Ford To Revup Restructuring Plan

DETROIT, Sept 22 Tom Brown writing for Reuters reported that; with a renewed sense of urgency, Ford Motor Co. <F.N> looks set to step up the pace of its lagging turnaround effort after last year's $5.45 billion loss.

Company officials have said repeatedly that there was no "Plan B" for the restructuring announced in January at the world's second-largest automaker, and stressed that efforts to return it to profitability were on track.

But Ford President and Chief Operating Officer Nick Scheele spoke of the need for more aggressive cost-cutting measures in a speech at a Credit Suisse First Boston automotive conference in New York last week, even as he said the company was making progress toward the restructuring plan's goal of producing $7 billion a year in pretax profits by mid-decade.

"We've undertaken an intense review of all our costs and will be finding more efficiencies down the road," Scheele said.

"I've got total confidence that the (plan's) $1.5 billion mid-decade objective for overhead cost reduction is the very least that will be achieved," he said.

Scheele stopped short of laying out any specific steps toward more belt-tightening at Ford. Ford has already said it would cut 10 percent of its work force, or 35,000 jobs, as part of the turnaround effort.

But against a backdrop of mounting competitive pressures, and due perhaps to the protracted time frame before the benefits of the turnaround will be obvious to investors, Scheele said there was a growing sense of impatience among Ford executives.

"Let me just stress one very key message," Scheele told Wall Street analysts. "While pleased with our progress we are not satisfied with the way things stand," he said.

STOCK ADRIFT

Ford had an upbeat surprise for investors earlier this month, when it said it would report a modest third -quarter profit in the instead of the loss it had forecast earlier. Scheele also told reporters the company was beating its target for cutting vehicle production costs this year.

The good news however failed to boost Ford's shares, which are languishing at or below a 10-year low on the New York Stock Exchange. Ford's shares have underperformed those of General Motors Corp. <GM.N> by about 50 percent this year, and few analysts believe they will make a comeback any time soon.

The company's enormous pension liabilities, its high marketing costs such as interest-free loans and fierce competition from rivals at home and abroad form a catalog of reasons to be skeptical about Ford's ability to overcome some of the many challenges it faces,.

The 99-year-old automaker is also saddled with an aging vehicle lineup, and lack of new and attractive mass-market cars and trucks to bolster sales of its core "blue oval" brand.

"They're the weakest from a product standpoint," said Scott Hill, an analyst with Sanford C. Bernstein. "Clearly relative to both their domestic and foreign competitors, they're in the weakest position."

Perhaps most important of all, the Bush administration's advocacy of "regime change" in Iraq is adding to fears of a double-dip U.S. recession. If that occurs, Ford could suffer the most pain among Detroit's automakers given its lack of fresh products.

Scheele himself cited talk about a U.S.-led war on Baghdad when asked by journalists about the state of America's shaky economic recovery last week.

"MASSIVE STRUCTURAL PROBLEMS"

The jury is still out on how soon Ford might move to deepen the cuts outlined in its restructuring plan. Any further cuts could be difficult to implement, given restrictions on plant closures and blue-collar layoffs under Ford's contract with the United Auto Workers union.

But Saul Rubin, an analyst at UBS Warburg, who downgraded Ford from "hold" to "reduce" earlier this month, is among those who would champion further cuts. He has warned of risks to Ford's credit rating resulting from its finance arm, Ford Credit, which is one of the world's largest issuers of corporate debt.

"I think people are beginning to realize that Ford has some quite massive structural problems that they need to deal with.

"At the end of the day my own view is that it's inevitable at some point in the next one to two years, the sooner the better, there will have to be a massive restructuring. I think the restructuring plan they announced early in the year just doesn't go anywhere near far enough, and that's the ultimate problem here," Rubin said.

Scott Sprinzen, the top auto industry credit analyst at Standard & Poor's, said the rating agency has a negative outlook on Ford, whose jealously-guarded investment grade debt rating is now just three notches above junk status.

That outlook "speaks to the potential for a downgrade should the turnaround plan not lead to a significant benefit, such that the company's profitability is restored to a more adequate level," Sprinzen said.