Storm clouds are building over Dearborn, and the rumbling you hear is not the song of a V8 engine.

What's happening to Ford? Sales aren't exactly slumping: August sales of Ford vehicles were up more than eight percent from last year. Ford isn't strapped for cash: the company says it has over $20 billion on hand. But Ford common stock is in the toilet, dropping below $8 a share this week, and the third-quarter earnings report, due out tomorrow, is not likely to make anyone feel better.

Many devils live in the details at Ford. One of them is the fact that while they're selling a lot of cars and even more trucks, they're not making a whole lot of money on those sales: incentives — rebates, low-rate or even no-rate financing — are eating away at the bottom line. Many dollars are being poured into development of the next version of the F-series truck, while the replacement for the long-in-the-tooth Taurus, Ford's ostensible "volume" sedan, exists only as drawings and dreams. There is still no long-term plan for the all-but-invisible Mercury brand other than to give Lincoln dealers something smaller to sell. And the high-zoot imports in the Premier Automotive Group aren't moving out of showrooms with much alacrity in these recessionary times.

There are further problems. Ford's pension fund for retirees, no thanks to the decline in equity markets in general, is about $3 billion in the hole. And larger rival General Motors, by offering incentives which Ford must match to keep market share, is in better shape to ride out the recession.

And it gets worse. Ford came out better than Firestone did in the recent flap over rolling Explorers, but the company's last two new-model introductions, the Focus in model-year 2000 and the Escape in 2001, have been marred by repeated recalls, and the flap over gas-tank explosions in Ford's large cars is not making consumers feel any better.

By no means is Ford about to go the way of Studebaker or Kaiser-Frazer. But what Ford needs most right now is a line of really excellent cars and trucks that people will line up to buy, without a bunch of expensive incentives. Until they get one, there will be clouds over Dearborn.

The Vent

#313
15 October 2002

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