Surprised at yesterday's announcement from Ford head honcho, CEO Alan Mulally (left), that the U.S. automaker will reduce its overall North American production by 15 per cent in the second quarter?
Or the cutting of 430 jobs at its Windsor V8 engine plant due to customers bailing on large pickup trucks and sport-utility vehicles?
Nope. Me neither.
What is surprising is Ford's continuing sense of entitlement and head-in-the-sand attitude as to why its in such bad shape:
• During a conference call with industry analysts, Mulally said his world was recently rocked, on Tuesday, April 22, to be exact. That's the day the average price of gas in the States shot past $3.50 a gallon.
"We saw a real change in the industry demand for pickup trucks and SUVs in the first two weeks of May. It seemed to us that we reached a tipping point where customers began shifting away from these vehicles at an accelerated rate."
Dude—that "shift" started in 1973, exactly one day after the Oil Crisis I, and ramped up again after Oil Crisis II in 1979, and again after 9/11...
• Mark Fields, Ford's president of the Americas, said in the company statement: "Rapidly rising commodity prices—particularly steel prices...are having a tremendous impact on our sales, our manufacturing operations and our profitability as we look to 2009."
OK, yes. Steel prices have doubled in the past five months.
Trouble is, last time I checked, Toyota Corollas and Honda Fits are made with steel and run on high-priced gas as well.
Look. Ford can point fingers and keep on playing the blame game until every one of its plants is shuttered. But the facts are Ford's current woes are all self induced, and decades long in the making.
The hard, non-PR smoothed over truth is: by not kicking the addictively profitable SUV habit during the times of cheap gas in the mid-1990s, Ford—and General Motors and Chrysler—basically handed the North American passenger car to the Japanese and Korean brands on a silver hubcap.
Plus, Ford, internally, kept up its walls.
Where GM and Chrysler worked toward combining global synergies to reduce product development costs, Ford's European, North American and Asian groups acted like warring tribes. It's only recently that Ford's decided not all North American buyers want an F-150 or Explorer with plans to harmonize European and North American product lines. But those vehicles won't start showing up on our shores for years. The first, the subcompact Verve doesn't arrive until 2010.
Final note: I was in New York City yesterday. The average price of gas was $4.30 a gallon. That's a 22 per cent increase in the four weeks since Mulally's "tipping point".
[Source: Automotive News, The Star, Ford]