GM, Ford In Different Lights

Anthony Fontanelle
February 4, 2007

General Motors Corp. and the Ford Motor Co. are both struggling to finally end their miserable melancholia in the automotive realm. They entertain swift strategies and viable solutions however the other is not so fortunate to realize its goals.

GM announced that it will make money in the last quarter after about 2 years of dismal sales. On the other hand, Ford posted its worst annual loss in its 103-year history in the industry. Despite the disparity in sales, the plight of these auto giants is basically the same. They got high labor costs and they are overly dependent on trucks and SUVs for profits. These are the least-appealing vehicles in the industry in present times. In fact, only few costumers are purchasing these vehicles.

On the other side of the scenario is the fast-rising Japanese automaker – the Toyota Motor Corp. Earlier, this automaker has announced that its global production increased by 10 per cent in 2006. The figure brought Toyota inches away from GM, the world’s largest automaker.

Analysts in the industry pointed out the essential differences between Ford and GM. According to them, GM went into the tank first and is ahead in the restructuring game. GM started its restructure plan in 2006 by getting more than 34,000 production workers to take buyouts or early retirement offers and reducing its structural costs by $9 billion annually.

GM also unleashed new product lines including pickup trucks and cars. These new products are entries to different segments in the industry and they are enjoying quite a warm welcome. GM ensured that these vehicles do not only offer quality auto parts – from EBC Greenstuff and wheels to engines – but also offer advanced auto technologies and styling as well. This is to broaden GM’s market at the same time be a leader in their respective segments.

Ford is following GM’s formula but is about a year behind, said Burnham Securities analyst David Healy. The automaker hired Alan Mulally late last year to guide the automaker in the recovery process. Mulally came from aerospace giant Boeing Co. His experience, wisdom and leadership learned in his previous company are expected to be applied to act as a saving grace for Ford. Mulally is confident about Ford’s new products and he has a positive vision that the automaker could get through bumpy roads to eventually settle on much safer ground.

Unfortunately, Rebecca Lindland, an auto analyst at Global Insight, an economic research and consulting company, said that the Dearborn-based company does not have the momentum that GM has. “The biggest difference is GM is on track. They have a mission. When I talk to the people there, when you see the products, you get a feeling of confidence and empowerment,” she said. “With Ford, all we hear about is conflict, turmoil, uncertainty. Internally this is at all levels.”

“I consider Ford to be in crisis and GM to be in transition,” said Gerald Meyers, a former chairman of American Motors Corp. who now teaches leadership at the University of Michigan. “The future is not clear yet at General Motors. There is a future. It’s just a matter of how much and when, and that’s a big step ahead of Ford.”

Meyers added, “Throughout its 103-year history, Ford has relied to a large degree on a single product to carry the company — from the Model T to the 1960s Mustang to the 1980s Taurus and recently the Explorer SUV and F-series pickups. With so many Asian and European competitors in the marketplace, Ford’s business model might not work anymore. Even if it did, he and others see no hits among Ford’s offerings.”

“I don’t think there’s anything coming down the pike that’s going to save the company near term,” said Bruce Clark, a senior vice president with Moody’s. “The answer to that question will be determined by how successful they implement their restructuring. They’ve given themselves a big cushion, but that doesn’t mean they don’t have problems.” The analysts concluded that Ford can turn itself around before it runs out of cash.

Source: Amazines.com