The BIG picture isn't bright for FORD.....why??

[JPFS1]

Hi all

Well as i look into my crystal ball of future earnings of the largest auto manufacturer's in the world (GM & Ford).. who would have thought that they are going broke...?? and they are!

In a world where the largest Economy (US) is in a state of despare, trying to mask the seriousness of the problem, the ugly nature of their deep seeded problems are now rising to the surface for all to see.

Put simply, the US dollar will continue to fall causing commodity prices to rise, Oil will look cheap at current prices when we look back to today towards the end of the year.

What does this all mean for GM and Ford??? Production costs increase eating into earnings and profits. We've seen the measure's GM have gone to already, knocking projects on the head ie. VE global platform derivatives etc.

Have a look at GM and Ford's stock price performance over the last couple of years for an indication....

There are many factors that have contributed to this downturn, but i won't go into it, and i can't see them doing anything to fix it, they seem quite content to continue on their merry way.

The future is looking very bleek IMHO, not wanting to sound too pesimestic, but the worst is not over!

[darkfang888]

No its not, we may see a return to the (basically) non-performance-based 80's and early 90's... ugggghhhhh... so many taxis... wait I own one!

[b2tf]

Ok my take on this is that while GM and Ford are predominately based in the US, they do have seperate markets and theoretically if the US market was to go bust they could still quite easily survive (albeit smaller) in the European and Australian markets.

The beauty of having several primary markets (i.e. USA + Australia + Europe) is that while you can maximise profits through wider product exposure to a greater percentage of buyers, you can still manage to develop profit if one of those markets goes under by simply adjusting your approach to the markets. For example, Ford Australia is focused mainly on Falcon and to a lesser extent Territory, because these are their main markets. Ford Europe are more focused on smaller cars because thats what the market demandsm and Ford US are focused on sedans and performance (for arguments sake anyway). If Ford US were to go under, Ford as a company would have to adjust their approach to the remanining markets of Europe and Australia, and therefore expand them (i.e. AWD models in Aus, RWD models in Europe etc etc.). That way, they lose one market but they use the resources from it which are now redundant to expand the 2 remaining markets.

Basically the more 'arms' Ford or any other similar company has (a good example is GM - Holden, Chevy, Buick, Cadillac just to name a few), the better off they are if one becomes redundant. It also has flowon effects while all markets are viable, because you can take technology developed for one market (i.e. AWD in USA) and use it in another (i.e. take AWD technology to Aus market and put it in Falcon etc). If one arm goes bust, the body puts the energy from it into the other arms and thus they get stronger (theoretically).

The big picture (and the thing to remember) is that while some markets may become smaller or possibly even redundant altogether, there are almost always more markets or the ability to expand other pre-existing markets using the information,technology and resources that were in the redundant one.

*B2tf exits lecturer speak mode, and looks at what he has written :

[JPFS1]

IF Ford US were to go down, i really wouldn't want to think what would happen to Ford AUS. It wouldn't be pretty.

If the price of production to Ford (globally) to build their product doubles over a short time, what happens to profit? what happens to future projects? what happens to funding their other 'arms'...??

Delphi, GM's major parts supplier is heading for bankruptcy and word is that GM won't be far behind them... depending on some restructuring that's in the works. This is all because of a failing 'once great' economy... this is drastic, that a company like GM can be taken out... if it does, imagine the effect to other major US corporations?

There's no real pretty picture at the moment, especially in the US with their US $ problems.

[GTP 320]

Why don't you cheer up and have a happy day instead of trying to create doom and gloom for Ford and GM.
Cheers John

[b2tf]

Originally Posted by JEM

IF Ford US were to go down, i really wouldn't want to think what would happen to Ford AUS. It wouldn't be pretty.

If the price of production to Ford (globally) to build their product doubles over a short time, what happens to profit? what happens to future projects? what happens to funding their other 'arms'...??

Delphi, GM's major parts supplier is heading for bankruptcy and word is that GM won't be far behind them... depending on some restructuring that's in the works. This is all because of a failing 'once great' economy... this is drastic, that a company like GM can be taken out... if it does, imagine the effect to other major US corporations?

There's no real pretty picture at the moment, especially in the US with their US $ problems.

Hence why Ford has development + R&D facilities in Europe, Australia and a lot of other places - not just the US.
A theoretical death of Ford US would mean no more R&D, not permanently though - only until profits recover. With enough development done already in all of those markets, you can take all of that work and insert them into models previously existing in the worldwide markets.
There are your 'new' models, there are your profits.

You can almost guarantee GM wont fall over, I can understand why people would be thinking this with all the info thats flying around lately, in particular the dropping of the ZETA architecture into US programme, but i find it highly unlikely that GM would die alotogether anytime soon. If it did i dare say you could expect to see Holden etc still exist except on their own, and if for example Holden became its own entity, it would be an Australian market only company.
Anyway, back2thepoint ( :hihi: ). Delphi is going down the tubes, so is iON who supply Ford Aus. Doesnt mean they're the only companies capable of doing it, hence why most business have a tender process for all new contracts. You'll find that some companies do keep records of the 'next best' company if their chosen one falls, but usually they simply go through another tender process to best determine the company capable of honouring the contract.

The US economy is pretty much just a much bigger version of ours (but with differences of course). Basically things grow until its sustainable for a period of time, from there it may develop further but not at a rate where it could collapse (i.e. not putting all your eggs in one basket and running with it). A theoretical example would be developing AWD technology in a Falcon or Commodore whilst still engaing in development of features for the regular RWD range.
I dont imagine Ford would have gotten to the point where they're hoping and praying that all of their research pays off big time, there would be safeguards and policies in place to ensure that if the cash reserves/productivity of the regular range drops below a certain point, the R&D of other future projects would be suspended until it was possible to safely do so again - i.e. do them without going over a certain level of financial risk.

Put quite simply, they make sure they cover their **** before going any further.

[b2tf]

Originally Posted by GTP 320

Why don't you cheer up and have a happy day.instead of trying to create doom and gloom for Ford and GM.
Cheers John

LOL I like that reply! :hihi:

[JPFS1]

yeah i am a happy person and having a happy day...

can't say the same about our big manufacturer's though ;)

nah, i guess i'll just have to go out and buy that performance ford i always wanted before.. 1/ they are axed, or 2/ they are double the price..

seriously though, i didn't start the thread to cause a doom and gloom feel, just thought if anybody would find it interesting and want to talk about the 'health' of our companies we love.

cheers.

[Chucky]

It'll certainly be very interesting to see what happens to GM over the next few years.

The optimist in me likes to htink that Ford saw this crisis coming a few years ago & has taken care of the required plant closures etc to get through the down turn.
The pessimist in me (being a 'pies supporter) says otherwise!

[Steffo]

Personally I think that eventually that the American "Big Three" (ie: GM, Ford, Dodge) will all end up being owned by the German "Big Three" (BMW, Mercedes-Benz, Volkswagen) one day. Oh wait, Mercedes-Benz already owns Dodge. And I've heard roumours that VW wants to buy into Ford, not much, but a small % of it.

I don't think its a bad thing either. They're all far superior manufacturers to Ford/GM/Dodge, and well, for Dodge at least, being owned by Mercedes-Benz has been nothing but good. Their profits are up, their sales are up, they're introducing all new models, etc etc.

[b2tf]

Originally Posted by Steffo

And I've heard roumours that VW wants to buy into Ford, not much, but a small % of it.

I just had an awful thought - a new beetle with flower holder in dash, blonde bimbo with daddy's credit card behind the wheel, and a Ford badge on the bonnet. : :

[SpoolMan]

Originally Posted by GTP 320

Why don't you cheer up and have a happy day.instead of trying to create doom and gloom for Ford and GM.
Cheers John

Good one John, we all need more happy days.. :

[Psycho Chicken]

You mean Chrysler Steffo? :P haha couldn't help it.

[XRQTOR]

Originally Posted by Steffo

Personally I think that eventually that the American "Big Three" (ie: GM, Ford, Dodge) will all end up being owned by the German "Big Three" (BMW, Mercedes-Benz, Volkswagen) one day. Oh wait, Mercedes-Benz already owns Dodge. And I've heard roumours that VW wants to buy into Ford, not much, but a small % of it.

I don't think its a bad thing either. They're all far superior manufacturers to Ford/GM/Dodge, and well, for Dodge at least, being owned by Mercedes-Benz has been nothing but good. Their profits are up, their sales are up, they're introducing all new models, etc etc.

What other car companies do "Ford" own, i thought they owned a fair few other brands. You would have a list or a link to what big companies own what would you.

[MethodX]

Mazda, Jaguar, Aston Martin. Lincoln, Mercury, Volvo, Land Rover.

Steffo Mercedes and VW arent in great shape themselves so who knows how they will end up.

[XRQTOR]

Originally Posted by MethodX

Mazda, Jaguar, Aston Martin. Lincoln, Mercury, Volvo, Land Rover.

Steffo Mercedes and VW arent in great shape themselves so who knows how they will end up.

Is that all i thought the list was bigger. Still there's plenty of other markets they have fingers in.

[MO]

More than most ppl are aware of,they have been hedging their bets for ages now,but don't worry FORD will be the winner at the end ......when fossil fuel runs out in about 10to50 yrs.

[Dave_au]

Meanwhile. if global sales trends continue, Toyota will have enough capital at the end of this year to entirely buy out GM if they so wish. You guys love knocking whitegoods on wheels, sometimes people just want a reliable small car.

As for Ford, its the cylindrical market cycle. All car brands are not doing too well at the moment (Toyota being the exception). As for interest rate woes, Ford US should have an active currency hedging role whereby they contract themselves into forward interest rate and currency swaps in an attempt to mitigate their foreign exchange gains or losses, so there's nothing exceptionally new there. Ford's problems would even be mirrored in other US consumer and industrial products manufacturers. The traditional US market has been fully exploited, with little chance of the major growth cycles that have been experienced since the global economic recovery of the early 90s. Domestic disposable expenditure will soon be in decline with the rise in interest rates as consumers swtich from being spenders to misers.

What many of the manufactures are left with is a product portfolio for North American tastes, with pricing and costs in line with a first class world economy. The next area of growth in motor vehicles will most likely be cheap and affordable cars to much of south east asia and south america. As to who bites the bullet and starts making a $5000 or less car for these markets is anyone's guess.

[Yaw]

If you have ever seen the movie demolition man, that is what globasliation will cause, competition to the point of a duopoly or monopoly of any given market, just like Bill Gates has built. There can only be one winner in the end.
I just hope sizzler beats taco bell, because I hate tacos.

[Homer1]

Originally Posted by Dave_au

Meanwhile. if global sales trends continue, Toyota will have enough capital at the end of this year to entirely buy out GM if they so wish. You guys love knocking whitegoods on wheels, sometimes people just want a reliable small car.

As for Ford, its the cylindrical market cycle. All car brands are not doing too well at the moment (Toyota being the exception). As for interest rate woes, Ford US should have an active currency hedging role whereby they contract themselves into forward interest rate and currency swaps in an attempt to mitigate their foreign exchange gains or losses, so there's nothing exceptionally new there. Ford's problems would even be mirrored in other US consumer and industrial products manufacturers. The traditional US market has been fully exploited, with little chance of the major growth cycles that have been experienced since the global economic recovery of the early 90s. Domestic disposable expenditure will soon be in decline with the rise in interest rates as consumers swtich from being spenders to misers.

What many of the manufactures are left with is a product portfolio for North American tastes, with pricing and costs in line with a first class world economy. The next area of growth in motor vehicles will most likely be cheap and affordable cars to much of south east asia and south america. As to who bites the bullet and starts making a $5000 or less car for these markets is anyone's guess.

Actually in terms of total revenue, Toyota are worth more than the US Big 3 put together. They just don't produce as many cars as GM in terms of volume, hence thier no.2 carmaker spot.