Wednesday, January 25, 2006

FORD – For Obvious Reasons, Dead


If I were to describe a major corporation’s products as being best-known for rolling over and spontaneously catching fire, you might believe I was referring to some caricature of a corporation, some Michael Moore-inspired nightmare that has no basis in fact. But I am talking about Ford, the company which seems, to paraphrase Robert Downey Junior, to like the taste of a gun barrel in the mouth.

Ford’s problems started the same way they did for other U.S. carmarkers. Ford was caught by surprise by the quality and popularity of Japanese imports during the 1970s, and suffered the disasters of the Pinto and the 1974-78 Mustang II. Ironically, then as now a combination of poor engineering and worse marketing.

Ford learned from its blunders, or so it seemed, to the point where it’s stock climbed all the way up to $29.85 a share in 2005. But problems were already moving towards disaster long before that high-water mark, and doom was unavoidable by the time anyone in Dearborn looked up to see it. One very key blunder early on was the removal of Jacques Nasser as CEO, replacing him with William Clay Ford Jr. in 2001. This occurred as part of a series of operational changes in an effort to “return Ford to profitability”. Many management professionals were given the boot, and the company failed miserably to consider the most likely causes of lost revenue and market share. And to elect a CEO largely on the basis of family control of the stock – Ford himself admitted that “his name and his family's control of the company's voting stock was a factor in his selection” – is a serious mistake for a major corporation to make. While the company enjoyed some success in rising stock prices until 2005 and a measure of profitability, no one at Ford appears to have ever seriously examined the causes for Ford’s problems, assuming that they would simply go away. And so history repeated itself, this time with possibly fatal consequences.

I mentioned the Pinto and the Mustang II, because they represented fundamental errors made by the Ford Directors. The Pinto was rushed into production, in about half the time normally taken to develop a new model, and so safety risks were not recognized until people died. If you do such a poor job of engineering that you make even Ralph Nader appear reasonable, you have really and truly screwed up. And then there is the Mustang II, an underpowered model no one wanted or was really ever liked. Taking the most famous model of muscle car Ford made, and replacing it with a weak sister with a penchant for transmission problems and oil leaks (as three of my friends constantly complained to me about the car), is an incredibly poor decision, impossible to justify with any knowledge of History of Economics. And judging from the finances of Ford during those years, it was an expensive lesson.

That was then, this is now though, right? Surely after those twin fiascos, you might expect someone at Ford would have put a report together, with some clever variant of a title on the line of “Hey, Let’s Not Do Something This Stupid Again, OK?” But apparently not.

First, there was the Ford Explorer. The SUV is largely a good idea. People love the idea of a big powerful truck, safe from likely accidents with plenty of power for driving and comfort. People don’t mind the big price tag, or even the lousy gas mileage, as long as they feel like they have a strong, capable, safe ride for their family. Emphasis on “safe”.

This is why the Explorer was bungled. Something in the design of the Explorer made it prone to exploding tires and rollover accidents. Extremely prone. Literally hundreds of Explorer drivers died in rollover accidents, and while tiremaker Firestone took a lot of the blame, NHTSA tests showed that Explorers were far more likely to roll over than any other model or brand. Even after extensive refitting and redesign, the Explorer in 2004 was still regarded as the most likely vehicle to suffer a rollover accident.

Ford recalled the Explorer in 2001 and again in 2003, although the company denied any risk of serious accident from the design errors. It doesn’t take a business genius to recognize that if your leading model of SUV has a propensity to kill people in rollover accidents, you have a serious problem. Unfortunately, Ford’s decision to deny there is a problem has not restored great confidence in the model, nor brought Ford to where it was in market share.

What could be worse? How about your most profitable line of vehicles catching fire by themselves? That’s not just a nightmare, that’s exactly what happened. In 2005, Ford was forced to recall 3.8 million F150 trucks, Expeditions, Broncos, and Lincoln Navigators, because the damn things self-ignited while parked. They burned down homes, they destroyed nearby cars and property, they killed people, and for some reason that just wasn’t a popular effect of the vehicles. And just as before, this came after years of denial by Ford that there was any kind of problem, and with no apologies for the lives lost and damage caused by the fatal flaw.

So, how did this all happen? Maybe it’s the fact that Ford never brought in experts to analyze past mistakes. Maybe it’s because CEO William Ford thought it was more important to kiss up to the union than to listen to his best people, to such a point that he canned the folks who could have warned him about what was coming, and how to avoid it. Maybe it’s because Ford has insulated itself in an echo chamber, hiding from real-world opinion and conditions for so long that the company really believes that they will survive every blunder they make.

Certainly that’s the only way I can explain the Ford Fusion. Granted, my degree is not in Marketing, but can someone please explain to me the reasoning in investing a major showcase effort in a product which is not the least expensive in its class, the most reliable, the fastest, the most luxurious, the highest rated by expert comparison, the safest, or by any standard the best in its class? There is no reason, from any rational perspective, to buy a Ford Fusion, yet this is what Ford is banking on to be its star for the future.

At no more than 221 HP, the Fusion is weak in comparison with any of the major muscle cars. At no better than 32 mpg highway (I mean for crying out loud, my 1998 Honda CRV gets better than that!), the Fusion is not an economy car. This car, to be blunt, is no threat to the Accord or the Camry. It might be good for a laugh when matched against the big guys from Japan, but it is by no means a contender. What manner of con man convinced Ford to mass-produce the Fusion, I can only speculate. No matter what manner of idiot in a boardroom thinks this will revive Ford’s futures, the present course is aimed directly at extinction.

What to say about Ford, then? Well, once upon a time there was a great carmaker, called Packard. Nice cars, comfortable, reasonably priced. But Packard couldn’t keep up when they had to, and the company died out. Just like the Hudson, Studebaker, and many other formerly famous names. It appears to be time to say good-bye to Ford.

Have you driven a Ford, lately? There’s a very good reason why not.

No comments: