of its labor negotiations.

Ford Chief Financial Officer Lewis Booth said earlier Thursday he thought the labor contract would be favorably received by ratings agencies. Ford is hoping to return to investment-grade status again soon, but achieving it “is not an absolute necessity to pay dividends,” Booth told investors.

“Our shareholders have been very patient. It would be nice to get investment grade ahead of time, but that’s not in our control,” Booth said.

Barclays Capital on Thursday said contract ratification paves way for a quarterly dividend of 8 cents.

“With the contract behind it, Ford is likely to consider instituting a regular dividend,” said Barclays analyst Brian Johnson. He expects Ford to pay a dividend for 2012 of 36 cents, beginning with an 8-cent dividend in the first two quarters of 2012, ramping up to 10 cents per quarter in the second half and 55 cents by 2015.

But Ford could announce a dividend when third-quarter results are released next Wednesday, Johnson said.

Fitch expects Ford’s rating could be upgraded in the next 12 to 24 months, but said reaching investment grade — “BBB-” would require financial assurances Ford is strong enough to withstand the cyclical pressures on the auto industry.

The agency does not want to assign investment-grade ratings to Ford unless it is reasonably confident the automaker has the liquidity, cost structure and profit-generating potential to maintain the status even in a period of economic stress.

But elevating Ford to “BBB-” or higher is likely if the company continues with its current business plan, Fitch said.

“We continue to make progress on our plan, and we are pleased with this positive step,” said Ford spokesman Todd Nissen. “Ultimately, the credit rating agencies determine when we return to investment grade. Our job is to stay focused on making progress on our plan.”

Mark Fields, Ford president of The Americas, said Thursday that Ford’s mid-decade outlook remains intact with the terms of the new labor agreement.

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UAW Ratifies Ford Deal with 63 Percent Approval

The United Auto Workers has made it official: Its 41,000 members at Ford Motor Co. voted to accept the tentative agreement, the union announced Wednesday.

Results concluded Tuesday at the 58 UAW-Ford locals.

The final tally after two weeks is 63 percent in favor of the agreement with 22,031 “yes” votes to 37 percent voting against or 12,957 “no” votes, including 4,243 skilled trades voting in favor and 2,268 against. Total number of votes cast was 34,988, according to The Detroit News.

“I am pleased with the strong support for this agreement from UAW Ford members. I believe UAW Ford workers understood the importance of each and every vote,” said UAW Vice President Jimmy Settles, head of the union’s Ford Department.

“That was evident in the high voter turnout with 85 percent of the overall membership voting, and at locals like Kansas City, where more than 80 percent of members voted and more than 90 percent of those voted in favor of the agreement.”

He addressed some of the dissatisfaction shown by members in comments on the UAW-Ford Facebook page during negotiations.

“Working people in this country are clearly frustrated about the inequity in our society. Our members at Ford are frustrated with the economy, the lack of wage increases over the years, outrageous executive compensation and the immorality of Wall Street,” Settles said.

“Through this process, we have developed open and honest debate, along with high participation among our members, and we hope to continue with the debate and activism as we move forward to the 2012 federal election, which is critical not just for our members at Ford, but for all working people in the U.S.”

But the main goal was preserving and adding jobs.

“As the nation’s economy remains stalled and uncertain and its employment rate stagnates, we were able to win an agreement with Ford that will bring auto manufacturing jobs back to the United States from China, Mexico and Japan,” said UAW President Bob King.

Mark Fields, Ford president of the Americas, said, “This agreement is proof that, by working together with our UAW partners and local communities, we can significantly create new jobs, invest in our plants and people, and make a very positive impact on the U.S. economy.

“Our agreement is fair to our employees and it improves our competitiveness in the U.S.”

Ford is planning a conference call with investors Thursday morning to go over the new agreement. The automaker is hoping rating agencies will upgrade its status after securing four years of labor peace with an agreement that keeps Ford’s costs competitive.

Ford now joins General Motors Co. in ratifying a new four-year contract. Chrysler Group LLC has just begun voting on its proposed deal. The first local, representing a transmission complex in Kokomo, Ind., voted 56 percent in favor. Chrysler voting will conclude Oct. 25.

The Ford agreement adds 5,750 new UAW jobs, which brings the total to 12,000 over the course of the agreement with positions previously announced.

“As a result of these negotiations, the UAW and the domestic automakers announced a total of 20,000 direct manufacturing jobs including the creation of 6,400 jobs at GM and 2,100 at Chrysler,” King said. “The American auto industry is on its way back.”

The Ford agreement also includes $16 billion in investment in new vehicles, including $6.2 billion to upgrade plants including Michigan Assembly, AutoAlliance International in Flat Rock, Romeo Engine and some transmission plants.

Outside Michigan, Ford will invest in Kansas City, Louisville, Ky., and Avon Lake, Ohio.

With ratification, workers with a year of seniority will get a $6,000 signing bonus and receive $7,000 in “inflation protection” and other lump-sum payments over the term of the agreement.

Employees are eligible for profit sharing under a new and simpler formula. The first payment will average $3,700 this year.

Entry-level wages were also increased to $19.28 over the term of the agreement.

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Ford UAW Contract Ratification Assured

Ford Motor Co. workers have ratified a tentative labor agreement not necessarily because they liked it, but because many felt it was the best they could get in today’s economy.

As final results from the United Auto Workers locals were reported late Tuesday, it became mathematically clear the agreement had passed after a groundswell of “yes” votes in the final days of voting, reported The Detroit News.

Cementing ratification was a narrow 53 percent approval by about 5,000 members of Local 862 representing workers at the Kentucky Truck and Louisville Assembly plants.

Romeo Engine also approved the deal overwhelmingly : 492 in favor and 128 against. The Sharonville transmission plant in Cincinnati was in favor with a vote of 994 to 354. The Lima, Ohio, engine plant also approved the deal.

The Walton Hills, Ohio, stamping plant that will close by the end of the contract rejected the agreement 273 votes to 44.

The UAW, whose top officials recommended its passage, was expected to confirm the deal’s ratification Wednesday.

Approval of the four-year agreement that keeps Ford’s costs in line with its domestic competitors should prompt a hike in the automaker’s credit rating. Ford is hoping by year-end to return to the investment grade status it lost in 2005.

“That’s the hidden dimension here,” said Harley Shaiken, a labor professor at the University of California-Berkeley. Returning to investment grade, he said, will make it “significantly less costly to invest money.”

Last month, a day after General Motors Co. ratified its labor contract, Standard & Poor’s raised GM’s corporate credit rating two notches to “BB+,” saying the deal provided for GM’s continued profitability and cash generation in North America. BB+ is one notch below investment grade.

GM said the new labor deal will only raise its labor costs by 1 percent annually over four years.

S&P said at the time it expects to also raise Ford to “BB+” with a stable outlook if Ford ratified an agreement that does not put it at a disadvantage relative to GM.

When the deal was announced Oct. 4, Ford’s John Fleming, head of labor affairs, said the terms improve the competitiveness of the Dearborn company, and keep labor costs in line with the current $58 an hour in wages and benefits.

Shaiken said investment grade will make Ford even more competitive and likely to invest in the U.S.

The proposed contract was all about jobs and investments: 12,000 jobs including 5,750 entry-level positions not previously announced, as well as $16 billion in investment of which $6.2 billion would go into plants. That includes work that would have been done elsewhere such as China, Japan, Mexico and parts of Europe.

Heading into the final day of voting Tuesday, 63.2 percent of Ford’s 41,000 were in favor of ratification with 16,691 votes in favor and 9,698 rejecting the deal.

The 6,993-vote difference — with about six of 58 locals still to report representing about 9,000 workers — was considered too large for the naysayers to bridge.

Final-day results were still pending from the Avon Lake, Ohio, assembly plant.

Some large locals rejected the deal in early ratification votes, including Michigan Assembly and Chicago Assembly. But the results alarmed many workers and drew larger numbers of employees who approved the pact in later votes, including members at AutoAlliance International in Flat Rock; Dearborn Truck; Twin Cities in St. Paul, Minn.; and Kansas City.

“We got more jobs,” said Paul Vella who works at the Livonia Transmission plant that approved the deal by about 77 percent and is hoping to be awarded future work building an 8-speed transmission when the 4-speed they are making is phased out.

“The economy’s bad and I’m just happy to have a job,” he said.

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Wall Street Optimistic Ford/UAW Deal Will be Approved

Wall Street is optimistic the tentative labor agreement between Ford Motor Co. and the United Auto Workers that keeps U.S. labor costs competitive will pass in the final two days of voting.

Ratings agencies have said successful ratification of the vote is a precursor to upgrading Ford’s credit rating. The automaker is hoping to return to investment grade as early as year end, a status it lost in 2006, according to The Detroit News.

Two-thirds of the 41,000 Ford workers have finished their ratification votes and 62 percent are in favor of the four-year pact.

Most of the union locals still to report will not be finished voting until Tuesday — the deadline for all 58 locals.

The agreement requires a simple majority to be ratified, at which point the agreement becomes official. Confirmation of passage is expected Wednesday.

“After some early results appeared to put ratification at risk (vote was 55 percent against early Friday), several large facilities have voted in favor by wide margins, including Dearborn Assembly (62 percent in favor) and Kansas City Assembly (88 percent in favor),” said analyst Rod Lache of Deutsche Bank in a research note Monday.

“It now appears likely the deal will pass, as the remaining 40 percent of the workforce would need to vote approx 70 percent “no” in order to swing the overall outcome.”

Lache said the agreement will keep Ford’s U.S. labor costs relatively flat over four years, ratification removes the risk of a work stoppage and the deal positions Ford well if the auto industry recovers in the U.S.

Additionally, “we believe that this clears one of the final hurdles to the announcement of a meaningful dividend at Ford in the relatively near future,” Lache said.

Brian Johnson at Barclays Capital also said in a research note Monday that approval by Ford workers appears likely.

“Overall, we estimate the tentative contract would add about 70 cents per hour to Ford’s labor costs, or about $70 million annually — assuming only 1,000 skilled trades retire,” Johnson said.

“Higher attrition could lower the net cost further,” Johnson said, noting Ford still has the highest cost per hour because the $58 an hour rate going into the contract was much higher than Chrysler Group LLC’s $49 and General Motors Co. is expected to benefit from greater skilled trades attrition and cuts to legal services.

Barclays estimates a strike would have cost Ford $273 million a day in lost revenue and $71 million a day in lost profit, although some of that would be made up in 2012 with increased overtime, Johnson said.

“Nevertheless, a strike would have delayed any rating agency upgrade or dividend,” Johnson said.

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