Automobile Retailers

According to an article in Business Week magazine, a Ford and General Motors merger was discussed at a recent management meeting at General Motors. The idea was shot down, of course, but the prospects of such a merger were most interesting to the casual observer.

The idea for the potential merger was proffered by a General Motors executive who was clearly reacting to the current strain on the markets. A merger would likely save some grief but could probably also add some tension to the industry giants. There is certainly no assurance that such a merger would wind up saving both companies, either.

Citing “someone familiar with the discussion,” the Business Week article goes on to say that the merger was turned down because it would have been a huge distraction from the real business of the day and that any such merger would compound the numerous problems both companies were having. I think the idea of the merger would actually minimize the problems, as both companies could attack them together and come up with a grouped solution. But I suppose that’s why I’m a blogger and not a business executive with a sinking automotive firm.

As many pundits and analysts have admitted, such a merger could save a lot of the issues both companies face as the merging of the business capital would certainly come in handy when dealing with fiscal issues. Having the financial pools of both companies to deal with would certainly be advantageous and could provide some remarkable opportunities for investors.

For now, though, the idea is simply a discussion in passing. Perhaps the idea of the merger is enough to get some tongues wagging in the higher circles, as the combination of business capital and executive power would likely make an instant impact in the industry and could wind up putting a lot of people back to work. The Ford dealer outlets and GM dealer outlets would be grateful.

Oil company apologists are everywhere. They come in all walks of life and some of them even post on this very blog. If you’ve ever heard someone say, “The oil companies are ONLY making four cents a gallon on gas prices,” then you’ve heard an oil company apologist spin their web. The figures completely ignore the fact that almost every single oil company in the United States (and the world) has reported record profits during the last year.

And nevermind that four-ten cents on the dollar is the normal profit range for most companies in the best of times…

I’m not sure that any company making $12-billion of pure profit by June needs an apologist, but that’s just me. I don’t honestly care how much of a percentage they’re making on the dollar. If a company is making a penny on the dollar and they cut several billion dollars in five-six months, I’d have very little trouble feeling sympathy for them.

The fact of the matter is that the United States has gone to war for its oil companies.

In March of 2001, oil company execs met with President Bush and his staffers to discuss oil in Iraq. The meeting involved an analysis of the oil fields in the Middle East, with a prime focus on Iraq. At that time, the price of oil per barrel was $23.96 each (today the price is $135.59). At the time of the meeting, there were 63 other oil companies in 30 other countries competing for oil in Iraq using natural means and market tactics.

Now that the United States Army is occupying Iraq and the prices for oil are through the proverbial roof, guess who gets first crack at all of the oil contracts? Do you think it’s New Zealand? Or Japan? Nope. It’s Exxon, Shell, and BP from the United States.

As reported in the New York Times, those companies were reported to receive no-bid contracts from Iraq’s Foreign Ministry. The companies prevailed over others in the natural bidding war and some smaller oil companies, like Shell, wound up getting first dibs over some large oil companies from China and Russia.

The story goes on, naturally, and we all know how the oil prices rose from there and how American companies got first dibs on other contracts in Iraq. Oil company execs, using immunity from the United States, have had first crack at large pieces of oil resources in Iraq while under guard from U.S. military. Does this really still give oil company apologists a case?

Back in the United States, car companies are suffering from the weight of oil and rising gas prices. The local Ford dealer is having trouble moving old models of its big trucks off of the lot, while Ford execs are dropping salaries and cutting workers. This also relates to the rising gas prices, which are lining the pockets of oil companies and other parties. The cycle has doubtlessly cost thousands of Ford workers their jobs and millions of dollars to the company.

So really, do oil companies really need another apologist?

Most people are assuming by now that the reports for sales from the month of June are going to be rather bad. The sales figures will be released next week and Ford and GM are said to be bracing themselves for the results.

Many estimations for the sales figures have them dropping as much as 25%, which is a shocking prospect for both of the massive Detroit companies. With shares falling rapidly in both companies, it shouldn’t surprise anyone that Ford and GM aren’t looking so good at the moment. Both companies have taken tons of SUVs and pickups out of their production schedules, too, which have led to plant closures and layoffs.

Ford also shocked stockholders and the world of automakers when it announced that it was going to delay production and distribution of its F150 for 2009. This news came when Ford said that it still had too many 2008 models of the truck to sell. Once popular, the Ford F150 is just no longer a viable option for car owners that have to face the alarmingly high gas prices.

Many analysts have poured through the books to find out when the last time a company delayed production on a vehicle in such a way in Detroit. Automakers rely on new model introductions to boost showroom sales at the dealerships and to stimulate the overall sales of all vehicles from the company. With this move, Ford certainly won’t capitalize on greater sales anytime soon. The move is considered to be both expected and, at the same time, somewhat perplexing.

It appears that things are going to look different down at the local Ford dealer for quite some time. The General Motors dealerships are certainly not faring much better, but it appears that Ford is really taking the brunt of the changing markets, gas prices, and production decisions. Time will tell what will happen to the company, but next week’s sales figures likely won’t be good.

Presidential nominee Barack Obama is going to meet with leaders of Ford Motor Company and General Motors this week. Ford CEO Alan Mulally is among ten business execs who are will meet with Obama privately in Chicago on Wednesday. General Motors CEO Rick Wagoner is scheduled to participate in a forum on competitiveness with Obama on Thursday in Pittsburgh, campaign officials confirmed.

The meetings are geared to ease the tension between Obama and the domestic automobile industry. Many have felt that Obama’s tough policies regarding the top earners in the country have been too hard on big business and may wind up chasing much of it away. These fears are generally unfounded, of course, as having Obama’s plans in place firmly would increase the general cash flow of the consumers and wouldn’t impact the top drawer economy in an overly profound way.

Much of the problem between Obama and the automakers industry has come about as the result of comments he made in 2007 about the American automakers needing to make more fuel-efficient cars. Naturally the American automakers didn’t take to this admonition well and, despite Obama’s insistence that the writing was on the wall, simply continued business as usual. We all know how well that’s been working out, don’t we?

In all reality, the automakers are going to need to work out a better plan for their survival. We’ve already seen in a few short months how much the business aspect of automaking can change. Companies like Ford and GM seem to be holding on desperately, selling shares and manipulating their business plans. The layoffs and the salary reductions are certainly not indicators of a solid quarterly report.

The average Ford dealer and GM dealer will also suffer as a result of the top-heavy business plans, so one hopes that Obama’s meeting may spark some serious change in the direction American carmakers are heading. If not, workers at Ford and GM may be in for a long summer.

Things keep getting worse for Ford and its army of workers. With plant closures and scores of layoffs in the works, Ford stockholders must be thinking of jumping ship. The idea that the once all-powerful Ford Motor Co. could be looking death in the face if it continues on its current force will likely shake the American economic world and the automotive industry as a whole.

Something will happen and something will come along to bail Ford out, you can bet on that. But the lifeline, wherever it comes from, will not come in time for the latest round of contract employees who have been losing their jobs since the beginning of June.

Ford is aiming to dismiss some 15% of its salaried workforce by the first day of August, creating some serious internal change in a time of a shifting economic environment in the United States. The struggling market has resulted in an 11.2% sales decline for the automaker, with an unbalanced amount of the decline (14%) hitting the profitable truck line-up.

Ford started the dismissals early this month, letting go of 200 employees on contracts. The next round of dismissals will take place on Thursday, say insiders.

As August 1 approaches, the majority of the dismissals are still to come. Ford spokesman Mark Truby confirmed that the dismissals had spread to the white collar aspect of the workforce, noting that the cuts were among the company’s contracted employees.

Ford is also cutting many benefit programs, such as scholarships and tuition programs for its workers. They are forgoing the filling of additional positions and new positions, choosing instead to put the expansion of many new departments on hold until the economic tide changes for the company. This does not bode well for the average Ford employee, of course.

With Ford workers losing jobs and benefits, now might be the time for those who can afford it to head on down to a Ford dealer and help the company out of this tailspin. Take a look at a new Ford Focus, for instance, and see what one of the world’s finest automakers has to offer.

The bad news seems to follow Ford Motor Co. around and it doesn’t seem like the changes in stock or shareholder power is changing much by way of the company’s fortunes. The latest round of news from the automaker is that production is being significantly scaled back and that the launch of the car formerly known as “The Meal Ticket” is being postponed until further notice. That’s right, the beastly and unnecessary Ford F150 is being postponed.

Ford is apparently going to make even more cutbacks than it originally announced last month. The third and fourth quarter cuts will go beyond the original segments of SUVs and light trucks. The cuts, originally announced in May and June, will now see production sliced in North America by about 15% in the second quarter, 15-20% in the third quarter, and 2-8% in the final quarter. The cuts in the final quarter are intended to leave the company with a leg to stand on to resume proper production.

Along with the production cutbacks is the postponement of the launch of the Ford F150. The latest high volume vehicle from Ford, the F150 will be pushed back until late fall from its September launch date to allow the company room to breathe after the cutbacks in production.

The offset here is that Ford is ramping up production of some of its more fuel-efficient cars. More production time will be granted to the Ford Focus, the Ford Escape, and the Mercury Mariner, the latter two of which are compact SUVs, naturally.

Ford’s cutbacks will only make sense if the company returns to full production with a better business plan. Like many short-sighted American companies, Ford seems to believe that this is a trend and that the environmental concerns will simply blow over like a noxious gas. The fact of the matter is that the market shift is more significant than a simple reactionary charge from gas prices and global warming. It’s been in the wind for a long time and the shift to smaller cars is likely here to say.

Stop by your local Ford dealer today and tell them you want them to do more for the modern consumer.

Both Ford and General Motors may need to write down $1.1 billion and $1.5 billion respectively if U.S. auto credit continues to be pressured by a struggling automotive market.

The weakening United States used car market has created a growing problem for the financial arms of both companies and outstanding values of leased vehicles are likely to be lower than originally expected. This will impact the rates and benefits provided by the fiscal departments of Ford and GM, which may make the prospect of leasing a car in the United States a very different ballgame.

Traditional trucks have, obviously, been impacted the most. The consumer shift to more fuel-efficient vehicles has caused the market for trucks to falter, thus impacting the lease rates and overall financing issues experienced.

Surging oil prices also play a factor. By driving U.S. car markets to record lows and forcing Americans to avoid purchasing the gargantuan vehicles they know and love so well, the industry has shifted to accommodate the changing tide of time. Car companies that have not performed the shift so well are feeling the pinch instantaneously. There is no time for a learning curve. Ask Ford or GM.

Large sport utility vehicles and trucks have seen a significant price drop on the used market, as people are dumping their monsters off for a smaller beast in the form of a hybrid or a fuel-efficient car. Taking this into account, along with the gas prices and the shift in sales, any casual observer can see that companies without a fluid fiscal plan will be almost making things up as they go.

And such is the case for Ford and GM, as their financial arms struggle with the changing markets and with their top-brass refusal to market change effectively. As long as Ford and Ford dealer outlets continue to promote large trucks and SUVs primarily ahead of other smaller vehicles, they will continue to stumble in the markets and with customer sales. The day Ford and GM start being more responsive, on the other hand, is the day they can start looking up again.

As of late we’ve been following billionaire Kirk Kerkorian and his adventures with Ford Motor Company. According to reports early this morning, Kerkorian has increased his stake in the company and now holds 6.49% of stakes. This comes according to a regulatory filing.

Between April 21 and Thursday, Kerkorian and his Tracinda Corp. acquired 140.8 million shares in Ford Motor Company. This occurred through an extended series of stock purchases. At this point and time, it looks as though Kerkorian is going to back Ford through its turnaround phase and will even be there to share some of his business expertise.

Kerkorian may now propose business strategies and may explore infusions of additional capital to help Ford with its turnaround process. His input will be valuable for the automaker, whose struggles as of late have been well documented on this blog and elsewhere. Kerkorian’s input of more capital and his business plan adjustments should give Ford increased flexibility in implementing some of its plans for the future, say experts.

After a previous round of investments, Kerkorian owned 5.6% stake in Ford. After a following round, Kerkorian increased his stake to the aforementioned 6.49%. Kerkorian, who owns a majority stake in gaming company MGM, previously waged activist battles with both General Motors and Chrysler. In both cases, he failed to gain control over his target.

Kerkorian’s deal with Ford has been watched for months by analysts. He is up against some difficulty at this point, however, as he will be targeting a company owned by the prestigious Ford family, who owns 4% special voting stock in the company that controls 40% of the company’s voting rights. This will be a difficult roadblock for Kerkorian to overcome if his intentions are for majority interest in Ford.

At this point, however, Ford has continued to treat Kerkorian like a friendly investor. He has been greeted with a meeting a few days ago and has since expressed his desire to help Ford turn things around. Any potential majority owner would certainly be interested in turning things around, however, and Ford dealer outlets and stockholders across the country should watch this situation carefully.

American car giants General Motors and Ford signed contracts worth $1.8 billion with China for more exports. The deals were signed separately out of Washington on Monday.

The General Motors deal saw to it that GM will export $1 billion worth of component kits, machinery, equipment, and fully-assembled vehicles. The deal runs through 2010 and also includes the export of the luxury Cadillac brand to Shanghai General Motors.

As for the Ford deal, the car company will send more than 30,000 American-built vehicles to China and will supply additional parts, such as transmissions. These part components will be sent to Ford’s joint venture, Changan Ford Mazda Automobile Co. Ltd. The deal springs into place in 2009 and will be worth $800 million.

The two contracts were signed on the eve of the fourth round of Sino-U.S. Strategic Economic Dialogue, which is a biannual meeting aimed at discussing long-term strategic issues in bilateral trade relations.

The deals come as China is showing potential in its luxury car market with rising car ownership overseas. GM is determined to keep the lead position in the Chinese market, so the deal is important. GM, the world’s largest automaker, exported over 4.2 billion U.S. dollars worth of automobile products to China through its joint venture in the country over the past 11 years.

As for Ford, the deal is in place in order to increase market share in China. The products that will be sent over with diversify the products already available in the country, enabling a familiarity with Ford products to be built among the Chinese buyers. Ford is hoping to expand its market share just about anywhere right now, so the deal with China is an important one.

The visual of two American car company giants putting down major deals with China is probably controversial for many, but the world has been changing continuously and big business knows no borders. A Ford dealer in China is just as viable for the company as a Ford dealer locally.

As we well know by now, Ford is trying just about anything to hold on to its market share.

For the Michigan Truck Plant in Wayne, Michigan, this means a nine-month closure. The plant builds large sport utility vehicles and will be shut down for nine months while Ford execs figure out what to do. Decline for the mammoth vehicles has declined as the result of consumers finally gaining some sense, rising gas prices, and overwhelming concern for the environment. Okay, so only one of those reasons is true. You figure it out.

The Michigan Truck Plant makes the Lincoln Navigator, which is a favourite of rappers, and the equally gargantuan Ford Expedition. Seeing as how only millionaire hip hop performers can afford the beasts, the move to shut the factory down temporarily really isn’t surprising. But some are calling it a stay of execution, as many Ford factory workers are starting to feel the cold pinch of reality.

“We are seeing less demand in the large truck and large SUV market right now,” Ford spokesperson Mark Truby said, adding that the sky was blue and that people need oxygen to survive.

With the consumer move to smaller vehicles is obvious to most people with a brain, it seems that Ford’s top brass are still struggling with the idea that the beastly Super Duty and other trucks like it are actually only functional for those with houses to move or those in industry. The selling direction to soccer moms and others simply caught in on a fad and Ford was all too late to get off of the bandwagon. As most drivers without serious business needs change to smaller cars, Ford keeps imagining people are interesting in the huge trucks.

Even the local Ford dealer outlets are feeling the pinch, as less and less people are coming on the lots in search of large commission/large gas tank vehicles. Instead, smaller cars are flying off of the shelves, so to speak, and cars like the Focus are selling at a decent rate.