Daniel Howes: Ford’s past & future

Ford poised for big changes

You can bet Ford Motor Co. will deliver three things when it reports its second-quarter financials Thursday morning:

First, the numbers will be ugly, analysts predict. The Dearborn automaker, whose sales of trucks and SUVs have withered under the weight of $4-a-gallon gas, will book fat so-called "impairment charges" for its under-utilized truck plants and further cut production of pickups and gas-guzzling SUVs even as it pushes to ramp up production of cars and crossovers.

Second, but arguably far more important, Ford will detail the most sweeping realignment to its product portfolio and U.S. production plans in at least a generation, say three sources familiar with the situation. That includes converting three truck plants to car production, as first reported by The Detroit News in early June, and speeding the introduction of Ford’s hot European-based cars and crossovers to fuel-conscious American buyers.

Michigan Truck in Wayne, whose Expedition and Navigator SUVs made it the engine of Ford profits earlier this decade, will be converted to production of Focus-based compact cars. Louisville Assembly, home of the Explorer SUV, and Cuautitlan Assembly in Mexico will be converted to car production, too, while Twin Cities Assembly in Minnesota will be granted a temporary reprieve from closure to continue building the small Ranger pickup.

Virtually all of Ford of Europe’s so-called B (compact) and C (small midsize) cars and crossovers will be integrated into Ford’s U.S. product portfolio over time, say two sources familiar with the situation, realizing CEO Alan Mulally’s vision to transform Ford into a single global entity modeled after rival Toyota Motor Corp.

And, finally, Ford will reaffirm its plans to make Mercury, the Blue Oval step-child whose death has been predicted repeatedly, a core piece of its North American brand triumvirate. Ford is expected to confirm it will continue integrating the three brands and consolidating their distribution networks — industry-speak for stronger dealers consuming weaker ones.

Little of this should be big news to folks who’ve been paying attention to the steady unspooling of Ford’s story the past 18 months or, more recently, its frantic response to the implosion of pickup and SUV sales amid record high oil prices, slumping consumer confidence, tightening credit and soaring commodity prices. They don’t have much choice.

However fierce the criticism of Mulally and his team, which has presided over a record slump in Ford stock and a stunning loss of U.S. market share, this is also true: The Balkanized Ford that helped define American automaking for five generations and pegged its fortunes to pickups and SUVs is poised to disappear — thankfully.

For much of the past decade, Ford’s leaders drove an outmoded, siloed corporate structure powered by big V-8s into an increasingly inter-connected world dominated by more globally aware companies. Mulally is using a real crisis to force a more tightly integrated Ford on its hidebound culture because that’s where the global auto market is headed, and Ford must change or die.

At least that’s the plan, assuming Mulally and his team have enough time — that is, cash — to execute it all in the face of brutal economic conditions they cannot control. For now, according to the thinking atop the Glass House, Ford has time because it has enough cash and a plan that aims to balance Ford’s product line with expected market demand.

Getting there is and will be ugly, painful and complicated. Ford is executing another round of layoffs aimed at cutting 15 percent of its salaried payroll in North America. And it is offering a third round of buyouts to hourly workers as it cuts production of vehicles like the thirsty Explorer SUV and profit-rich F-150 pickup.

There’s no guarantee the gambit will succeed. Nor is it certain that oil prices, which closed Tuesday at $127.95, won’t reverse course and start climbing back toward $150-a-barrel. Or that Mulally’s marketing whiz, Toyota veteran Jim Farley, will be able to engineer a sufficient revival of the Ford, Lincoln and Mercury brand cred.

But Ford is taking giant steps in the right direction — at last.