Ford Resigned to 14-15 Percent Market Share

Ford Resigned to 14-15 Percent Market Share

By Bill Visnic

DETROIT –- In a conference call to summarize key points of its new four-year contract with the United Auto Workers (UAW) union ratified Wednesday, Ford Motor Co. officials say their U.S. market-share target for the foreseeable future is in the 14-15 percent range, reflecting the new realities of a company that is working feverishly to pare itself to a profitable size.

Ford’s U.S. market share as recently as 2002 exceeded 20 percent. Its share in October was 15.8 percent of the U.S. market, trailing the industry leading 25 percent of General Motors Corp., closely tracking that of Toyota Motor Corp.’s 16.1 percent and easily exceeding Detroit rival Chrysler LLC’s 11.8 percent of the market in October, according to Edmunds.com's calculations.

But Ford’s continuing market-share decline and an ongoing slowdown of the U.S. economy are a double hit that it appears Ford’s cost-saving new labor agreement will not immediately overcome.

“We are looking at a slowing economy,” says Don Leclair, executive vice president and CFO. He says Ford envisions a total U.S. market of well less than 17 million vehicles this year and next, but believes the market will be “back to trend” at around 17 million units by 2010-'11.

He says Ford is projecting its U.S. production to “stabilize” at around 2.93 million units over the period of the new contract.

Because of its new cost-saving agreement with UAW and resultant plans to refit several U.S. assembly plants with “flexible” body-assembly lines, Ford also says it has abandoned a once-controversial portion of its Way Forward plan to build a new low-wage assembly plant in North America. Ford’s savings of around 60 percent in labor costs for new hires under the now-ratified UAW labor agreement –- combined with the fact Ford still needs to shed manufacturing capacity to match its market share –- appears to obviate the need for the proposed new assembly plant, which it was widely believed would be sited in Mexico.

Ford CEO Alan Mulally stresses that savings from the new labor agreement –- including the vital off-loading of future retiree health-care costs in a UAW-managed Voluntary Employee Beneficiary Association (VEBA) fund taking over in 2010 -– along with critical new investments in flexible manufacturing, will enable Ford to accelerate new-product development.

Ford says it will have flexible body shops in place in all its U.S. assembly plants sometime before the end of the new labor agreement. Such operations typically enable quicker response to customer demand for different models or variations, and insulate against the need to produce at more rigid volume levels. Mulally says Ford is targeting a 100 percent utilization rate for its plants by 2011-'12.

Additional “right-sizing” will come from a new round of buyout packages offered sometime early next year to the 54,000 UAW workers Ford currently employs. Despite these initiatives, however, Ford executives will not concede the company has totally pared the differential between the cost of its labor and that of Japanese automakers’ non-union assembly plants.

Ford says its manufacturing footprint now has the company retaining one more assembly plant than initially called for under the Way Forward Acceleration Plan. The company already has closed four major U.S. assembly plants. It also will continue with plans to close its Twin Cities, Minnesota, assembly plant, currently building the Ford Ranger and Mazda B-Series compact pickups, but has delayed the Twin Cities closing from 2008 until 2009.

Source: Ward's Auto Reports

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.