Topic: Ford: Quality equal to Toyota

[WpgMonty]

Very interesting article about Bill Ford and Alan Mulally.

Maybe the Way Forward is going to work, and maybe now would be the time to invest in Ford.

Ultimately, Bill Ford and his board bet on what they hope will prove to be a long-term fix, hiring a turnaround expert from Boeing to overhaul the company from the factory floor on up. The president and C.E.O. they chose, Alan Mulally, is expected to shrink and refocus the company, killing some brands and selling off others, as evidenced in the deal announced in March to sell Aston Martin for nearly $1 billion. All of this will require a delicate dance with dealers, suppliers, the U.A.W., and some increasingly impatient shareholders who plan to call for an end to family control at the annual meeting in May. “It’s a high-wire act, no question,” says lead director Irv Hockaday. 

Two conflicting forces in American business—the long-term players and the short-term opportunists—are engaged in a heated debate...On one side are the long-haul believers like Ford and his family. On the other are the high-stakes players who see companies as assets to be flipped or managed in order to capitalize on the moment. That’s just good business, they’d argue.

What he needed now was someone to perform triage, and he was willing to swallow his pride and step aside if he had to. He’d found the right man for the job, one who knew manufacturing, understood unions, and could appreciate both Ford’s culture and its storied past. Best of all, he was a fixer, not a quick fix. 

If Ford and Mulally are to be believed, it's all about long term thinking, and not about pleasing and appeasing short-term stock holders. I so want to believe them...

It seems as if the entire population of North America has developed short attention spans; it's all about instant gratification and short-term fixes. It seems as if most large corporations look no further than the next quarterly earnings report and it's impact on the value of their stock. Where's the long-term thinking? Doesn't anybody realize that what's best for a company in the long-term sometimes is quite negative in the short-term? Do investors not realize that by forcing a company to improve it's bottom-line for the next quarter so that they can get out at a higher price is hurting everybody in the long-term? Maybe they just don't care.

Where would Ford and GM and Chrysler be had they looked beyond the next quarter's earnings? What if the Detroit 3 had spent money on research and development instead of glitzy advertising? Instead of forcing suppliers to cheapen parts what if the Detroit 3 had spent more money on better parts? They would be Toyota and Honda, that's what.

I am engaged in investing for the long haul, and I only have invested in companies that I feel look much further into the future, certainly further then the next quarter. Banks, insurance companies and mutual funds are all about the long term. I may not get stinking rich investing in this manner, but most people who play the stock market for short term gains end up losing money, only a small percentage make big dollars that way, and in so doing have changed the face of investing and market capitalism to it's detriment.

[PJungnitsch]

Where would Ford and GM and Chrysler be had they looked beyond the next quarter's earnings?

The best explanation I've seen on how they got that way here:

Wall Street hasn't done Detroit any favors over the years. The Street is supposed to be the hard-nosed arbiter of success for corporate America, the white-hot cauldron of capitalism that's made this country's economy the most powerful in the world, the place where the money talks and you-know-what walks. (Though having allowed Enron to happen, Wall Street seems no longer to see the difference.) And, yes, Detroit has hardly covered itself in glory over the past 30 years. But I can't help wonder whether Wall Street should share some of the blame for the decline of America's two remaining automakers.

Let's be absolutely clear up front: Few people buy stock in a company for any reason other than they expect a return on their investment, and stockholders in auto companies are no exception. But in an era where screen jockeys zap billions of dollars a day through the ether at the touch of a computer keyboard, Wall Street's institutionalized ADD has resulted in a feverish short-term view of a business whose lengthy product cycles and huge investment costs are just too damned difficult to deal with.

Maybe that's why many of today's most successful automakers--Toyota, BMW, Porsche, to name three--are those who've never had to sweat a quarterly earnings call with a posse of skeptical Wall Street analysts looking for an opportunity to make a fast buck and ready to trash the stock price when they can't see one. To these companies, the concept of shareholder value has a very different meaning: "I don't watch [the stock price]," Dr. Shoichiro Toyoda once told Toyota North America president Jim Press. "I'm not going to sell my stock. If I worried about that, the decisions that I make wouldn't reflect the fact my name is on the back of every car."

Most Wall Street analysts will tell you Toyota, famously stingy with dividends, doesn't treat its shareholders well. But its stock is worth roughly four times that of General Motors. Go figure.

As Pulitzer Prize-winning author and journalist David Halberstam records in his book, "The Fifties," Bunkie Knudsen, who ran Pontiac and Chevrolet in the 1950s and 1960s, reckoned it all started to go wrong for Detroit when Fred Donner became president of GM in 1958. Knudsen was outraged that Donner would insist on talking about GM's stock price, and what the analysts on Wall Street thought about it, at his daily meeting with the heads of GM's divisions. Before Donner, those meetings were mostly about making cars.

Financial engineering quickly replaced product engineering as Detroit's primary business. GM and Ford essentially morphed into highly profitable finance companies with an auto business attached. That meant you could easily get a great deal on a new car. Only problem was, that new car wasn't always so great anymore. But the fat earnings on the loans and lease deals made the business look good and that kept the stock price pumped.

It's a sign of how entrenched this view of Detroit's business model has become that GM's decision to unload a majority share of its finance company, GMAC, earlier this year was treated by many as something akin to selling the family farm. But the sale is good news, because it means GM is shifting its focus back to its real business: designing and engineering cars and trucks. Meanwhile, over at troubled Ford, there are rumors the company may buy back its stock, now worth barely 15 percent what it was in 1999, and become privately owned. I hope the rumors are true, because Ford will then be free to concentrate on what it needs to do best: make cars and trucks.

Bunkie Knudsen, David Halberstam writes, believed in a simple concept: The people in Detroit had to make good cars, and if they did, the people in New York would take care of the stock. If only it were still true...

http://www.motortrend.com/features/editorial/112_0611_the_big_picture/

[WpgMonty]

The best explanation I've seen on how they got that way here

Agreed.

Wall Street's institutionalized ADD has resulted in a feverish short-term view

Could he have said it any better?

Perhaps GM and Ford understand now. Well, not quite sure about General Motors yet, but I think Bill Ford and Alan Mulally get it. It's not about the dividend, it's about the long-term stock value.

[ArticSteve]

I repeat: "conducted for Ford by the RDA Group"

The RDA Group is an organization whose members are former Bush Administration officials. 

Desperate propaganda from a dying automaker; Republican style. 

[barrie1]

Personally i think both of these companies have figured this out and are working on building mich superior products to what they were building 10 years ago even. They only had one way to go and they are improving as there products are getting as good and in some cases still superior to many of the Import brands. Who seems to have the most recalls now as the Big 2 if not 3 are way down on the list in comparison to some of the others. The No.s do state the truth if you look them up correctly.