Mark Fields, EVP of Ford (F) was in line to become CEO. But, the job went to someone from Boeing (BA). Fields may have shown why yesterday.
The Ford exec made the comment that if an economic downturn began to threaten Ford’s financial goals for 2008 and 2009, it would simply cut costs further. "If we see weakness on the revenue side, we have to take up the slack on the cost side," he told The Wall Street Journal.
How would that work out? Ford is going to get all it can from the UAW in this round of negotiations. But, the union is not going to give more at the office if Ford’s sales continue to fall. Ford has already taken out a huge number of its white collar work force and cut its dividend.
If Ford could close more plants, it probably already would have. At some point plant closings will irreparably harm the company’s ability to increase production in an upturn.
Perhaps no one has mentioned to Ford that costs cannot be cut to zero. The Big Three have tried, and they are already probably as close as they can get.
If sales go badly in 2008 and 2009, Ford is just going to lose more money.
Douglas A. McIntyre
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