Ford chairman touts turnaround progress

John Porretto

Wednesday, Dec. 3, 2003 | 9:28 a.m.

DEARBORN, Mich. -- Ford Motor Co. Chairman and CEO Bill Ford Jr. says the company's turnaround is on track, as evidenced by an expected return to profitability this year, but he acknowledges there's still wasted expense at the world's No. 2 automaker.

In a wide-ranging interview Tuesday with automotive journalists at the automaker's global headquarters, Ford reiterated the company's expectations of earning about $1 a share, or roughly $1.8 billion, in 2003.

Next year, Ford said, when the automaker plans to beef up its aging car lineup, "I expect us to have a better year even than we did in '03."

The great-grandson of founder Henry Ford touted accomplishments since announcing a revitalization plan nearly two years ago: beating Wall Street profit estimates for seven straight quarters, improving the company's cash position by $9 billion and slashing costs by $3 billion this year alone.

Trying to rebound from a combined $6.4 billion in losses in 2001 and 2002, Ford has announced more than 7,700 job cuts worldwide in the past couple of months as part of its restructuring.

Bill Ford said he didn't expect any major staff reductions upcoming. But he emphasized the attack on expenses is far from over and has shifted from non-production costs to those involved with manufacturing vehicles.

"There's a lot of waste in a company this size," he said. "We see it everyday. What I'm trying to do is instill a mind-set in the company: If this were your company, would you really spend your money this way?"

Aggressive cost-cutting and strong results at Ford's finance arm helped the automaker narrow its loss to $25 million in the third quarter, but intense pricing pressure continued to plague automotive operations. Ford's worldwide automotive sector lost $609 million in the July-September period.

Bill Ford said a strengthening U.S. economy should boost domestic sales, and he's confident for a rebound in Ford's struggling European operation.

But not everyone is so assured.

Credit ratings agency Standard & Poor's last month lowered its long-term ratings on Ford to one notch above "junk" status, saying it expected only limited financial improvement in the next few years.

S&P cited intensifying competition in North America and abroad and moderating results at Ford Credit caused by a decline in its portfolio and expected higher interest rates.

The automaker has disputed S&P's decision, and the chief executive took issue again on Tuesday.

"We have the financial flexibility to do anything we choose," he said.

In October, the automaker announced an expansion of its China operations that will cost up to $1.5 billion and boost car production from 20,000 annually to 150,000.

Ford and its Chinese partner, Changan Automobile Group, plan to expand production at their factory in the western city of Chongqing and build a second car plant and a new engine plant.

Bill Ford said further expansion could be announced soon, but he wasn't specific.

In another initiative, Bill Ford said he's charged vice chairman Allan Gilmour with spearheading a national dialogue -- in Washington and among other automakers -- on the rising cost of health care for employees and retirees.

Ford said he wasn't "raising the banner" for a national single-payer health care plan, but "I think we need a dialogue in a national forum that we haven't had yet."

He gave no timeframe for the project, but he was fairly specific on one matter. Health care costs, he said, add an estimated $1,200 to the price of each new vehicle -- more than the cost for steel.

"We need a new approach, and I don't know what that approach is," he said. "But I do think the current model is broken, and it's driving investment decisions away from the U.S., and that's wrong."