A Ford in the Road

May 25, 2006
By seadmin

We started the trading week with a major announcement from Ford Motor detailing some of their plans to find a "Way Forward." That’s the name they gave to their bad news. The restructuring of the nation’s second-largest auto manufacturer contains some very strong medicine and some disappointing news for a full one-fourth of their entire workforce.

About 30,000 Ford employees will receive pink slips in the next two years in an attempt to rein in expenses, mostly created by promises of big pensions that were made long before the Honda Odyssey outsold the Windstar and the Toyota Camry knocked the Taurus out of the number 1 selling spot.

This latest move shows just how hard the U.S. auto manufacturers have to work to return to profitability. It also demonstrates, with abundant clarity, the fact that even titans can get toppled. This shift didn’t happen overnight. The Japanese entered into the U.S. auto market nearly three decades ago. They started out with cars that everyone just giggled at: "Don’t look at it too long or you’ll dent it." But they were patient and they were diligent. They were great observers of demand and desire. And now Japan has walked away with the prize of the U.S. auto market as GM, Ford and Chrysler shrink in an attempt to eke out a profit.

This is a big problem for the U.S. economy. Our major manufacturers, the ones that employ tens if not hundreds of thousands of Americans are retrenching. But it’s worse than even a retrenchment because we are not just losing jobs, we are sending our money outside the country as we ever increase our trade deficit with each passing day.

What’s now looming on the horizon is the Geely -— if you haven’t heard of it, I promise you will. This is China’s emergence in the U.S. auto arena and it starts at under $10K. It’s my guess that it won’t take China three decades to get up to speed in the U.S. market.

China’s foray into the U.S. auto market will surely crowd an already fiercely competitive environment where the U.S. has clearly lost market share. The negative trend will simply continue.

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