Ford Motor Co's new restructuring plan may not stem its steady loss of market share, analysts warned, as investors balked at the automaker's announcement on Friday that it will not return to profitability until 2009.
An unexpected drop in truck sales and rising material costs forced Ford to accelerate a restructuring plan announced in January to increase the number of plant closures to 16 and to cut an additional 10,000 white collar jobs. The automaker is now set to eliminate a third of its North American workforce.
Ford vowed to use new products to halt its slide. It plans to renew 70 percent of its product line, measured by volume, by next year and to introduce five completely new vehicles by 2008.
"We've taken a sobering look at the industry and our own business, and the entire team in North America has a renewed sense of urgency and a clear view of what it will take to position this business for profitability," said Mark Fields, the Ford executive vice president responsible for the turnaround plan.
Analysts, however, expressed skepticism about what comes next at Ford, given that Fields also conceded the company's US market share is expected to drop to 14-15 percent from its current share of about 17 percent.
Ford shares closed down nearly 12 percent at US$8.02.
"Our ranking doesn't matter," chairman Bill Ford said in a conference call with analysts.
"You've seen companies chase share with disastrous results," he added. "I think our employees want to see a realistic plan."
The decision to become a smaller, more profitable company is logical, Goldman Sachs analyst Robert Barry wrote in a research note.
"But with little expected relief for the top line any time soon, cost cuts that may prove inadequate by the time they are realized, relentless pricing pressure, and ongoing mix shift to lower-profit cars, not to mention macroeconomic risk that could derail [Way Forward Two], we remain skeptical about what this smaller, more profitable company will look like," he added.
Analysts also questioned whether the amended plan goes far enough given that the company is expected to lose US$9 billion this year.
"We had hoped Ford would close additional assembly plants and make remaining ones highly more flexible, announce the exit/sale of several brands [maybe Lincoln Mercury, Jaguar and Land Rover], reduce fleet mix to a set lower level and hint at more warranty sharing with suppliers [where we see little accountability]," Bank of America analyst Ron Tadross said in a research note.
"We do not think any of the things announced today will help Ford fix its 3,000-per-unit dollar US vehicle resale value disadvantage versus Toyota," he said, adding that the plan was "inadequate on the capacity-reduction front and omits any bold steps to fix the business."
Fields, however, said Ford is focused on both cutting costs -- a new labor agreement will save the company US$600 million -- and developing new products.
"This remains a product-led turnaround first and foremost," he said. "As we made clear in January -- and as we will underscore today -- the future of Ford will be driven by bold, innovative products," Fields said.
The new vehicles Ford has brought recently are excellent, noted Alan Baum, an analyst with the Planning Edge in Southfield, Michigan.
"Product development at Ford hasn't been that bad. I think Ford gets it. The new vehicles are really very different from the products they're replacing. That isn't true at GM," Baum told reporters.
But Ford has fallen behind US rivals in the development of more efficient engines and transmissions, Sean McAlinden of the Center for Automotive Research in Ann Arbor, Michigan noted recently. General Motors and the Chrysler Group have new advertising campaigns, promoting the fact they have several models that get better than 19km per US gallon.
FALLING BEHIND: Samsung shares have declined more than 20 percent this year, as the world’s largest chipmaker struggles in key markets and plays catch-up to rival SK Hynix Samsung Electronics Co is laying off workers in Southeast Asia, Australia and New Zealand as part of a plan to reduce its global headcount by thousands of jobs, sources familiar with the situation said. The layoffs could affect about 10 percent of its workforces in those markets, although the numbers for each subsidiary might vary, said one of the sources, who asked not to be named because the matter is private. Job cuts are planned for other overseas subsidiaries and could reach 10 percent in certain markets, the source said. The South Korean company has about 147,000 in staff overseas, more than half
Taipei is today suspending its US$2.5 trillion stock market as Super Typhoon Krathon approaches Taiwan with strong winds and heavy rain. The nation is not conducting securities, currency or fixed-income trading, statements from its stock and currency exchanges said. Yesterday, schools and offices were closed in several cities and counties in southern and eastern Taiwan, including in the key industrial port city of Kaohsiung. Taiwan, which started canceling flights, ship sailings and some train services earlier this week, has wind and rain advisories in place for much of the island. It regularly experiences typhoons, and in July shut offices and schools as
An Indian factory producing iPhone components resumed work yesterday after a fire that halted production — the third blaze to disrupt Apple Inc’s local supply chain since the start of last year. Local industrial behemoth Tata Group’s plant in Tamil Nadu, which was shut down by the unexplained fire on Saturday, is a key linchpin of Apple’s nascent supply chain in the country. A spokesperson for subsidiary Tata Electronics Pvt yesterday said that the company would restart work in “many areas of the facility today.” “We’ve been working diligently since Saturday to support our team and to identify the cause of the fire,”
TECH PARTNERSHIP: The deal with Arizona-based Amkor would provide TSMC with advanced packing and test capacities, a requirement to serve US customers Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is collaborating with Amkor Technology Inc to provide local advanced packaging and test capacities in Arizona to address customer requirements for geographical flexibility in chip manufacturing. As part of the agreement, TSMC, the world’s biggest contract chipmaker, would contract turnkey advanced packaging and test services from Amkor at their planned facility in Peoria, Arizona, a joint statement released yesterday said. TSMC would leverage these services to support its customers, particularly those using TSMC’s advanced wafer fabrication facilities in Phoenix, Arizona, it said. The companies would jointly define the specific packaging technologies, such as TSMC’s Integrated
RSS