UAW'S GETTELFINGER STOKED ABOUT MULALLY AT FORD; STIFFS DCX

In a pair of stories on UAW President Ron GettelFinger's speech before the Detroit Economic Club this week, Automotive News reported dramatically different treatments for Ford Motor Company (R) and DaimlerChrysler. www.autonews.com

Gettelfinger is "looking forward" to working with new Ford CEO Alan Mulally. Gettelfinger previously headed the UAW Aerospace Department when he "worked with" Mulally before on labor issues at Boeing.

Automotive News quoted Gettelfinger as saying "I found him to be a very credible individual. I never had an issue with him that we weren't able to sit down and talk our way through."

Skeptics reading between the lines will wonder whether Gettelfinger's purr words mean that the UAW chief expects Mulally to be an easy mark or if they mean that Mulally is such a slick salesman that he charms much of the fight out of labor negotiators.

Obviously, both Gettelfinger and Mulally have produced enough positive results on behalf of their respective sides that their respective career trajectories have remained on upward paths. But FoMoCo's situation is undoubtedly more critical than anything either of these leaders faced during Boeing talks. So perhaps the olive branch is a tacit recognition of FoMoCo's dire straits and their potential adverse impact on UAW membership.

Undoubtedly, Mulally's record in labor negotiations was a signficant attraction for William Clay Ford, Jr. But those who believe that hard-nosed negotiations leading to significant labor concessions are necessary to any real "Way Forward" are likely puzzled at Gettelfinger's apparent endorsement. Perhaps there'd be less angst if Gettelfinger had said "that Mulally . . . he's one smart, tough S.O.B! We're really going to have to work harder to obtain the kind of fair contract our workers need . . . "

Gettelfinger, however, may not see the "Way Forward" quite the same as the Glass House gang. Whistling past the graveyard of "right-sizing" and the 30,000 job cuts already announced, Gettelfinger said FoMoCo's challenge is to regain market share. While this is obviously the way a "labor supplier" would prefer FoMoCo to return to profitability, the reality is that Mulally and the Glass House gang will probably seek profitability at FoMoCo's currently reduced volume.

The bind for the UAW is to find a balance that saves as many dues-paying union jobs as possible and preserves the bulk of existing retiree benefits.

In stark contrast, Gettelfinger wasn't as kind to DCX. Automotive News reports that Gettelfinger said the UAW won't give DCX's Chrysler group concessions on health care costs. Gettelfinger said that the issue won't even be brought to a union vote.

Of course, the UAW previously agreed to some health care cost relief for FoMoCo and General Motors: "[A]ctive UAW workers forgo some future pay increases and face higher co-payments for prescription drugs. UAW retirees [from GM and FoMoCo] with pension incomes of more than $8,000 a year will start paying monthly premiums, deductibles and co-payments for health care" according to the Automotive News report.

It isn't that GM, FoMoCo and Chrysler aren't all at a huge health care and retirement cost disadvantage to the non-unionized Japanese transplant factories, because they are. It's just that Chrysler's financially healthier at the moment than GM and FoMoCo.

The UAW position evidences that its bargaining posture is often divorced from the big picture in the global automobile market. Instead of agreeing to a "pattern" that treats each automaker equally, fairly and competitively within the context of prevailing North American labor costs, so as to improve the Detroit 3's competitiveness and retain as many jobs as possible, the UAW apparently seeks to cherry pick, and grab all they can, while they can. This leads to greater cost distortions and less competitiveness. Moreover, it adversely affects consumer choice in that the high cost producers must cut somewhere else merely to stay in the game.

Perhaps Gettelfinger should just "ask Dr. Z" about it.

WARRANTY WAR: GM ONE-UPS FORD, BUT STILL TRAILS THE KOREANS

Yesterday, September 6, 2006, General Motors announced a new Five Year/100,000 mile powertrain warranty for all 2007 model vehicles sold in the United States and Canada, according to the Automotive News. www.autonews.com See also www.gm.com/warranty.

The new warranty replaced GM's standard three year/36,000 mile warranty and is fully transferrable and free of deductibles.

"The move is a bid by GM to counter successful marketing of long-term warranties by competitors such as Hyundai and Kia." www.autonews.com

Of course, GM's warranty volley is also in the context of Ford Motor Company's own escalation of the burgeoning "warranty war." FoMoCo jacked up the powertrain coverage on 2007 Fords and Mercurys to five years or 60,000 miles and on Lincolns to six years or 70,000 miles.

"'What we’ve found is that two-thirds of customers trade or dispose of the vehicle before five years and 100,000 miles,' said Mark LaNeve, GM's vice president of vehicle sales, service and marketing. 'This really matches the way customers buy cars.'"

The truth is that these enhanced warranties are simply a disguised sales incentive. However, they provide long-lasting psychological effects not available from one-time hits, such as rebates, employee pricing or zero-percent financing.

From a business perspective, long warranties are simply bundled repair insurance. For aftermarket service warranties, the warranty company's bet is that the premiums they collect from warranty sales will exceed their repair and administration costs.

But in the minds of consumers, a long warranty is a "guarantee" of reliablity. The consumers's logic is that the manufacturer wouldn't (and couldn't) "guarantee" a vehicle for so long if they thought it was going to break down. Thus, these enhanced warranties create "peace of mind" in consumers and, correspondingly, higher quality perceptions for the brand. This feeling is further extended by "roadside assistance" benefits that are copied from aftermarket "extended warranty" plans.

At least that's what the manufacturers hope.

It's not the first time we've been down this road. In the early 1960s, Lincoln shocked the automotive world by offering an unprecedented 24,000 mile warranty on its new "Kennedy" Continental. http://www.time.com/time/magazine/article/0,9171,894536,00.html Lincoln's problem then, as now, was that it badly trailed Cadillac in sales and perceptions of the brand's quality were not the best. The "long" warranty sought to garner attention for the "all new" Continental and to "one-up" Cadillac.

Chrysler played a similar game years later with its "5/50" protection plan.

FoMoCo boosted warranties on Ford Focus a few years back to offset a spate of negative publicty surrounding a number of recalls.

Of course, the Koreans have been the most aggressive in using warranties to assuage consumer angst about quality. In the 1980s -- when Consumer Reports was really emerging as a de facto promotional vehicle of the Japanese automakers (albeit with no "smoking gun" ever uncovered linking any coordination or collusion) -- Korean cars reportedly lagged in the quality cellar. Perhaps only the Yugo and maybe Jaguar had a worse reputation for quality back then.

To combat the widespread public perception that Korean cars were cheap, flimsy and of minimal quality, Korean manufacturers began offering dramatically extended warranties "for free" (e.g. warranty cost was burried in the sales price). Now Korean warranties extend as long as 10 years/100,000 miles.

Some would argue that the Koreans' aggressive promotion of warranties has saved their businesses in the U.S. and permitted them to move up-market more rapidly than would ordinarily be possible.

GM and FoMoCo dealers probably have mixed emotions about the escalating "warranty war." Undoubtedly they see the warranties as better than simply putting more "cash on the hood" with rebates and other discounts. Moreover, they probably expect these moves to counteract some of the misperceptions about "Detroit" quality signficantly lagging behind the Japanese. And undoubtedly they welcome the increased opportunities for service work under the warranties, although compensated by the factories at controversial "warranty flat rates."

But the dealers will miss some of the profits from the "F&I" department that the combination of short factory warranties and generous aftermarket "extended warranties" provided. Extended warranties have a 50% or better (sometimes MUCH better) gross profit margin. And in many states, sales are relatively unregulated, so dealers can keep all the difference from the transaction price (which the dealer generally sets) and the cost to "buy" the warranty from the service warranty company. (However, some warranty companies have a "charge back" provision if a dealer's warranty claims become excessive) And although the new, longer "powertrain protection" warranties do still preserve room for aftermarket "bumper-to-bumper" warranties, selling them to skeptical customers will be more of a challenge.

Similarly, these moves may also deprive some revenue from GMAC and Ford Motor Credit, both of which offer extended warranty products. But the manufacturers also realize that warranties are a deferred, contingent cost (excluding any reserves for such repairs and promotional costs), unlike rebates and discounts which always hit the bottom line immediately. And they recognize that warranties add perceived value without cheapening transaction prices, thus benefiting residual values and, thus, improving perceptions of brand's lasting value.

It's unlikely that GM's move is the final shot in the current "warranty war." FoMoCo may be unable to stay at less than 100,000 miles. And market pressures will likely force the Detroit 3 to move closer and closer to complete "bumper-to-bumper" coverage.

New FoMoCo CEO Alan Mulally is probably now wondering what sort of business he's got himself into. After all, Boeing usually sold its aircraft to sophisticated business customers with their own staffs of highly-trained mechanics, operating under the scrutiny of the FAA or other aviation authorities. This business about dealers, warranty repair rates, public perceptions and the "warranty war" is fresh ground for him.

MULALLY’S LEXUS AND A DEBATE ON BILL FORD

Dale Jewett of Automotive News, reporting on the "lighter side" of new Ford Motor Company CEO Alan Mulally's press debut, inadvertently uncovers Mulally’s lack of "car guy" credentials:

"Mulally was asked what car he drives now."‘I drive a Lexus today. I can't wait to own a Ford car,’ he said. Later in the news conference, Mulally said his Lexus was an LS 430 sedan. Bill Ford chimed in: ‘That is being keyed now as we're sitting here.’"

Mulally’s car choice indicates he’s just another bland suit with no particular passion for American automobiles, or even sporting automobiles. You could throw a rock through the clubhouse at the average country club and hit probably a half-dozen clones. But at least if he ever drives a Lincoln, he’ll realize just how uncompetitive FoMoCo really is in the luxury sector.

IS IT REALLY BILL FORD’S FAULT (PART II)

Speedzzter’s analysis of Bill Ford’s failed tenure at the top of FoMoCo (http://speedzzter.blogspot.com/2006/09/is-it-william-clay-ford-jr.html) has generated some strong reactions. The most prolific was from "Zanatwork" over on www.blueovalnews.com (Zan seemingly has no "work" other than to opine in hundreds of forum messages on his views of FoMoCo.)

Zan’s justification of Bill Ford’s tenure is illustrative of how mediocrity and defensiveness can creep into corporate systems. It probably explains much of how such a huge corporation could drift when both problems and solutions seem obvious to a number of outsiders.

Issue 1. FoMoCo's market share has declined for NINE STRAIGHT YEARS, dating back to the twin failures of the 1996 Taurus "Fishmobile" and the too-cramped-for-Real-Americans Mondeo/Contour (a/k/a the "Junior Fishmobile").

Zan: "Okay, so thank Trotman and Nasser for essentially blowing off long-term car development. As this critique dates back to 1996, why use it, when acknowledging Bill's tenure started in..."

REBUTTAL: The problems with the Taurus and Contour were obvious as early as 1999. Yet replacements for them failed to occur until FoMoCo’s "Year of the Car" in 2005. Now while Bill Ford didn’t take the top spot until October 2001, he bears some responsibility as an inside board member for putting up with the lack of earlier fixes. Moreover, the results of the 4-6 year gestation period of Ford’s newest sedans (cribbed from existing Mazda and Volvo platforms) are tepid at best.

Issue 2: Bill Jr. has been in a position to influence the direction of FoMoCo since 1999 (and arguably even earlier given his family's extensive holdings) And in the wake of Jac "the Knife" Nasser's failures--epitomized by FoMoCo's failed internet strategy and the Explorer-Firestone fiasco, Bill Jr. has been in the top job since October 2001.

Zan: "So..are we talking about Nasser's failures or Bill's? The author needs some clarity."

REBUTTAL: It ought to be clear that if Bill were a competent car guy, and something more than a tired Glass House bureaucrat he’d have seen the problems in 1999 (or well before–given that the warning signs were obvious years before to someone with an insider’s knowledge of Ford’s strategy) and used his influence with his Dad and other insiders to shake things up. Waiting until October 2001 to dump Nasser and then accomplishing so little in five years arguably proves that Bill hadn’t really though much about what direction to go BEFORE he arrived at the top.

Issue 3: If Bill Jr. had "the answers" wouldn't we have seen them in the nearly FIVE YEARS he's been at the controls? Instead, we've got a huge list of fits, starts, flip-flops and missed opportunities.

Zan: "He had "answers", but played too much defense on certain models, i.e. the Five Hundred. He did a number of things very right, including the Edge, the Mustang, the Fusion, and others. He did NOT have all the answers...I can't name anyone that does."

REBUTTAL: Whether the "Edge" is a hit and how much so remains to be seen. The Mustang was a competent effort, but left a lot of "game" on the table. The Mexican Mazda a/k/a Fusion has been mildly successful, but Ford is still canning 30,000 workers and closing 14 plants in North America, so whatever success it has, it’s not enough to prompt FoMoCo to put the Mexican Mazda in other plants or to save existing jobs. And it has done little to stem the marketshare growth of the Asian transplants (who actually assemble Fusion’s competitors in the U.S.A. Still, pointing to three "successes" doesn’t rebut the larger list of "fits, starts, flip-flops and missed opportunities."

Issue 4: Bill Jr. may eventually recognize, as his uncle Henry II did over fifty years ago, that having one's name on the building doesn't make one an expert in the car business. He's taken some steps in that direction with the elevation of Mark Fields and the creation of a "Management Committee" after finally purging out all those "retirees" Howes blames for FoMoCo's decline. But Bill Jr.'s epiphany won't come soon enough to undo the damage of the wasted 2001-2006 period.

Zan: "If one reads "autoextremist", [www.autoextremist.com] he has a recent article stating that layers of managemnet worked hard to keep Bill essentially uninformed of many hard truths for years. Hard ot make good calls when the information on your desk is inaccurate. [sic]"

REBUTTAL: And that’s part of the POINT! Bill Ford lacked the knowledge, sophistication and skill to know when FoMoCo bureaucrats were blowing smoke. And he did precious little to develop alternative streams of information. Besides, it doesn’t take "layers of management" to figure out a car is, underpowered, uses too much fuel, has weird styling, is uncompetitive on features or price, has reliability issues or just plain mediocre!

Issue 5: The CD3 and D3 sedans "developed" (mostly cribbed from Volvo and Mazda) on Bill Jr.'s watch are underwhelming and arguably uncompetitive. FoMoCo' sedans are down on BOTH horsepower and fuel economy to much of the competition.

Zan: "This earns a "duh", as the CD3 is selling essentially at capacity and both had to launch ahead of the 3.5 motor, which wasn't ready. Stay tuned for a change in that attitude by this time next year."

REBUTTAL: No defense of the D3 (Five Hundred, Freestyle and Montego). The delay in the 3.5 Duratec is inexcusable, considering that FoMoCo undoubtedly knew others would be building similar engines. And now that we know that the 3.5 Duratec is significantly down on power to the better established Nissan VQ. As Speedzzter previously reported, www.edmunds.com did a brief comparison piece of two new 3.5 liter V6s hitting the market: Ford’s long-awaited Duratec 3.5 and Nissan’’s VQ35 HR.

Ford’s lump, slated for the upcoming Ford Edge, Lincoln MKX and MKZ, pumps out a reported 265 horsepower and will only be hooked to a six-speed automatic in its initial installations.

But Edmonds reported Nissan’s 3.5 will rip out 306 horsepower when it shows up in the next Infiniti G35 and Nissan 350Z. It will also be coupled with either a six-speed manual or a paddle-shifted six-speed slushbox. And all of this will come with 10 percent better fuel efficiency than Nissan’’s current V6 in that class.

The Glass House bureaucrats and the FoMoCo Kool-Aide (tm) drinkers (Zan?) undoubtedly say that’s an unfair comparison. But is it? How many committees whacked down the output of the Duratec? How many naysayers and pennypinchers thought that it would be "enough" to run mid-pack among the current Japanese V6s –– failing to anticipate that Nissan and probably others would be moving the target upward? How badly were FoMoCo’s powertrain engineers restricted because some Ivy-League trained business analyst could not "make a business case" for a class-leading engine?

Issue 6: Bill Jr.'s FoMoCo has let profitable niches, such as the police car and livery trade, rot by mostly stopping development of the Panther and this neglect has drastically weakened the retail demand for these unique models (Why buy a new car that looks like a 1998 model and has less power than a new Honda?).

Zan: Anyone that in 1999-2001 saw a huge retail demand for BOF rwd American cars, raise your hand. Anyone? Beuller?

REBUTTAL: This a classic "chicken or egg" fallacy. FoMoCo neglects Panther development and promotion, resulting in an underpowered, less than optimally-fuel efficient, somewhat overpriced sedans with overly conservative and now dated styling. Then it kills all consumer-directed advertising. Then it fails to fight back when both Cadillac and DCX launch a brilliant, fuller lines of exciting RWD large cars. And then to justify its total inaction, its defenders claim there was simply no "huge retail demand for BOF rwd American cars."

It would seem that FoMoCo hasn’t really explored whether there’s a viable retail niche here.

Issue 7: While Bill Jr. did permit a redesigned Mustang for 2005, his bean counters saddled it with weak engine internals, too few variants to adequately cover the market, less than optimal fuel economy and inadequate power in the mass-produced GT model.

Zan: "This statement makes me concerned that the author uses high-powered drugs. Too few variants for a market it controls and dominate? Fuel economy babbling about the pony car segment? Stupid bordering on the delusional...Ford had to add a produciton shift for the 2005 model year, and sales have been very strong for almost 2 full years. [sic]"

REBUTTAL: Ad hominem attacks in lieu of argument usually mean the blows are starting to land.

Ford is still canning 30,000 workers and closing 14 plants in North America, so whatever success it has, it’s not enough to prompt FoMoCo to put the Mustang in other plants or to save existing jobs. And don’t forget that Mustangs (excluding GT500) require heavy promotion and $500+ rebates to sell. So the current Mustang line-up "diversity" isn’t attracting enough buyers. See, FORD MOTOR COMPANY HAS WASTED MUSTANG'S PERIOD OF EXCLUSIVITY, posted August 17, 2006 (http://speedzzter.blogspot.com/2006_08_01_speedzzter_archive.html)
More importantly, FoMoCo failed to equip Mustang with sufficient technology to achieve both high performance and high fuel efficiency. Simply using a similar "active fuel management" strategy employed by GM would boost Mustang fuel economy three to five miles per gallon with NO LOSS IN PERFORMANCE! Why wouldn’t Ford do this?

Although Zan leaves the point about weak hypereutectic pistons and spindly powdered-metal cracked cap rods in the 4.6 3V modular engine alone, others have criticized the "weak engine internals" conclusion. Certainly the Mustang GT is the cheapest 300 h.p. car in a game where 300 h.p. is barely the initial ante.

The simple fact is that as many as 25% of Mustang owners modify their cars. The flaws in hypereutectic pistons and Ford’s PM rods have been well known since 1996, when owners began modifying the 305 h.p. 4V SVT Cobra engine, often to explosive results.

And with only 281 cubic inches, supercharging is one of the few cost-effective ways to make a Mustang run with an ordinary Mitsubishi EVO, Subaru WRX or even a five-year-old GM V8. Yet FoMoCo’s cheapness limits bolt on power to about 450 h.p. gross (even though the block will withstand as much as double that).

Thus Saleen, Roush, Vortech, Paxton, Procharger and others are limited to expensive, dodgy low-boost supercharger systems that do not provide as much "bang for the buck" as they could have if FoMoCo would have only anticipated how thousands of its customers wanted to use their cars. And countless potential sales have been lost to other alternatives (imports, older Mustangs, older GM cars, etc.) because the cost to build a 550+ h.p. car is unnecessarily inflated by the expense of an engine rebuild, due to FoMoCo’s failure to make available heavy duty engine options in Mustang GT.

Finally, FoMoCo did absolutely nothing to address this issue -- even over the counter. The Ford Racing Performance Parts catalog has NO SUPERCHARGED ENGINES AND NO SUPERCHARGER READY ENGINES FOR ANY MUSTANG!

Issue 8: While Bill Jr. did permit the GT supercar and the Shelby GT500, he starved SVT and Ford Racing Performance Parts, decimated the number of FoMoCo supported NASCAR teams (reducing Ford's chances to Beat GM, DCX and now Toyota on the track), failed to engineer a return to Indianapolis, squandered the valuable Cosworth legacy, and killed FoMoCo's decades-long tradition in Formula One participation without replacing it with another high-profile international competition alternative.

Zan: "Ford Racing Parts has had near-record years since the new 'Stang. I'd agree that SVT's presence is a tiny fraction of what it was, but it seems they've been given a reprieve.Return to Indy? Why? Open Wheel Racing in this country is on life support, and it did it to itself.Cosworth and the F1 development got criticized as ‘dead wood’ for Ford at the time, and now their absence gets hammered. Must be great to be a critic...."

REBUTTAL: Indy still attracts 300,000 or more fans and is still of enough significance that Honda spends millions to be there. F1 is still important enough that Honda, Toyota, Renault, Mercedes and Ferrari spend hundreds of millions. And Cosworth was a Ford brand with 35+ years and millions in "brand equity" which could have been tied into Ford’s similar DOHC "street" engines.

The simple reality is that under Bill’s watch, Ford significantly retreated from motorsports, did almost nothing of benefit to grassroots racers and failed to adequately leverage its promotional investment in motorsports with its OEM products. If Bill were a car guy and a true racing fan, he would have insisted on a better job and invested the dollars necessary to achieve it.

Issue 9: Bill Jr.'s FoMoCo has failed to recognize and adapt to the resurgence of rear wheel drive in premium, luxury and high performance niches.

Zan "The Mustang and GT make a lie of part of that, but in premium and luxury vehicles...I have no argument."

REBUTTAL: High performance is not limited to a temporary, unobtainable supercar (GT) or a cramped pony car. For example Cadillac and DCX sell several low 14 and 13 second (in the quarter mile) RWD sedans. Other than a couple of expensive imports, FoMoCo builds ZERO. In trucks and SUVs, Ford has no high performance presence. And FoMoCo’s shift to Mazda and Volvo platforms, its failure to develop DEW98 or import the Australian Falcon or to even pump up the power in the Panthers means that FoMoCo will be unable to rapidly respond to the resurgence in RWD anytime soon.

Issue 10: Bill Jr. failed to have a contingency plan for $3.00/gallon fuel prices, which have been foreseeable for a long time.

Zan: "Spare me. Honda and Toyota's truck programs moved ahead, DCX is putting forward bigger RAMs and SUVs like the Commander and Aspen, and Nissan's Titan has SUV spinoffs in the large-SUV category. The WHOLE INDUSTRY blew that call."

REBUTTAL: That would explain all of the Toyota and Honda hybrids, the Honda Fits, the Nissan Versas, the Scions, the Toyota Yarises . . . (Apparently the Japanese can pursue more than one market segment at a time)

Issue 11: On Bill Jr.'s watch, FoMoCo failed to properly develop the Focus as a viable alternative to Honda and Toyota (and now Scion) in the youth market.

Zan: "I don't have much argument for that, but the Focus isn't dead yet, either."

REBUTTAL: We just get saddled with the obsolete versions, while the rest of the world gets the latest and greatest, sort of like how U.S. car companies used to dump all their obsolete designs down into South America during the 1960s and 1970s.

GM turns backflips and spends millions developing and racing its Ecotec as a viable alternative to Honda and Toyota in "tuner" markets. DCX builds a "world engine" facility and has made headlines with its SRT-4s (Neon-based and Caliber) as well as with its Neon ACRs. But Ford dumps the Zetec and the SVT Focus, refuses to import or build here the RS (which could take sales from WRX and EVO as well as build nameplate image), has never built a "club racing" version of the Focus for the U.S. and can’t even get the bolt-in Mazdaspeed variations of the Duratec into anything wearing a Blue Oval. Seems like mismanagement, doesn’t it.

Issue 12: On Bill Jr.'s watch, the 6.0 PowerStroke fiasco damaged FoMoCo's truck reputation and allowed DCX and GM time to catch up in turbo-diesels.

Zan: "Yes, and as we know, Ford is the only company with wide ranging defects (cough)."

REBUTTAL: The point is that Ford hasn’t reacted fast enough to either the 6.0 problems nor the drastic improvements in Cummins and Duramax. Although FoMoCo still has the lead, it’s smaller and sitting on a lead with the Taurus eventually cost FoMoCo market leadership and a huge chunk of its business. Given that trucks are the current savior of FoMoCo, any problem ought to be aggressively addressed and constant innovation should be the watchword.

Issue 13: On Bill Jr.'s watch, the new F-150 came in too heavy, without high performance options, without manual transmissions, without fuel-saving multivalve engine technology, and without turbo diesel engine options.

Zan "Still on his watch, it remained atop the sales charts, is better in terms of structure and interior than the competition, avoided the downturn in the performance truck market caused by expensive gas, and has a turbo-diesel that will come in not long after the new clean diesel...which somehow the author didn't mention. [expletive deleted]."

REBUTTAL: Justification for sitting on a lead? FoMoCo hardly avoided an overall downturn. It delayed development of a light diesel option, forcing diesel buyers into heavy Superduty trucks (even while Volkswagen brought diesel power back to tiny cars–so don’t say light turbo-diesels were impractical on the old "high sulphur" fuel) Clean diesel will be here in January, but Ford’s F150 diesel won’t.

It failed to develop relatively efficient high performance trucks. It failed to match, much less beat DCX and GM in large gasoline engines. It failed to develop a credible Suburban competitor. It has no models competitive with GM’s "mid-gate" trucks. It slowly responded to Toyota’s bed tie-down system. It has given the market for multivalve DOHC truck engines to the Japanese. It has let GM beat it on both power and mileage. It failed to offer F-150 with manual transmissions. In short, Ford hasn’t done enough to keep pressure on its competitors. Being number one simply isn’t enough (besides if Chevrolet and GMC sales are combined, Ford’s "number one" claim is questionable) .

Issue 14: On Bill Jr.'s watch, FoMoCo's minivans have lagged the competition in power, economy, innovation and marketshare. Now FoMoCo is giving up on the segment, in favor of "people movers."

Zan: The Freestar is a clean miss, but the upcoming models appear better aimed at shaking up the market. Will he get credit for those if they work?

REBUTTAL: Misses the point. FoMoCo should have seen the minivan problem on the horizon as soon as it was clear the Japanese were entering the market with competitive products (not the goofy forward control vans they originally tried to sell). If "people movers" work, Bill Ford will get his fair share of the credit.

Issue 15: On Bill Jr.'s watch, an unnecesary and divisive "boycott" has damaged FoMoCo's dealer base, especially in the "Bible belt" without yielding any particular benefits to the company otherwise.

Zan: "Is this moron blaming Bill for the actions taken by a bunch of homophobes, offended my companies treating the GLBT society as human? Golly!"

REBUTTAL: The point was that Bill Ford could have looked out for his dealers by choosing a less confrontational path and by living up to the compromise agreement negotiated by Texas dealer Jerry Reynolds. It’s not as if FoMoCo’s controversial stance has pumped up the bottom line.

Issue 16: On Bill Jr.'s watch, Ford's SUVs have continued to decline in marketshare, notwithstanding redesigns, because they lack sufficient power, economy and value to stay competitive (especially in trendy niches such as luxury SUVs).

Zan: The SUV market has shrunk while crossovers are coming on. The Escape, Mariner, upcoming Edge, and Freestyle are in place and/or being positioned to adapt to the market's change.

REBUTTAL: Escape and Mariner haven’t been world-beaters in the cute-ute or crossover market. The Edge hasn’t proven anything yet. Freestyle has been disappointing. Moreover, FoMoCo’s failure to compete harder for a shrinking pie of SUV sales . . . or to innovate to boost the value, economy and practicality of SUVs indicates FoMoCo on Bill’s watch was out of touch and had no contingency plan for an obvious possibility.

Issue 17: On Bill Jr.'s watch, FoMoCo has failed and refused to adopt new technologies, such as cylinder deactivation, "twin-charging," turbocharging (in North America), electric-clutched superchargers, broad use of variable intake runner technology, broad use of variable valve lift and timing, and even off-the-shelf multivalve heads in some applications.

Zan:" "I'd like someone from powertrain R&D to answer these allegations, as I'm reading several rumors constantly that refute this statement."

REBUTTAL: You can’t buy rumors . . . . But you can buy each of these fuel saving technologies (except twincharging in the US) in other brands NOW! Bill Ford’s FoMoCo was asleep at the switch on engine innovations.

Issue 18: On Bill Jr.s' watch, the 3.5 Duratec, which is touted by some as FoMoCo's "engine of the future" came to market late and down on power to the Japanese competition.

Zan: "This person is a true moron. The engine produces VERY competitve power to like-fueled engines that even have more expensive hardware applied...and this engine is in the very early stages of its development.

Is it late? Yes. Is this on Bill's watch? Yes."

REBUTTAL: Did www.edmonds.com lie? The 3.5 may be the world-beater all the Kool-Aide (tm) drinkers are hoping for, but out of the box–its simply mid-pack. Mid pack isn’t enough when the Japanese are eating Ford’s lunch and then making them do the clean-up, too.

Issue 19: On Bill Jr.'s watch, Lincoln slipped further behind Cadillac and began its ill-advised move downward into the morass of "near luxury."

Zan: I'll admit that Lincoln has been run poorly...but it never was competing with S-Class Mercedes sedans in the first place.

REBUTTAL: Who was talking about Mercedes?

Lincoln can’t even touch Cadillac anymore, much less Mercedes. Lincoln can’t even really touch Chrysler 300C or 300C SRT-8 . . . . And with the moves away from RWD, V8s and American assembly operations, Alan Mulally and his golf course buddies won’t even be able to find an American-built alternative to his Lexus LS430 among Lincoln’s line-up! "Poorly run" is a gross understatement!

Issue 20: On Bill Jr.'s watch, the Japanese took virtually all of the praise and adoration for development of hybrid-electric vehicles, while FoMoCo stalled, delayed and flip-flopped in this image-building (yet otherwise relatively meaningless) segment.

Zan: "Gosh, it isn't like Ford was the first domestic playing in the market, has more hybrids nearing production, or got hosed by Toyota holding back on powertrain items...."

REBUTTAL: Therein lies the problem. 14 shuttered plants and 30,000 pink slips, in part, because FoMoCo hasn’t invested enough to develop (or license) "trendy" technologies ON IT’S OWN! The environmental radicals do have a small point in that if Bill Ford were truly one of them, he’d have invested more in "green technologies."

Issue 21: On Bill Jr.'s watch, FoMoCo continued its failure to offer any affordable alternative to Chevrolet's Corvette.

Zan: "This is a failure? The market is small and would cost more than it brought in for years...when Ford's in the black, that would be a worthwhile project."

REBUTTAL: Although this point is linked to the Thunderbird debacle, it ought to be clear that Corvette is a huge image booster internationally for GM and Chevrolet. GM has sold plenty of lesser Chevys because of Corvette. GM’s small block engines have ruled the aftermarket because of Corvette development of them and the image derived from Corvette.

And Ford didn’t even develop an affordable Corvette-beater when it was flush with profits! Even a half-hearted attempt, such as using Mustang bits to take on the objective numbers of Corvette would be better than nothing (other than a rare and hyper-expensive and now dead Ford GT).

Issue 22: On Bill Jr.'s watch, FoMoCo basically killed the storied Thunderbird nameplate with an effete, boulevard poser in the obviously failed mold of Chrysler's Maserati TC, Buick's Reatta, and Cadillac's Allante.

Zan: "This person has very little knowledge of previous T-Birds, obviously. It was the closest to the spirit of the original, which was hardly a hard-edged performance car."

REBUTTAL: So FoMoCo goes down the same failed route again?

While Thunderbird arguably went astray, abandoning any pretense of sporting in 1958 under Robert McNamara’s leadership, and only slightly recovered with the mid-1980s "Aero-birds," the retro revival was a perfect time to turn Thunderbird into a Corvette competitor (albeit one with "heritage-inspired" styling). Ford didn’t step up and now we know the result. If Bill Ford was a real car guy, he might have avoided this missed opportunity.

Issue 23: On Bill Jr.'s watch, FoMoCo flipflopped on the "Hurricane" truck engine project and failed to leverage its advantages in multivalve overhead cam engines in V8 markets (while the Japanese continued to make inroads with their DOHC Four-Valve V8s and V6s, and DCX and GM dominated the large V8 market).

Zan: "No real argument, though I'd blame it on an overreaction to rising fuel prices. It looks like a chancy time to bet on big V8s."

REBUTTAL: Meanwhile the OEM, aftermarket and marine fields are yielded to GM and DCX. In 1999, it probably looked like a "chancy time to bet" on small diesels, or hybrids or fuel-saving technology, too. Thus this "risk" logic appears overly conservative. Shouldn’t Ford have a contingency for the return of "large V8s." Even a revival of the Windsor, based on widely available aftermarket parts, would be better than doing nothing.

And why not think out of the box with things like emission-compliant "large" crate V8s for the aftermarket?

And why leave awesome engines, such as the DOHC ‘01 and ‘03 SVT Cobra powerplants on the parts shelf, instead of installed OEM or available over-the-counter?

Why not follow GM and DCX’s lead into cylinder deactivation and other efficiency technologies to make big V8s more fuel efficient?

Issue 24: On Bill Jr.'s watch, FoMoCo failed to take any marketshare away from GM in the opinion-leading aftermarket repower niche. FoMoCo's line of "crate engines" simply aren't competitive on variety, price, features or availability.

Zan: "Not much argument here, but Chevy has always had an advantage in the ‘small block friendly’ performance market."

REBUTTAL: See Corvette rebuttal, above. So FoMoCo should just punt. It should just live with the indignity of Chevy-powered street rods, Chevy-powered ‘56 F-100s, and even Chevy-powered Mustangs?

Why just give Chevrolet a walk-over in the essential grassroots competition and hotrod markets? Where’s the "Bold Move" in that?

Issue 25: On Bill Jr.'s watch, FoMoCo failed to develop a competitive sub-Focus subcompact for the North American Market.

Zan: "His watch isn't over, and B-cars are in development."

REBUTTAL: Meanwhile, the Japanese have such cars here now. Clear evidence that FoMoCo failed on Bill’s watch.

Issue 26: On Bill Jr.'s watch, FoMoCo allowed the Taurus to decline into a fleet car sold at commodity prices and failed to develop competitive alternatives to Toyota Camry and Honda Civic.

Zan: "The Taurus was a joke before he took the reigns, as mentioned above. The Fusion is a Camry competitor, and the Focus gets a huge upgrade shortly. Again, his watch isn't over."

REBUTTAL: Taurus was NUMBER ONE until Ford lost its way in the mid-1990s. So the point was that the problems were obvious at least TEN YEARS AGO and Bill’s regime didn’t do much to fix them. But there’s always, "tomorrow, tomorrow" (meanwhile FoMoCo may slide a couple more percentage points in marketshare).

Issue 27: On Bill Jr.'s watch, FoMoCo failed to make use of Eaton supercharger technology (except in a few expensive niche and import models), notwithstanding that it had mostly funded the development of it. However, DCX, GM and others have greatly benefitted from this "Ford" technology.

Zan: "HAR! Yeah, people are lining up for Crossfires, supercharged W-cars, and what-not. Also, there's not shortage of people on this very board that sneer every time a "blown" Ford is announced...."

REBUTTAL: So the alleged disdain for Eatons will doom the GT500?

None of that refutes the point that FoMoCo didn’t really reap all it could from its investment in turning the Eaton into a fuel-saving high performance strategy (as compared to larger naturally aspirated engines of similar peak output).

"Fuel economy is not compromised . . . when utilizing the bypass system in conjunction with the supercharger. EPA (environmental protection agency) figures support this claim. A typical domestic vehicle equipped with an Eaton supercharger shows no fuel economy penalty for highway driving, and only a one mile per gallon penalty for city driving."

"The Eaton supercharger system incorporates a specially designed bypass valve, which is actuated by a vacuum motor near the throttle body, and recirculates the supercharger air flow when boost is not required. During typical driving conditions, the engine is under boost around 5% of the time, which means the remaining 95% of the time the engine is under vacuum, allowing for better fuel economy and a quieter ride. In addition, the helix angled rotors, along with specially designed inlet and outlet port geometry, also reduce pressure variations resulting in a smooth discharge flow and a lower level of noise during operation."

http://automotive.eaton.com/product/engine_controls/superchargers/whysuperchargers.asp

Issue 28: On Bill Jr.'s watch, Mercury has floundered as a badge-engineered marque with a lack of clear direction and poor sales, despite having an exemplary initial quality.

Zan: "Not much argument...see my sig.[sic]

[Zan wants to be Mercury’s product manager]

Issue 29: Bill Jr. has failed to solve the paralysis-by-analysis problem fostered by FoMoCo's committee system, causing products that do make it through to be too late to market, too conservative, tepid in design and generally uncompetitive.

Zan "See the "autoextremist" reference above, and the speeing-up of development. Stay tuned [sic]"

REBUTTAL: This doesn’t refute that Bill didn’t figure out how to get the job done, notwithstanding his years of development within the Ford organization and his powerful family ties.

Issue 30: On Bill Jr.'s watch, FoMoCo's sales have continued to shrink, declining 12% in the most recent sales month (August 2006) to 255,112--notwithstanding a blow-out Zero percent financing sale and increased warranty coverage.

Zan: "Yeah, compared with the "employee pricing" fire sale of last year...the 0 for 72 slae is on for weeks vs. months for the other. What a goober. Last year's debacle may never be beaten."

REBUTTAL: Misses the point. Remember FoMoCo’s been shrinking for NINE YEARS! Bill’s regime didn’t significantly abate the slide.

Issue 31: On Bill Jr.'s watch, FoMoCo hasn't developed a reliable method to locate "stars" in the automotive world, attract them into the FoMoCo's orbit, and to empower them to build legendary motorcars.

Zan "I'll be sure to tell the all-first-rate design staff Ford has right now."

REBUTTAL: You mean the same ones who’ve neglected Panther, punted on minivans, brought us the underwhelming retro Thunderbird and the Five Hundred, let Lincoln LS shrivel and die while Cadillac and DCX actually fought the import invasion . . . .

Issue 32: On Bill Jr.'s watch, FoMoCo has failed to leverage its associations with Panoz, Roush, Saleen, Steeda, MG, Noble and Morgan by providing them with power-adder ready DOHC 4V engines at reasonable costs, and exploiting the favorable publicity from the "Powered by Ford" niche marques.

Zan: Panoz runs Ford gear, Roush is a development partner, as is Saleen, as is Steeda, noble is a customer, and Morgan's in bed with BMW while MG is essentially dead. This person needs psychiatric help.

REBUTTAL: Totally misses the point. Ford hasn’t achieved the kinds of promotional synergies it could have in using its associations with these specialty marques to promote "Powered by Ford."

PANOZ BEAT PORSCHE AT LEMANS AND FOMOCO CAN'T GET ANY MILEAGE OUT OF IT!

STEEDA AND SALEEN WON MULTIPLE CHAMPIONSHIPS WITH FORD POWER, BUT DOES FOMOCO TAKE ANY PROMOTIONAL ADVANTAGE OF IT?

BTW, although the Morgan Aero 8 is BMW powered, the heritage models sold overseas still use Ford power.

FoMoCo hasn’t made the DOHC head available for Roush, Saleen and Steeda tuner Mustangs. And each of these are limited in power output by the "weak internals" of the production V8s. If FoMoCo were really lending a helping hand, it would sell the tuners the "good stuff."

MG did die on Bill Ford’s watch, but before it did, MG used basically a 2001 Cobra engine in sedans. Ford held out on the "good stuff’ there, too.

MG will be back, under Chinese control, and Ford will have lost the opportunity to associate or leverage powering this brand.

Issue 33: On Bill Jr.'s watch, FoMoCo failed to develop the Lincoln LS as a viable alternative to Japanese, American and European sports sedans, instead allowing it to atrophy and die before its time.

Zan: "No argument...the LS was/is a failure. I don't see that it had much development life to offer."

REBUTTAL: Translation. GM, DCX, Toyota and Nissan can develop V8-powered RWD luxury performance sedans, but Lincoln can’t.

There was nothing wrong with LS that more power and more refinement couldn’t have fixed. But Ford’s attempt to preserve Jaguar (who builds the similar S-Type ) severely limited Lincoln’s ability to fully develop the DEW98 platform for itself.

Issue 34: On Bill Jr.'s watch, FoMoCo has failed to appropriately identify and apply the essential "brand DNA" of its various nameplates, leading to such fiascos as pouring millions into Jaguar in the hope that it would be successful selling Mondeo-based compacts and ignoring FoMoCo's legacy as the company which brought low-cost V8 power to the masses (ironically, none of FoMoCo's latest sedans will accept a FoMoCo V8).

Zan: "On his watch, but much of this had NAsser and Wolfgang involved. As far as the V8s are involved...hasn't gas been pricier of late? I don't like it, but it's hardly difficult to see logic involved"

REBUTTAL: Gas is $6.00 in Europe, but the Germans and Italians still develop V8s (and even W12s!) GM offers V8s with 31 M.P.G. Chrysler isn’t far behind.

The point is that cheap V8 power was a hallmark . . . a distinctive of Ford for decades. Ironically, they’re poised to be the first of the Detroit 3 to abandon it (although Chrysler basically did in the Iacocca ‘80s) except in specialty and high-performance sporty cars.

Although V8 power will need to change with the times, the psychological draws and the inherent smoothness advantage of V8s won’t go away soon. Ford started down this path when it bet the farm on the V8-less Taurus twenty years ago. An although it’s spent millions on V8 development, it hasn’t offered its best V8 in a RWD (or even an AWD) sedan in a long time. Nor has it even built very many FWD V8s–and none recently.

Simply put–FoMoCo is squandering its unique V8 heritage in favor of unremarkable six cylinders and outsourced fours.

Issue 35: On Bill Jr.'s watch, FoMoCo neglected the compact truck segment, allowing Ranger to age ungracefully, while competitors continued to invest in the segment.

Zan: "Ummm...while the Ranger has been sadly ignored, the compact truck segemnt is essentiall: the Ranger. The others are mostly mid-sized. [sic]"

REBUTTAL: This seems to contradict all the hand-wringing over fuel economy. If FoMoCo had a competitive small truck, wouldn’t it stand to benefit from high fuel prices more than it has with the Ranger?

Bill neglected it and its just "another brick in the wall" that traps 30,000 (of workers and 14 plants in a death spiral (who needs plants if you’ve got few products of interest?)

Issue 36: On Bill Jr.'s watch, FoMoCo's stakeholders, such as its salaried workforce, its union workforce, its dealers, its suppliers, the communities which depend on these groups of stakeholders, and ultimately, FoMoCo's loyal customers, have all suffered by virtue of the foregoing FoMoCo failures and others too numerous to mention.

Zan: "Many of the failures mentioned are hardly applicable, and I'd be scared of others this chump would bring up. The spin was already ridiclous.[sic]"

REBUTTAL: And now we can see how myopia and defensiveness block out objective criticism of the Bill Ford regime at FoMoCo. Multiply this several times over and you can see why FoMoCo is failing.

Sad, isn’t it?

ALAN MULALLY'S "WAY FORWARD" AT FORD MOTOR COMPANY (R)
Anyone familiar with the Ford Motor Company and the Fords recognizes this pattern.

William Clay Ford, Sr., according to a number of Ford family biographies, retreated to the bottle and then to the Detroit Lions football club when he got shoved out of the Continental Division by his Eat-it-Hump-it-or-Poop-on-it older brother, Henry Ford II.

Henry II himself tapped the "Whiz Kids," GM-ex Bunkie Knudsen, and the self-promoting father of the Chrysler K-Car and the Opera Window (and Ford Mustang), Lee Iacocca, to handle the dirty work while he kicked back as Chairman.

And press reports just this year had William Clay Ford, Jr. retreating to the sanctity of the Detroit Lions training facility in lieu of engaging debates in the Glass House.

The weak always retreat when the going gets rough.

But Billy’s old news now. His time at the top will be judged by the long look of history.

But thankfully Bill (or perhaps the Board) recognized that a new CEO was in the best interests of Ford’s stakeholders. Or maybe it was just time for a new guy to absorb all the "slings and arrows" of the pundits and second-guessers while "Waiting for Ghosn."

So what advice for the new guy?

Sure he’s an airplane whiz, but what does he know about building and selling relatively cheap (as compared to a jumbo jet) consumer products? What does he know about competing in a cutthroat industry where there are EIGHT huge players, instead of just two or three? What does he know about the ethos, pathos and logos of American motoring?

ALAN MULALLY’S "WAY FORWARD"

1. Forget Boeing: Sure, you had nearly four decades of success at America’s most successful aircraft builder. Sure, you figured out how to maneuver the Byzantine halls of power in a huge American manufacturing concern. Sure, you probably even know the prosaic beginnings of Boeing in the Old Red Barn and can draw some folksy parallels between Boeing and FoMoCo. But FoMoCo isn’t Boeing. And FoMoCo’s problems are more serious than some temporary downturn caused by the 9/11 attacks. Your slate is blank now and "the whole world is watching." (not to mention all of us armchair yahoos in the blogosphere)

2. Don’t Get "Bunkied:" FoMoCo history is littered with brilliant auto-men who didn’t last at FoMoCo. And you’re not even a bona fide automotive executive, yet. Most of those who rose to the top worked their way up through FoMoCo.

One notable one who didn’t is Semon "Bunkie" Knudsen. Knudsen was brilliant at GM. But when the father of the Small Block Chevrolet engine–Ed Cole–bypassed Knudsen on the GM depth chart, Bunkie became restless. Henry II then tapped Bunkie to run FoMoCo, to the chagrin of Iacocca’s people. Iacocca and his crew never let Bunkie settle in. And in less than two years, Bunkie was out.

The Glass House is undoubtedly filled with all sorts of long time FoMoCo "lifers" who figured that if Bill Ford bailed out, that they would the "natural" replacement. And, just like Iacocca, each of those "movers and shakers" undoubtedly has an informal network of supporters. While younger guys like Mark Fields may see this as a wash or even a positive development for their chances to move up someday, not everyone may be so patient. So figure out who really runs that place and get them on your team, pronto! Don’t be another Bunkie.

3. Walkabout: Forget about kicking back in your new corner office with a Starbucks. Pack your suitcases. Dress well, but leave the custom tailored CEO suits at home. You need to go on a long-term "walkabout" of the Ford world. You can’t learn sitting in meetings all day with people who may or may not understand reality. You need hard data acquired first hand, and without all the interest group filters and political garbage. You need to find the hidden talent at FoMoCo to lean on and also the bureaucrats and self-promoters to avoid. More importantly, you need to get inside the head of FoMoCo’s customers and dealers.

4. Really Visit the Dealerships: Spend at least two days every week in dealerships. Don’t go for the official dog-and-pony shows though. Don't just talk with the head man or the F&I guys. Talk with customers waiting in the service area. Talk with line techs. Listen to service managers. Ride with salesmen. Visit both struggling dealerships and market leaders. Get in touch with the people on the front lines of sales (it will be worth more than 500 pages of executive summaries).

5. Really Visit the Shop Floors: Spend at least one day a week on plant floors. Walk around without the usual circus of hangers on. Don't make it some scheduled "state visit." JUST SHOW UP UNANNOUNCED. Tell the UAW reps and the managers to screw themselves if they want to filter what you learn by observing and interacting with the front lines of manufacturing.

6. Spend Quality Time in Engineering: Spend at least one day a week with a small cadre of aggressive engineers. Of course you still need to periodically walk through engineering labs, styling and other departments to show the flag, learn first hand and to build morale, but quality time with a hands-on "focus group" of creative engineers will do much to increase your depth of analysis and appreciation for the technological challenges facing FoMoCo.

7. Learn to Drive: Take a performance driving course. Bonderant did wonders for Don Petersen's understanding of the real world.

8. Get into the Product: Test everything you can get your hands on. Forget being driven anywhere (unless it's riding with a customer to gain more first hand impressions). Car guys must drive. And you need to drive all of the competitors' cars, as well as everything you sell. Add in some older used cars and trucks into the mix, too, because the first impressions many get of a brand often come from something you've already done and forgotten about.

9. Really Meet the Customers: Go where the Ford enthusiasts are.

Nearly every weekend of the year, there's a race, car show or other automobile event where privateers are pumping up Ford brands "for free" because of their passion for them. Seek out these people and learn from them. See and be seen.

Don't just go to the big NASCAR shows. Don't just hob-knob in the luxury boxes. Hit some dirt tracks. Experience the Chili Bowl. See Mustangs on the strip at an FFW show. Let Rick Kopec or even Carroll Shelby show you around some Shelby meet. Walk the 18th fairway at Pebble Beach during the Concours* and visit the paddocks at the Monterey Historics and Goodwood. Stay up all night in the pits at one of the 24 Hour races. Walk the pits and the starting line at Bonneville during Speed Week (you might even talk the SCTA/BNI into letting you make a pass in something reasonably safe that your private engineering cadre puts together for the occasion--You'll make the cover of HOT ROD if you do). Pose for photos with the ordinary people and sign autographs.

*But use one of those corporate jets to make sure you're also in Detroit to experience the Woodward Dream Cruise.

10. Be Open: Let people in and out of FoMoCo get to know you. Surely letting cameras follow you around during some of your travels would make for interesting, candid television which could help promote the Ford brands and to humanize perceptions of your leadership. Utilize the automotive and business press to get your message out. Show up on www.fordboldmoves.com

11. Don't Neglect the Spiritual side of Life: Given other executive responsibilities, items 1-10, above, will dominate your time. However, you cannot understand Ford's customer base from a purely secular perspective. Furthermore, if you neglect higher things, your ethics and empathy will suffer.

12. Trust but verify: Delegation is the only way anything gets done in any complex organization. And it's even more so in one where the top boss is always out in the field. However, people being people, organizations typically are designed to insulate top management from reality and to defer decisionmaking. But if you've got the best managers in place, you can trust them with most of the details as long as you become the "quality checker." Customer-driven goals can breed "American Innovation" if encouraged.

13. Don’t Forget the Forty-Percenters: Remember, you’re a hired hand. Bill didn’t fade into the sunset. Just like Henry II, he’ll be around and it’s still his family name on the building. And Bill’s power base comes from stock control. So even if Wall Street loves you, if Bill doesn’t, be worried. Remember what happened to Iacocca.

Of course, if you pull this gig off, you’ll be a legend of modern American business. On the other hand, the least you can do is keep the seat warm for Carlos or Mark . . . .

Just don’t screw it up any worse than it already is, Okay?

REUTERS REPORTS THAT BILL BAILS OUT

Ford Motor Company (R) reportedly named former Boeing Veep Alan Mulally as president and chief executive officer. http://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2006-09-05T200941Z_01_WEN4964_RTRIDST_0_AUTOS-FORD-URGENT.XML&rpc=66&type=qcna

William Clay Ford, Jr. will remain executive chairman.

So what does Mulally know about the car business? Is he a car guy or just another bean counting wonk?

INVESTOR'S CRITICISM OF "THE WAY FORWARD"

Ford Motor Company's "Way Forward" has been roundly analysed and even criticized. One of the more concise criticisms is found at Mish's Global Economic Trend Analysis: The Way Forward.

Notwithstanding that FoMoCo is still developing its latest plan, Mish summarizes what he thinks we know so far about the "Way Forward" as follows:


"1. Cut 4th quarter production 21%
2. Offer 0% financing for 6 years
3. Court Nissan
4. Sell Jaguar and Land Rover
5. Reduce list prices as compared to 2006
6. Close 14 North American plants
7. Eliminate 30,000 jobs in the US
8. Create 150,000 assembly jobs in Mexico
7. Increase Mexican made components by 300%
8. Shift some professional engineering and purchasing jobs to Mexico
9. Offer worker buyouts
10. (If all else fails) Take the company private"

Of course the foregoing summary adopts some speculative points (such as the extent of FoMoCo "Run to the Border" or whether "Waiting for Ghosn" is wishful thinking) and doesn't capture others (such as FoMoCo's increasing reliance on Mazda and Volvo for platforms and engine technology, FoMoCo's increase in warranty lengths, and FoMoCo's abandonment of the true luxury market for its Lincoln brand). It also inflates temporary tactical measures, such as the zero-percent clearance sale to major points of "The Way Forward."

Still, Mish identifies two questions suggested by his summary.

A. "Is this plan the "Way Forward" or are these acts of desperation?"

While certainly a judgment call, Speedzzter has often argued that "The Way Forward" smacks more of desperation than a real plan at "right sizing" and establishing the necessary predicate to recapture market share. Moreover, it is unclear whether the "Way Forward" actually addresses the cultural and institutional factors which led to the loss of FoMoCo's edge and nine-year decline. In some ways, the points cited are not unlike railroads in the mid 20th Century cutting back on routes and services in search of profits.

B. "After all the jobs and parts are moved to Mexico and China will Ford still be running ads to 'Buy American'?"

What ads to "buy American?"

Obviously Mish is being sarcastic, playing off of Bill Ford's occassional "driving American innovation" commercials, but this point deserves a little serious analysis.

The Detroit 3 have all been reluctant to play the nationalism card due in part to the international complexity of the automobile business and, likely, fears of somehow being labeled "racist." Thus, they have not effectively used guilt and national pride as a motivation to attack foreign invaders and call selfish and unreliable Americans "home" to products designed and built in the U.S.A. While FoMoCo is based in the U.S.A. and still employs more "Americans" than all the transplants combind, it operates as a multinational corporation with few parochial ties. That indicates that what is best for FoMoCo may not be best for America, and vice versa.

The dwendling number of FoMoCo faithful probably would relish it if Ford made a substantive argument for buying American, even with the caveats of international sourcing (caused by production efficiencies, lax government oversight and idiotic disincentives to domestic production). But FoMoCo will never take the "bold move" to attack on nationalistic grounds or point to the harm that internationalization is creating in America's withering industrial base.

And as troubling as FoMoCo's substantiated and rumored future investments in Mexican production capacity are, it is unfair to suggest that "all" the jobs are moving across the Rio Grande. Some will move to China or other lower-wage regimes. Others will remain in Dearborn or other U.S. venues (at least until such time as FoMoCo is acquired by some foreign multinational).

The real problem is that no one has created a "Harley-Davidson" moment in the minds of the customers. Customers aren't led to believe there is anything unique or special about Automobiles done in the American ideom. Automobiles are widely viewed as a somewhat fungible commodity. None of the manufacturers are making the case for "American innovation" (notwithstanding FoMoCo's occassional references to it). In fact, most builders seem to run FROM Americanism (except Toyota, who is desperately trying to convince everybody that it's as "American" as "hotdogs, apple pie and Chevrolet"). For example, DCX's Dr. Z promotes "German engineering" and William Clay Ford, Jr. himself lauds the wonders of "Volvo" (Swedish) safety. These metamessages play into the long-standing immigrant ethos favoring things that are "not invented here."

For years, "old Europe" was the traditional repository of craftsmanship. Stereotypically, Italy and France led in design, Germany in technology and the United Kingdom in efficiency and quirky, sporting innovations. The emergence of the Asians as a technological force, together with the decline in the Continental work ethic (coinciding with the rise of European socialism) have shifted these perceptions somewhat, but not their ultimate result. "Not invented here" still reigns supreme in American consumerism.

The Far East has emerged as the go-to source for compact electronic technologies and exceedingly reliable systems (notwithstanding that much of the fundamental research behind these came from North America).

Now car buyers in masse ignore the objective results from J.D. Power surveys and even their own showroom perceptions in favor of a herd mentality and the intangible "zen" of Asian automobiles.

Even "old Europe" has suffered. But instead of contracting and waiting to be overwhelmed, many of Europe's surviving manufacturers have continued to seeking advancement of the art and science of automobility.

The salient questions then become, how does FoMoCo tap nationalism in America and how is it advancing the art and science of the automobile.

In short, if FoMoCo's "Way Forward" isn't about both, then it might as well move "all the jobs" to the lowest cost producer and watch its marketshare sink on average one full percentage point per year into oblivion. If FoMoCo believes that if can build a better, more soulless transporation appliance than the Asians, it's sadly mistaken. Detroit's Woodward Avenue wasn't packed a couple of weeks ago to celebrate the Asian hybrid or the perfect Asian minivan!

The "Way Forward" here must recapture the American spirit and actually drive--not just talk about driving-- American innovation.

Cribbing Volvos and Mazdas and assembling them in Mexico just doesn't cut it under this standard.

"EXCITEMENT" AT FORD MEANS MORE MAZDA, VOLVO

Another memorandum from William Clay Ford, Jr., CEO of Ford Motor Company (R) is making the rounds of the automotive media. First published by the Detroit News on Saturday September 2, (and suspiciously coinciding with a Newsweek interview of Bill Ford), the memo is another bit of "change or die" hysteria of the sort now regularly emanating from the Glass House.

According to Bill, "The business model that sustained us for decades is no longer sufficient to sustain profitability . . . We must change to a new business model that requires greater bottom-line contributions from cars and crossovers, continued leadership in pickups in North America, healthier profits from all other business units, growth in Asia, greater integration of our global operations and an evaluation of strategic alliances."

Oh yeah, and "world peace," too.

"Healthier profits from all other business units" ought to send shivers down the spines of enthusiasts, because that's the sort of "profit center" mentality which eventually leads to cuts in performance parts operations, racing programs and low-volume niche builds. Why? Because some bean counter who would be just as happy counting widgets for Wal-Mart as working for FoMoCo will ignore the intangible benefits of these high performance programs, deciding that the return on invesment is not high enough for the risk involved.

Don't believe it? Just think back to November 197o when Lee Iacocca and Henry Ford II massacred the "Total Performance" programs out of concern for costs and environmental/safety image.

Bill also elaborated on what "greater integration" mean in "Fordspeak." Reuters reports that Bill opined "that since becoming CEO in 2001, the company had aligned product development of Ford, Lincoln and Mercury models 'much more closely' with Mazda and Volvo, to improve efficiency and produce 'more exciting vehicles', adding he wanted to drive this effort deeper."

Sure, Bill, Sure. That Ford Five Hundred is just a rolling ball of excitement.

Reading between the lines, this latest restructuring-of-the-month is a battle for the soul of FoMoCo.

On the one side are forces such as the truck staff, Ford Racing and the few true believers still pumping up Mustang. This side remembers Ford's historic swagger and its ability to take "bold moves" that transcend the competition's plans, set new benchmarks, and provide greater value to FoMoCo's customers. This side isn't rattled by the Japanese or the environmentalists or minor shocks to world fuel markets.

On the other side are the bureaucrats and bean counters who believe the "Way Forward" is off-shore engineering (at Mazda and Volvo), badge engineering, and just barely matching the objective performance of mass market Japanese cars in order to carve out a little bit of market share. This side is obsessed with cost cutting and placating any number of politically-correct non-automotive forces. This side ignores niches for the "big picture" and believes "excitement" consists of chromed wheels, extra stripes and the odd, profit-packed gadget.

Given the talent drain reportedly occurring at FoMoCo, the real question is which side will prevail.

It doesn't look too good right now.

JAGUAR LEAKS MORE THAN JUST MONEY

"Jaguar has cost Ford in excess of $10 billion since it acquired the brand in 1989," according to Autoweek. "It’s still not profitable and it continues to restructure."

A development that sure will not help is the August 30 "quarantine" of some 2006 and 2007 XJ sedans on reports of "massive gasoline leaks from vehicle fuel tanks." According to Automotive News, the "quarantine prohibits Jaguar dealers from selling any new or used XJs with vehicle identification numbers G49701 through H13209."

Of course, the National Highway Traffic Safety Administration is looking into the reports.

This cannot be good news for the mangy kitten brand. Much of that $10 Billion in losses FoMoCo fed Jaguar was to reverse the brand's "legendary" poor quality image. Yet this XJ fiasco is poised to create the same kind of quality black eye as the high profile grounding of Ford GTs out of concern for wishbone failure.

FoMoCo simply doesn't need this kind of publicity.

Moreover, now Jaguar seems to have stumbled into a fuel-tank quagmire familiar to FoMoCo's faithful. From the days of exploding Pintos to the more recent Police Interceptor controversy, fuel tanks have sometimes been a vulnerable point for FoMoCo. Now that expensive Jaguars are reportedly filling upscale garages through gasoline incontinence, many will recall Fords of the past who couldn't hold their gasoline and wonder why this sort of thing just keeps on happening.

One would think that with FoMoCo's history, they'd be particularly careful in checking fuel tank issues.

On the other hand, one can just envision the a Saturday Night Live-style satire based on the old "LA Law" opening sequence from the 1980s . . . [XJ trunk slams . . . car explodes . . . audience cheers as greedy trial lawyer goes up in smoke . . .

(a number of aftermarket companies dealing in Mustang and other vintage parts no longer serviced by FoMoCo would cheer lustily if the immolated "trial lawyer" were from Howard, Phillips and Andersen, a Utah law firm representing FoMoCo against these vendors on intellectual property enforcement matters. See http://www.mustangevolution.com/stockton-firm-faces-suit-ford-trademark-violation/)]

MARKETSHARE SLIDE WORSENS FOR FORD MOTOR COMPANY (R)

It just gets worse and worse . . . .

According to a report in Automotive News "Ford's domestic brands have lost 1.1 percentage points for the year to date." www.autonews.com

"Market share for [FoMoCo's] domestic brands was 16.8 percent at the end of August, down from 17.9 percent for the year-earlier period.

Ford sales analyst George Pipas told Automotive News "When the consumer is moving away from the segment where we have a 35 percent share and is moving toward small cars, where we have a 7 percent share, that's not very conducive to slowing the rate of decline or stabilizing or increasing market share."

Part of the problem, of course, if FoMoCo's poor selection of small cars.

Other than the "Mexican Mazda" CD3 sedan (Fusion/Milan/Zephyr/MKZ) and minor restyling of the previous generation Focus, FoMoCo doesn't offer much to match up with huge variety of small cars competing for economy-minded customers.

Ford insiders maintain that the CD3 is a modest hit. But FoMoCo's standards for a "hit" are so low these days that just not losing business is probably a "hit" in Dearborn.

FoMoCo is pinning signficant short-term hopes on the new "Edge" crossover and the underpowered 3.5 Duratec to reverse its fortunes. Yet FoMoCo apparently will continue to ignore several niches, such as cheap, yet entertaining youth market cars (Scion), factory "pocket rockets" (Civic SI, Cobalt SS, Caliber SRT-4, Volkswagen GTI), homologation-type high performance all wheel drive specials (Mitsubishi EVO, Subaru WRX), subcompacts (Honda Fit, Toyota Yaris, Mini Cooper) and alternative body styles (convertibles, coupes, "box" trucks).

FoMoCo partner Mazda is, however, having some success with its quirky Mazda 3 and Mazdaspeed 3. Neither the success nor the advanced turbocharged powertrain are available in the more prosaic domestic Ford models.

FoMoCo also offers no fuel-efficient sports cars, other than the Mazda Miata.

You'd think with FoMoCo's problems in small sedans, that it would have a slate of luxurious, street-burning "gas guzzlers" at the other end.

Nope. FoMoCo's shelves are bare there, too.

While Chrysler offers perhaps the finest luxury-sports sedan available in America for less than $50,000 (Chrysler 300 C SRT-8) along with a fairly decent range of lesser models (Dodge Magnum R/T, Magnum SRT-8, Charger R/T, Charger R/T Daytona, Charger SRT-8 and Chrysler 300 C), FoMoCo offers not ONE MODEL in the power-to-weight range or performance envelope of these cars.

But that's just because FoMoCo is concentrating on fuel economy, right?

Not really.

While FoMoCo's sedans do best the most extreme examples cited above (e.g. the SRT-8s) FoMoCo's newest FWD-based sedans aren't exactly class leading at the pumps. The EPA rates FoMoCo's 4 cylinder Fusion at 24 mpg city and 32 mpg highway and the Fusion 6 at 21 mpg city and 29 mpg highway. Similarly Five Hundred is rated at 21 mpg city and 29 mpg highway. Decent numbers to be sure, but they only roughly match Camry (23 mpg city/33 mpg highway (Camry four/Automatic) and 21 mpg city/29 mpg highway (Camry six/automatic), are only slightly better than the economy versions of Chrysler's large RWD sedans (21 mpg city/28 mpg highway (Chrysler 300 2.7), 19 mpg city/27 mpg highway (Chrysler 300 3.5), 17 mpg city/25 mpg highway (340 h.p. Dodge Charger R/T) and lag behind GM (21 mpg city/31 mpg highway (Impala 3.5) and 18 mpg city/28 mpg highway (303 h.p. Impala 5.3 V8).

Of course FoMoCo offers nothing to match hot (in terms of sales), headline-grabbing economy sedans, such as the Toyota Camry hybrid, the Honda Civic Hybrid or the Honda Accord hybrid.

FoMoCo has a line-up of "competent" sedans, but nothing that really causes potential sedan buyers to lie awake at nights. And until FoMoCo can figure out how to break away from the pack of competent "transporation appliances," its results will continue to trend lower and lower.

CONSUMER REPORTS RIPS ON ETHANOL

America's favorite group of know-it-all nannies--Consumer Reports- weighs in on the ethanol debate in a cover story this month.

As could be easily predicted, the magazine takes a dim view of E85, undoubtedly recognizing that its potential as a high performance fuel conflicts with the liberal dream of forcing everyone into tiny econoboxes, mass transit and vanpools.

Of course anti-CR conspiracy theorists will note that E85 isn't much of a priority for the Japanese car makers, whose products CR typically fawns all over (CR is probably the single greatest sales gimmick of the Japanese car builders, notwithstanding serious methodological concerns over CR's survey process. See http://www.allpar.com/cr.html; http://www.truedelta.com/pieces/newdots.php )

The crux of CR's argument is that although E85 produces fewer oxides of nitrogen, it lowers fuel efficiency by 27 percent (based on CR's testing of Chevrolet Tahoe) and thus won't save drivers money, even if they can find it outside the Corn Belt.

They also look askew at government incentives aimed at boosting production of flexi-fueled vehicles:

"[T]he government credits FFVs that burn E85 with about two-thirds more fuel economy than they actually get using gasoline, even though the vast majority may never run on E85. This allows automakers to build more large, gas-guzzling vehicles than they otherwise could under Corporate Average Fuel Economy rules. As a result, these credits have increased annual U.S. gasoline consumption by about 1 percent, or 1.2 billion gallons, according to a 2005 study by the Union for Concerned Scientists." http://releases.usnewswire.com/GetRelease.asp?id=71591

CR, of course, stays away from the real attraction of E85 for enthusiasts--high octane and the ability to absorbe more excess combustion heat than straight gasoline--two advantages that can be put to significantly higher and better use in properly-tuned forced induction engines.

CR apparently just can't understand why anyone would want to do such a thing . . . .