Ford looks abroad to help out at home / LJWorld.com

Business

By Tom Krisher and Dee-Ann Durbin - Associated Press Writers

July 25, 2008

Janet Hostetter/AP File Photo

New Ford Rangers stand parked in a lot in this April 13, 2006, file photo at the Twin Cities Ford Assembly Plant in St. Paul, Minn. Ford on Thursday said the plant will continue producing the Ranger small pickup through 2011, despite its worst-ever quarterly loss. Ranger sales are down just 4 percent in the first half of this year, versus 18 percent for the U.S. light truck market as a whole.

Dearborn, Mich. — Bleeding cash and with its very survival uncertain, Ford Motor Co., an icon of American automaking, will try to import some of its success from across the Atlantic.

Ford reported its worst-ever quarterly loss Thursday and announced plans to bring over six small, fuel-efficient cars it makes in Europe and start selling them in North America, where Ford is losing billions on its truck-heavy lineup.

The company burned through nearly $11 billion of its cash stockpile in the past year and reported a second-quarter loss of $8.7 billion.

Ford is trying to save itself by quickly morphing from a truck company into a car company. But the help from Europe won't arrive until 2010: It takes time to retool U.S. plants, and importing the cars directly is too costly.

Industry watchers wonder whether Ford has enough cash to survive until then.

"You have the gap before the plan can be fully executed," said Jeff Schuster, executive director of global forecasting for J.D. Power and Associates.

Ford has successfully sold cars in Europe for years, and it made billions of dollars selling trucks to Americans. But U.S. drivers have recoiled this year from high gas prices and bolted for smaller cars.

Most of the European models will be built in North America. The Fiesta subcompact will be built in Mexico, the European Focus will be built in Kentucky and Michigan, and the Transit Connect small van will be imported from Turkey.

Ford won't identify the other three. But analysts are betting on the Kuga, a small crossover vehicle, and the C-Max small van, both of built on the same underpinnings as the European Focus.

Past efforts by U.S. automakers to bring in European cars have flopped, but Ford CEO Alan Mulally said the U.S. market is vastly different today, with gas at $4 consumers cleaning showrooms out of small cars.

"We have seen this and the success of this in Europe and around the world," Mulally told reporters and industry analysts Thursday on a conference call.

James E. Schrager, clinical professor of entrepreneurship and strategy at the University of Chicago Graduate School of Business, said Mulally has been talking about bringing over European cars since he arrived at Ford in 2006 from Boeing Co. He said Mulally prepared well by mortgaging factories to arrange a $23.4 billion credit line shortly after taking over the company.

Ford gave no forecast for a return to black ink, but Chief Financial Officer Don Leclair said Ford had enough cash and credit to make it through the downtown. He said he didn't expect a recovery to start until 2010.

The company has about $38 billion in cash and credit lines, Leclair said, including more than $26 billion in cash.

The company has already announced plans to cut its salaried work force expenses by 15 percent, with 200 workers leaving the company as of June 30. Ford is also banking on selling a lot of the European vehicles in addition to domestic models, including a new Taurus due out next year and hybrid versions of the Fusion and Milan this fall.