- The Washington Times - Thursday, February 9, 2006

Ford Motor Co. has disclosed its latest turnaround plan, which as headlines worldwide reported, includes the closing of 14 plants and the elimination of up to 30,000 jobs. Questions remain, most notably — is it enough and will this plan work?

The “Way Forward” plan was developed over the past two months by 50 persons on 10 teams, representing every aspect of the business. Its short-term goals are to slow the rate of financial and sales volume losses and stabilize market share. It also includes massive cost cutting and hoped-for revenue boosts in order for Ford’s North American operations to turn profitable no later than 2008. Ford lost nearly $1.6 billion in 2005 in North America, although, overall, it was profitable for the year. Ford confirmed a few of the plant closings and more will be named later.

In 2002, when Bill Ford took the reins of the company his great-grandfather, Henry Ford, founded more than a century ago, he instituted the “Revitalization Plan” after the automaker lost $5 billion a year earlier. But the plan failed to meet most of the goals set for 2005. Quality was flat and caused losses in 2005, rather than improving across the board as Ford had intended. Market share was down. Costs ballooned. Cash flow was negative by the billions instead of positive in the billions.

What went wrong? Ford prognosticators (and those at General Motors and other companies as well) missed key predictions: gas prices that rose a dollar above 2002 levels, causing consumers to ditch big SUVs for smaller vehicles faster than anticipated; steel prices doubling; and 40 more nameplates that emerged to battle for a share of an essentially flat U.S. market.

For its part, Ford acknowledges its designs have been too conservative. While it closed plants, laid off workers and refocused on the car business in an effort to cut costs, its new products failed to capture the public’s imagination, causing sales and market share to drop instead of rise as Mr. Ford had predicted.

“The plans we announced in 2002 were not wrong,” Bill Ford says.

“They took us as far as we could go without making dramatic changes — but that’s not nearly far enough.”

So what’s the difference this time? Innovation, Bill Ford says. The word was used countless times in a briefing for the press, investment analysts and other execs. The briefing, held in Ford’s design studio where one could smell the modeling clay, is where the future of the Ford Motor Co. begins.

Vehicles will receive major freshening on average every 3.2 years, instead of the current 4.4 years. Designs will be bold, American and innovative as exemplified in the 2007 Ford Edge and 2007 Lincoln MKX crossovers. New models will fill “white space” market niches and could include the small but sporty Ford Reflex, introduced at the recent Detroit auto show, and the Ford Fairlane wagon shown last year.

Bill Ford spoke briefly of the top-secret Piquette Project, named after the Piquette Avenue plant where his great-grandfather gathered a skunk works [secret research and development team] to put America on wheels with the Model T. Word is the newest skunk works is working on a small car to be made in North America for which a new, low-cost plant will be built and recycled.

Innovation has been iffy at Ford lately. Indeed, Ford deserves big credit for building the first hybrid from a Detroit automaker and the industry’s first SUV hybrid, as well as for being more aggressive on hybrids than crosstown rivals General Motors and Chrysler.

Ford plans to offer hybrids in half of its Ford, Lincoln and Mercury models by 2010 and build 250,000 a year by then.

But this is the same company that only this year put the first satellite radio (Sirius) in its vehicles, still requires its buyers to order side air bags and side curtain air bags as optional fare when competitors such as Hyundai and Honda offer it standard on their cheapest models, and couldn’t make continuously variable transmissions work as Nissan has done so successfully.

“Change or die” is Ford’s rallying cry, and change it must make in an ever-changing world in which more players belly up to the table for bigger slices of the American pie.

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