Ford CEO’s Turnaround Plan Isn’t Working

Petter Solberg crashes his Ford in Rally Argentina, 2000. Photo: Getty Images
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As we all wait for California’s AB5 to get signed into law today, other news also abounds in the world of cars and transportation. We have a lot to discuss about Ford, strikes, and Vietnam. All that and more in The Morning Shift for Wednesday, September 11, 2019.

1st Gear: Moody’s Downgrades Ford To Junk Status As It Doubts CEO

Remember when Ford cut all of its cars and everyone wondered how, exactly, this was going to turn around the company that had spent years watching Toyota, Tesla, and even General Motors get in on electrification without doing... almost anything at all? Yeah, so, that question is still hanging in the air and patience seems to be running out.

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Financial services company Moody’s demoted Ford down to junk status (not the first time) and it seems like CEO Jim Hackett’s turnaround-plan-that-isn’t sits at the center of things, as the Wall Street Journal reports.

The WSJ pointed to “weak cash generation and a yearslong restructuring plan that the auto maker is undertaking just as the car market softens globally,” as the cause for the downgrading, elaborating a bit on what this means for Ford:

Still, Moody’s said Ford has “a sound balance sheet and liquidity position from which to operate.” That is in contrast to the last time Ford’s investment rating was under pressure, in the mid-2000s, when Ford was running out of cash. The auto maker had $22.1 billion in cash as of June 30, according to a regulatory filing.

The ratings cut could increase borrowing costs and hurt profit particularly at Ford’s lending arm, Ford Motor Credit, which routinely taps debt markets, analysts have said. It also will ramp up pressure on Ford Chief Executive Jim Hackett to boost results from the restructuring and a broader clampdown on costs.

“Ford remains very confident in our plan and progress,“ Ford said. “As Moody’s notes, we are already addressing two of its primary concerns: operating inefficiency and our China business.”

This isn’t a surprise exactly, and I would not feel great about that if I was running Ford.

Hackett took the reins in 2017 after the previous CEO, Mark Fields, was fired amid falling sales, a tumbling stock price and a perceived failure to bring about the changes needed to meet the future of transportation. It’s probably fair to say Hackett hasn’t proved the turnaround artist Ford wanted him to be.

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2nd Gear: EV Fees May Be Higher Than What Gas Buyers Pay

America has a lot to be proud of in terms of electric cars. We have Tesla and we also have, well, uh, we have Tesla at least. But government support for EV ownership isn’t exactly our strong suit, as Consumer Reports details from new analysis:

Almost all states have gasoline taxes to help pay for transportation projects, and electric-vehicle owners avoid them because pure EVs don’t use gasoline. But many legislatures are looking at extra fees to make sure all vehicle owners pay for roads.

A new Consumer Reports analysis shows that of the 26 states that currently impose EV fees, 11 charge more than the amount owners of similar gas-powered cars pay in gas taxes, and three charge more than twice the amount. And the trend is potentially for more EV fees: Among the 12 states considering proposals, 10 would have fees greater than what a driver on average would pay in gas taxes. Seven of those states would ratchet up the fees over time to twice the amount.

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China, for instance, has historically been extremely supportive of EVs with big breaks to buyers for ownership. That may be a bit of a bubble at the moment, but is that something we, as a country, are willing to bet on?

3rd Gear: GM Recalls 3.4 Million Trucks

GM needs all the help it can get in the truck market, with the Silverado losing hard to Ford and Ram and Lincoln making Cadillac look bad. And now, oh, hm, this is not great.

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Automotive News reports that more than 3.4 million GM trucks and SUVs are getting recalled. At issue are brakes. Not ideal! Via AN:

General Motors is recalling 3.46 million U.S. pickup trucks and SUVs to address a vacuum pump issue that could make braking more difficult and increase the risk of a crash.

The recall covers certain Cadillac Escalade, Chevrolet Silverado, Chevrolet Suburban, Chevrolet Tahoe, GMC Sierra, and GMC Yukon vehicles from the 2014-18 model years. The amount of vacuum created by the vacuum pump may decrease over time, GM told the National Highway Traffic Safety Administration in documents posted Wednesday

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GM did not say how many injuries are linked to this, but NHTSA reported nine crashes and two injuries. GM did clarify, at least, the issue in specific, as AN notes:

GM said the vacuum assist pump, which is lubricated with engine oil that flows into the pump through a filter screen, can in some cases lose effectiveness over time, as debris such as oil sludge can accumulate on the filter screen.

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All of this sounds great.

4th Gear: Vietnam’s Car Company Is Learning From The Best

The Big Three (Chrysler in particular) are famous for leaning on workers to buy American, to not even buy any competitor’s cars at all, even banishing those drivers to distant parking lots.

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Anyway, Vietnamese carmaker VinFast is getting in on that same action, as the Financial Times reports:

Vingroup, Vietnam’s biggest private company, is leaning heavily on its own staff to buy or lease its newly launched cars, electric scooters and mobile phones as the real estate group pursues a bold push into heavy industry.

Senior managers’ bonuses are under threat if too few of their team members buy VinFast vehicles, while all staff must switch to the company’s Vsmart phones, according to leaked internal emails confirmed to the Financial Times by two employees.

Meanwhile, workers said VinFast would soon be the only brand of car permitted to park at company premises.

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I hadn’t thought of this as a kind of step into the first tier of carmakers, but I guess haughty attitude is key in this industry.

5th Gear: What It’s Like To Prep For A Strike

The Detroit Free Press has a nice story up on what it’s like for the UAW members currently in a bit of limbo while the UAW bargains with GM before Ford and Fiat Chrysler.

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Uncertainty is the key word for the way things are playing out here, as the Freep details:

The UAW, which represents nearly 150,000 hourly workers at Ford Motor Co., General Motors and FCA, has chosen to negotiate a new contract first with GM. That deal will serve as a template for the UAW’s later talks with the other two. In 2015, the UAW led with FCA. The union negotiates a new contract with the automakers every four years.

If the UAW leadership believes it must strike, members at all three companies have voted to authorize one. That doesn’t mean the union will strike, but no one really knows until the 11th hour.

“At one minute before midnight, if there’s not something negotiated, the union will call for an extension or a work stoppage,” said Tommy Wolikow, who works at GM’s Flint Assembly plant. “I am definitely stressed out about it. The last thing anybody wants is a strike. But sometimes that’s what needs to happen, and the membership is ready to do that.”

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Read the whole thing, as it has a lot of workers telling their stories of past strikes, what that cost them, and what they wonder about those strikes’ legacy and efficacy. It’s a good look in the strain all of this puts on workers, to whom the memories of being one minute away from walking out in 2015 are still fresh in their minds.

Reverse: The Greatest Racing Series In History Started Today In 1966

The nearly-unlimited series Can-Am had its first race today, in 1966, at Mont-Tremblant. it kicked of a few brief years of innovation in aerodynamics, turbocharging, and how much a car company can get away with spending on racing. A Lola T70 won it. More from this race recap from Grand Prix History:

Large-bore sports cars were already racing in the United States for a number of years before the inaugural race for the new Can-Am series that was held at Le Circuit Mont-Tremblant in St Jovite, Canada. Located 13 km south of the village of Mont-Tremblant, Quebec, Canada. The circuit in the located in the Laurentian Mountains, carved out of the rolling hillside the track is 4.26 km (2.65 mi) in length. The first two sections of the circuit were built in 1964 and extended by another mile in 1965. The extension featured long straights and included a small hill, nicknamed “the Hump”. Besides motorsports the area is famous for its winter sports.

Chaparral had been the car to beat for the last two years but the team was absent from St Jovite, their new cars, not yet ready. A crowd in access of 50,000 would see the cars that started the race on Sep 11th, 1966. Pole position was won by John Surtees driving his own Lola T70. Joining him on the 3-car front row were two red M1B McLarens driven by team owner Bruce McLaren and his co-driver Chris Amon.

St Jovite, coming out of turn 8 on the back straight has a small hump that could cause the car to go airborne which happened to Hugh Dibley, ironically an airline pilot when his Lola flew over a fence and into a spectator area. Miraculously no one was hurt and Dibley would henceforth be famous. Anyone doing a similar feat of catching air and flipping his car was referred to as doing a “Dibley”. Shaken but not stirred, Dibley was a non-starter in the race.

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Neutral: Have You Ever Walked Off The Line? What Was Your Story?

With the thought of a UAW walkout in mind, I wonder if any of you reading this have memories of auto walkouts in your own personal history. Maybe it was you who walked off the line at a supplier, or maybe you remember when your mother or father did some years ago. Your memories are welcome here.

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About the author

Raphael Orlove

Raphael Orlove is features editor for Jalopnik.