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Ford can see a profit in 2011
Ford’s Mulally says worst is over in global auto sales crisis
19 May 2009
By IAN PORTER
FORD Motor Company chief executive Alan Mulally said he believes the world slump in vehicle sales has bottomed and that demand will start to rise in the third or fourth quarter of 2009.
This, and the progress being made in restructuring the group’s North American operations could see Ford back in the black by 2011, Mr Mulally told the annual meeting in Delaware.
He praised governments around the world for the stimulatory policies they had enacted, saying he believed these had hastened the recovery from the global financial crisis.
Speaking after the annual meeting, Mr Mulally said decisions to reduce interest rates and to counter the illiquidity of financial markets with cash advances in various countries were starting to have an effect.
"We are very encouraged," he said. "We're going to see the start of this turnaround in the third and the fourth quarter."He said Ford would continue to bring its production capacity down into line with demand around the world and would continue its long established policy of consolidating dealers across the US – a policy GM and Chrysler have also adopted.
"We are confident that we will not only survive this downturn, but that we will emerge as a lean, globally integrated company poised for long-term profitable growth," Mr Mulally said, adding that the automaker was on track to be at or above break-even in 2011, excluding special items.
Ford is the only US manufacturer not operating with the help of government loans, having started its own restructuring process in 2006 under its Way Forward Plan.
Left: Ford executives at the Ford annual meeting.
Capacity was to be cut 26 per cent, the workforce cut by up to 30,000 hourly workers and operating costs reduced by $US5 billion ($A6.5 billion).
During the meeting, several investors said they were encouraged by the company's response to the economic crisis and the restructuring moves it had taken to become more competitive.
The meeting attracted a modest turnout of 98 shareholders, although this was up from the meagre crowd of 58 who fronted the 2008 meeting.
This year’s meeting was enlivened by the appearance of former presidential candidate the Reverend Jesse Jackson who argued strongly for the company to make more cars inside the US, and not send more assembly work over the border.
Mr Jackson, who has actively lobbied on behalf of minority suppliers and dealers recently, said some company decisions to close factories had eliminated thousands of American jobs. He urged Ford to make renewed commitments to "reindustrialising" the US.
"The Ford Fusion, made in Mexico, can be made in America," he said. "The automotive industry is the heart of our manufacturing. It's the backbone of our financial markets."Mr Jackson said other countries had put barriers up against US vehicles while America continued to encourage free trade.
"Getting there, we face walls. Getting here, they face bridges," the civil rights leader said.
Ford executive chairman Bill Ford jun thanked Mr Jackson for raising those issues, but defended Ford's global strategy.
"Regarding the reindustrialisation of America, I couldn't agree with you more," he said. "We cannot let our industrial base go away. (And) we are investing here in America."As evidence, Mr Mulally pointed to Ford's announcement that it would produce the next generation Ford Focus compact car in Michigan.
Aside from Mr Jackson's appearance, this year's annual meeting was a low-key affair compared to past gatherings.
Chief financial officer Lewis Booth said programs to encourage motorists to trade in older models for new, more fuel-efficient vehicles were having an immediate impact in countries that had adopted them.
For the fifth year in a row, shareholders were asked whether they wanted to end the privileged voting rights that the Ford family held, which gave the family control of the company despite not owning a great proportion of the shares on issue.
The advisory vote seeking the end of the special voting powers failed for the fifth time.
Under the unique voting structure, Ford family members hold a 40 per cent voting interest through 70.9 million Class B shares, while the automaker had more than 2.3 billion common shares outstanding as of March 18, according to its proxy statement.
The motion received 25.05 per cent support when it was brought in 2005. It had received more than 27 per cent support the past two years, but received only 19.5 per cent at this year’s meeting.
Ford posted a company record net loss of $14.7 billion ($A19.24 billion) in 2008 and losses totalled $30 billion ($A39.25 billion) over the past three full years. It posted a first-quarter net loss of $1.43 billion ($A1.87 billion).
On the day before the annual meeting, the company raised $US1.4 billion ($A1.83 billion) through a new issue of 300 million ordinary shares at $US4.75, in a move Mr Mulally said was an important step towards making the company profitable again.
Part of the cash would be used to help meet Ford’s obligations towards the creation of a trust fund to handle all the health fund requirements of retired Ford employees. The fund would hand the responsibility to the United Auto Workers union and end Ford’s financial responsibilities in this costly area.
Issuing equity now and possibly funding a larger portion of its retiree obligations with cash would help Ford improve its balance sheet and reduce the potential impact of those obligations on its shareholders, Mr Mulally said.
In April, Ford also persuaded holders of $US9.9 billion ($A14 billion) in unsecured debt to accept repayment of less than 50 cents in the dollar made up of $US2.44 billion in cash and 468 million new shares.
The redemption cut the company’s annual interest bill by $US500 million ($A654 million), but Ford still has $US15.9 billion of debt on its books.
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Ford slashes debt, outpaces GM
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