Same Headline, Wrong Tactic, Again: Ford (F) To Cut Costs

Cars and Drivers

Published: June 14, 2008 5:53 am

Ford (F) is making the rounds of its employees and unions to tell them that the company will have to take out more costs. According to The Wall Street Journal, the word went out to "plant managers and representatives of organized labor on Friday that substantial reductions in overtime and additional buyouts of union workers were necessary to cut costs further."

Ford is making a grave mistake. At this point, the company is already in financial trouble. That is not likely to change. The brutal drop in US sales of SUVs and pick-ups happened so swiftly that it has ruined turnaround plans for the company and GM (GM). It is also severely hurting sales for importers like Toyota (TM) and Honda (HMC).

The cutting has to end somewhere. It will not bring back revenue, but it can insure that the company is never fixed. Dropping more manufacturing capacity, more marketing money, and more development capital make its almost certain that Ford is handicapped for years. It will lose its ability to design, bring to market, and advertise the products it needs to get back some of its market share.

Any company which has murdered its chances for future growth is no company at all.

Douglas A. McIntyre

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