News Intelligence Analysis

 

 

From the Financial Times

 

Ford sets out plans for ‘green’ vehicles

By Bernard Simon in Toronto and John Reed in London

Published: December 2 2008 15:47 | Last updated: December 2 2008 16:47

 

 

Ford Motor laid out plans on Tuesday for a family of hybrid petrol-electric and fully electric vehicles as part of a blueprint to accelerate the restructuring of its loss-making North American car and truck business.

Ford also said in a submission to Congress that it expects to break even or return to profitability, on a pre-tax basis, by 2011. The carmaker earlier this year abandoned its target of returning to profitability by 2009.

In spite of the current slump in sales, Ford said in a statement that it does not expect to run out of cash in 2009, “barring a bankruptcy by one of its domestic competitors or a more severe economic downturn that would further cripple automotive sales and create additional cash challenges”.

The comments were part of submissions by Ford and its two Detroit-based rivals – General Motors and Chrysler – to Congress to justify their plea for $25bn in emergency government funding. GM and Chrysler are due to release their plans later on Tuesday.

The three carmakers have suffered massive losses in recent years and are haemorrhaging cash.

Ford’s financial position is relatively less precarious than GM and Chrysler, thanks to a $23.5bn loan negotiated two years ago. Its cash reserves stood at $18.9bn on September 30, down $7.7bn from three months earlier.

Alan Mulally, chief executive, expressed the hope that the restructuring plan “helps instill confidence in Ford’s commitment to change, including our accountability and shared sacrifice during this difficult economic period.”

The company said it was asking for access to up to $9bn of the emergency loans, but that it hoped to complete its restructuring without needing the funds.

Shares in Ford climbed more than 11 per cent to $2.84 in morning trading on Wall Street.

As part of its drive to cut costs, Ford said that it was in discussion with the United Auto Workers union to eliminate the gap in labour costs between itself and foreign-owned plants in North America, which are not unionised.

UAW leaders are due to hold an emergency meeting in Detroit on Wednesday to discuss reopening labour contracts signed with the three carmakers last year.

It also spelt out plans to trim its dealer network and said that it would continue to “aggressively match manufacturing capacity to real demand”.

Ford has over the past three years reduced its workforce by 51,000. Over the past five years, it has closed 17 plants in North America, including a third of its assembly plants.

The carmaker said that the accelerated drive to produce more fuel-efficient vehicles would yield a full electric van for commercial fleets in 2010 and a battery-operated sedan in 2011.

The average fuel economy of its car and light-truck fleet would improve by 14 per cent for 2009 models, 26 per cent for 2012 models and 36 per cent for 2015.

It said that it would sell its fleet of five corporate aircraft as part of its cost-cutting plan. Mr Mulally and his counterparts at GM and Chrysler were excoriated by US lawmakers two weeks ago for bringing their begging bowls to Washington in their corporate jets.

In response to criticism of his compensation, totalling close to $50m over the past two years, Mr Mulally has agreed to a nominal salary of $1 if Ford draws on the emergency loans.

Mr Mulally said that “while we clearly still have much more work to do, I am more convinced than ever that we have the right plan that will create a viable Ford going forward and position us for profitable growth”.

Copyright The Financial Times Limited 2008

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