FORD MOTOR COMPANY (tm) TO LOSE $3 BILLION IN 2006?

www.fordboldmoves.com has linked to a Bloomburg story reporting that some analysts believe Ford Motor Company (tm) will lose as much as THREE BILLION DOLLARS in 2006. See http://quote.bloomberg.com/apps/news?pid=20601109&sid=a9j0FqY.dQJ0

"Ford Motor Co., buffeted by declining sales, shrinking margins on its most profitable vehicles and a dire need to conserve cash, may lose $3 billion in North America this year, people familiar with the company's internal projections said. "

The latest speculation comes on the heels of FoMoCo's halving of dividends and slashing board member payments, and on huge lengthening of the basic warranties for Lincoln and Mercury vehicles to address market perceptions of lower quality (however FoMoCo hasn't taken the "Bold Move" of matching or beating the Korean carmakers on warranty terms).

Still, FoMoCo may post a small annual profit (excluding one-time accounting charges), according to the analysts interviewed for the Bloomburg article, mainly on the back of earnings from Ford Motor Credit.

FoMoCo has achieved a modest percentage gain in cars (although not near the sort of results other small car builders are gaining). But unless you're satisfied with mini-shares of the market, the Five Hundred is a bust.

Ford continues to neglect the Panther platform (where's the restyling (the Japanese do it every four years like clockwork)? where are the 3V, 4V and supercharged V8s? Where's the crash-proofed fuel tank? Where are the true sports sedan models (not just buckets & a console in an ordinary sedan model)? Where is the next Town Car?

Where are the image-leading hybrids (even if they do have to offer ZERO percent financing to get rid of them)? ).

And now with the discontinued Taurus, the flailing Freestyle, the tired, previous generation Focus, the early retirement of the underdeveloped Lincoln LS, the refusal to import the Aussie Falcon, the horrible IIHS numbers on the Mexican-built, Mazda-based Fusion and the gutting of SVT, it looks like Ford has forgotten how to build a segment-leading sedan for the U.S. market.

CASE STUDY: NICHE MARKET NEGLECT IN THE CORRAL

Moreover, FoMoCo seems to be neglecting its best niche market--the Mustang. Notwithstanding the dealer-gouging hoopla for the soon-to-be-released, hyper-expensive Shelby GT500, Ford seems to be coasting on the built-up inertia of the 2005 restyle.

Given that the aftermarket has Eaton superchargers for less than $1000, bulletproof modular shortblocks for under $5000 (without any of the economies of scale of mass production) and 4V cylinder heads that aren't that much more expensive than good 2Vs and 3Vs, FORD HAS NO REAL EXCUSE FOR FORCING US TO SETTLE FOR A WEAK, FUEL-INEFFICIENT 300 h.p. with fragile hypereutectic pistons, crappy cracked-cap rods and cast cranks. TEAM MUSTANG--give us the GOOD STUFF at prices ordinary Mustangers can afford . . . or be prepared to lose mass sales to DCX when the Hemi Challenger is on-line.

And why is it that Ford doesn't build an affordable, RWD "tuner" car that kids can insure (any kid trying to get coverage on a Mustang GT will need two jobs -- if they survive the insurance agents laughter). A "tunable" V6 (forged internals, DOHC, dual pipes, low compression) would glide under the insurance radar and become a tuner-car star.

And why is it that even the weak-sister Mustang GT mill is saddled with a couple thousand dollars worth of trim and luxury options? Whatever happened to the stripper with a big bullet under the hood? I guess it's more fun to make hot rodders pay $5000 extra for two more cylinders and another exhaust pipe.

"JUST GOOD ENOUGH" VS. "SEGMENT-LEADING"

FoMoCo seems to be focused on "just good enough" instead of benchmarking and trouncing the best in a particular segment. Such mediocrity is a prescription for more marketshare losses and lower stock prices.

Philosophically, most people want it all (value, performance, reliability, fuel economy, low maintenance costs, smoothness, tractability, quality, striking looks, decent ride quality, plenty of helpful gadgets) at the cheapest possible price (that's basic microeconomics). The people I know who buy 156 m.p.h. German luxury sedans or cheaper Japanese knockoffs want the image, prestige and panache of them. The AMG and M cars are rarely driven anywhere near their performance potential (just like most people who buy $200 athletic shoes don't play ANY sport in them).

A major constant in the 100+ year evolution of the automobile is that reliable, operationally transparent higher performance always sells when it's priced within the same range as more ordinary competition. If it's too expensive or causes maintenance, economy or reliability hassles, then it only sells to the fanatics and early adopters.

Revolutions and huge market shifts occur when breakthroughs reach the popular consciousness and require no special sacrifices.

For example. Kettering high compression V8s revolutionized the market and made flathead technology completely obsolete within 10 years (less than five years in premium segments). Why? Because they offered more bang (and efficiency) for almost the same buck. In 1946, nobody expected 0-60 in less than 18 seconds. By 1964, even the cheapest full-size V8 could run 0-60 in 10 seconds, and the legendary times had fallen to around 5-7 seconds. Furthermore, even as expectations and technical capability increased, the consumers' actual use of the technology didn't (e.g. occasions of full throttle acceleration were undoubtedly more common in a V12 Continental than they were in a 430-powered Mark III/IV/V of the late '50s).

Of course, as higher technology (fuel injection, multivalve engines, variable cam timing, overhead cams, forced induction etc.) began to outstrip the hidebound Detroit "barge" luxury motif, Detroit fell further and further behind.

A significant factor in this was that market conditions in Europe caused many of their vehicles to develop to higher standards while Americans just kept working on the basic formulas and expectations established in 1948-1950. The emissions and CAFE crackdowns in the 1970s interrupted the natural development of market expectations and played into the efficiency strengths of the imports. However, as pressures eased, electronics, multivalve technology (hardly a new development) and reliable forced induction began to accelerate consumer expectations beyond the old cubes & carbs era.

Now, an ordinary Honda Accord V6 has as much performance as many "high performance" and "exotic" cars of twenty years earlier. The milestone vehicles in the sedan segments now outperform most legendary sports cars. Even a prosaic Honda minivan can whip many, if not most old sports cars (with the AC blasting and a DVD playing to entertain the kids).

TRANSPARENT PERFORMANCE AS A COMPONENT OF THE "NEW QUALITY"

Thus, to stand out takes even higher levels of refinement, fuel efficiency and objective performance. A 4.0 0-60 is probably the low limit under today's technology for transparent, no hassle, relatively cheap performance in a sedan. Furthermore, premium market expectations probably set the performance bogie in a 6-4 second range. Current fuel price concerns also require that fuel economy not be neglected in the pursuit of luxury, power and performance.

Carlos Ghosn told CNBC yesterday (13 Jul 06) that "Now, the [definition of quality] is going through a shift away from 'things gone wrong,' which is what people are now fixing. You've got to get more things you like. Do you like the materials, the colors, the fit, the sound? You've got to take the good cars apart. In the past, [the quality question] was: ‘Is the car reliable? Is the car durable?' Now, we're shifting…to the question: Did I get the right colors, features, material, sound, into the car?"

To get image conscious customers to look again, FoMoCo has to dramatically beat its competition. That doesn't mean victories which are apparent only to bookish technophiles, magazine editors or auto engineers. Cadillac has partially done this in its on-going quest to shed its poor image.

But FoMoCo should be benchmarking and beating the best on objective performance numbers (including fuel efficiency) at price points that drastically undercutting their European and Japanese "mainstream" competition. I've never taken anyone for a ride in a high performance car who said "I wouldn't want one of these even if I could afford it."

However, if a vehicle is too hard to live with or costs significantly more than other functional choices in the market, it will become a more narrow niche-oriented product.

HISTORY PROVES ADDING MORE PERFORMANCE IS CHEAP

Finally, as the 1960s U.S. muscle car era proved, it really doesn't cost that much more to add performance. In fact, it's probably cheaper now than it was 40 years ago. Fuel economy is manageable with the right balance of technologies and insurance costs can be managed through driver aids and decontented "economy" models (it's always better to engineer the platform & powertrains for the premium versions then to decontent/detune them to hit economy niches than trying to reinvent a lo-po heap into a superstar).

If FoMoCo were to market a 14.3 second quarter mile @100+ mph, 156 mph cruise capable, 8.5+g capable sedan with decent fuel economy, no maintenance hassles, good warranty, functional styling, and good quality (fit/finish/materials) and sell it at the same price as the competition is pushing 15.7 @ 90, 120 mph peak sedans of more or less equal quality, style and economy, it will gain marketshare.

Similar benchmarkeing approaches would work in other market segments. Just "good enough" isn't "good enough" anymore.