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Old 10-16-2003, 10:03 PM
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Ford: Sales, Marketing, and Financial News

Ford moves to regain engineering contol; suppliers lose clout


By JULIE ARMSTRONG | Automotive News

DETROIT - Ford Motor Co. is nearly finished hiring 250 engineers and redeploying 250 others to regain control over parts engineering and pricing - even as it eliminates other jobs and scours the company for savings.

The move reverses Ford's decade-long strategy of asking suppliers to engineer the parts. But Ford will not resume manufacturing those parts.

Vehicles developed under Ford's new engineering strategy will begin production next year.

Ford began to bolster its engineering staff about a year ago. It is one of several efforts to deal with quality problems that hampered the launches of the Ford Focus, Escape and Explorer.

The engineers will oversee nine major commodity groups.

"With a relatively small investment in engineering, we'll get a lot back in terms of functional performance, commercial performance and quality," says Will Boddie, 58, Ford's head of North America engineering.

Ford's shift is bad news for suppliers that want to engineer systems, which is more profitable than producing components. Boddie says Ford would reclaim some engineering work from Visteon Corp., Robert Bosch Corp., TRW Automotive, Johnson Controls Inc., Lear Corp. and other Tier 1 suppliers.

But spokeswomen at Johnson Controls and Lear say they are not aware of changes in their business with Ford. And a Visteon executive minimized the impact on his company.

"Ford brought in some additional engineering capability they felt they needed," says John Kill, Visteon's vice president of product development. "But if you look, for example, at climate control, we're still doing a significant portion of systems engineering for Ford."

A decade ago, Ford, General Motors and what was then Chrysler Corp. began asking suppliers to handle engineering and systems integration.

Spokesmen for GM and the Chrysler group say their companies are not changing course. Both companies say they did not go overboard on outsourcing and have more control over engineering.

"A lot of people felt that giving engineering to suppliers was going to be a cost savings," Boddie says. "There was also some feeling that suppliers knew more about the parts they manufactured than we did so they could design them more efficiently."

But Ford concluded a year and a half ago that it was wrong. It was paying too much and had given up too much control to the suppliers of the nine major commodity groups and as many as 69 other commodities.

"That supplier wants to use the parts that he manufactures. Therefore, he gets the profit," Boddie says. "The other components that he buys, he puts a markup on. When we looked at what was going on, we weren't necessarily getting the least expensive or best components. We're now buying all the components ourselves."

But Ford isn't taking over all engineering for those nine commodity groups.

"We're not exactly designing wheel cylinders for brakes or semiconductors on powertrain control modules," Boddie says. "If it's something absolutely critical to vehicle performance or if having control will give us a commercial or quality advantage, we want to do it."

Last year, Ford set up teams to review the case for engineering components. The reviews will be completed in two years.

Boddie says each team considers certain fundamental issues: Is Ford achieving the lowest cost? Does Ford have the right number of suppliers? How should Ford engineer the part?

It is not a foregone conclusion that Ford will bring all that work in-house. After reviewing window regulators, for example, Ford decided to let suppliers retain responsibility.

But it could end up cutting the number of window regulator suppliers it uses. Ford now has three or four suppliers, Boddie says.

Suppliers already are scrambling to replace lost business. For example, TRW Automotive is working to replace the brake business it will lose from Ford after current contracts expire.

"We really have no choice in the matter," says Sam Jenio, TRW's vice president of customer development for the Ford account. "It's a question of how you position yourself to get the most out of the new situation."

Boddie says no suppliers have complained to him. "I'm sure this has not been received completely positively by everybody involved," he says.

"On the other hand, I don't see any terribly negative relationships that have developed as a result of this."
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Old 10-16-2003, 10:08 PM
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I hope it works out for em.
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Old 10-17-2003, 05:55 AM
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I work for a supplier, and we just created a Controls Group (which i'm in). I think companies are relizing that they can't keep contracting to get things done.
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Old 10-19-2003, 05:43 PM
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Originally posted by Samer007
I work for a supplier, and we just created a Controls Group (which i'm in). I think companies are relizing that they can't keep contracting to get things done.
Interesting. Which contracter?
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Old 04-21-2004, 09:31 PM
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Ford Earnings Strong in Q1

Ford Earnings Strong in Q1 - - Ford beat the street and surprises with big Q1 profit. - - - by Joseph Szczesny (2004-04-21) - - Source: The Car Connection

Ford Motor Company doubled its profits in the first quarter with a surprisingly strong showing by its automotive operations, which were buoyed by profits from all corners of the globe including Europe and South America.

In addition, cost cutting, low interest rates and favorable tax changes in the United States also contributed to the profit of $1.95 billion or $1.07 per share in the first quarter on revenues of $44.7 billion. Last year, Ford earned $896 million or 49 cents per share on revenues of $41 billion in the first quarter.

William Clay Ford Jr., Ford's chairman and chief executive, said the results were a credit to the entire organization and indicated the company's turnaround plan was proving effective.

"Our plans is working and we are gaining momentum," Ford said. "Clearly we have challenges ahead, not the least of these is keeping up with the expectations that these results will create,'' the Ford CEO said in a conference call with analysts and reporters.

Beating the Street

The results reported Wednesday easily surpassed Wall Street predictions, which had expected the company to post a 44-cent- per-share profit.

"I wish we could just multiply our first-quarter results times four, but we can't,'' Bill Ford added.

Ford Motor Credit Company reported net income of $688 million in the first quarter of 2004, up $246 million from earnings of $442 million a year earlier. The improvement in earnings reflected smaller credit losses, higher prices for used vehicle auctioned off as they returned from leases and the positive impact of low interest rates, Ford Credit officials.

"We're making great progress on all our key business drivers, and you can see the results of that in record earnings this quarter," said Greg Smith, chairman and CEO.

"The entire Ford Credit team continues to provide superior service to Ford brands and Ford dealers, and I'm very proud of their efforts and of our results."

Ford's financial report also showed that the company's operations in both South American and Europe were profitable for the first time in several quarters thanks to a combination of cost reductions and stronger sales.

The profitability of Ford's European operations was something of a surprise because General Motors Corp. had reported the losses by its European operations had actually widened in the first three months of 2004.

The numbers

Worldwide automotive sales for the first quarter rose more than 13 percent, or $4.6 billion, to $38.8 billion. Worldwide vehicle-unit sales in the quarter were 1,788,000, up from 1,704,000 a year ago.

"We are very pleased with our first-quarter results across all our automotive and financial services operations," said Don Leclair, chief financial officer. "Our strong pipeline of new products gives us continued confidence that we are on the right track."

Consequently, Ford is raising its full-year earnings guidance from a range of $1.20 to $1.30 per share to a range of $1.50 to $1.60 per share from continuing operations, added Leclair. General Motors Corp. also reported that it was raising its earning outlook for 2004 because of the continuing improvement in economic conditions.

Ford, however, now expects to earn only 30 to 35 cents per share from continuing operations in the second quarter because of the several model changeovers planned for the second quarter. The company's Dearborn assembly plant will shut next month as production of the Mustang is shifted to Flat Rock and Ford also is building out at its Chicago assembly complex, which is being re-tooled to produce a new family of passenger cars and crossover vehicles. In addition, Ford also is going to be starting production at the brand new truck plant in the Rouge manufacturing complex in Dearborn.

Leclair, however, also noted that Ford has been able to improve the profit margin on every vehicle it sells by offering smaller incentives than key competitors. "We spent somewhat less on incentives than our closest competitors," Leclair said.

Ford also managed to reduce operating expenses by $600 million in the first three months of 2004.

In addition, Ford's product mix improved, which is heavily skewed towards trucks and SUVs, also improved, he said.

"Pricing was the largest component of the upside surprise," Rod Lache of an analyst with Deutsche Bank Securities Inc. said in a research note.

"The magnitude of the earnings surprise is breathtaking," added Lache, who noted Ford had predicted in January that its ability to cut costs this year was relatively limited.

The cuts in rebates and the planned retreat sales of vehicles to daily-rental fleets did hurt the company's market share, which fell from almost 20 percent to 18.7 percent.

Leclair, however, predicted the company's market share would recover as new vehicles such as the Ford Escape Hybrid, Ford Mustang and Land Rover LR3/Discovery begin to reach the market in the fourth quarter.

The only other adverse piece of new in Ford's first quarter financial report was the disclosure that the company's Premier Automotive Group, which consists of the Jaguar, Volvo, Land Rover and Aston Martin brands, has been hurt by the decline in the value of the dollar. The decline in the dollar has made building cars in Europe and exporting them to the U.S. more expensive, Leclair said. PAG swung to a pretax profit of $20 million in the first quarter from a loss of $88 million a year ago, Ford reported

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Old 04-21-2004, 09:36 PM
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GM is for sure on momentum. If Ford also starts gaining, the Germans and the Japanese are in trouble.
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Old 09-09-2004, 12:25 PM
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Show up for work:Ford cracking down on worker absenteeism to reduce soaring costs

Ford: Show up for work

Automaker, UAW aim to cut unauthorized worker absenteeism at Rouge, other plants

By Eric Mayne, and Brett Clanton / The Detroit News



DEARBORN — Ford Motor Co. and the United Auto Workers are cracking down on chronic absenteeism in an attempt to reduce soaring costs that are chipping away at the automaker’s bottom line.

Ford is targeting habitual no-shows with warning letters, local union bosses are urging line workers to shape up and plant managers are toughening disciplinary practices against employees who fail to show up on a whim.

Despite making major productivity strides in recent years, Detroit’s automakers have been unable to significantly reduce absenteeism, an enormously costly and disruptive problem.

Absenteeism among hourly workers in the automotive industry runs about 10 percent annually, about three times higher than in other industries, according to a study published this year by the Automotive Supplier Action Committee, a trade group. At some Big Three plants, absenteeism runs as high as 20 percent.

The figures include vacations, paid personal days off and medical leave, but the most crippling problem is employees who just skip work. Managers must scramble to find hundreds of replacements from pools of fill-in workers to perform tasks for which they may not be trained.

During last year’s contract talks, the UAW agreed to work with Ford, General Motors Corp. and DaimlerChrysler AG’s Chrysler Group to crack down on no-shows. Now at several Ford plants, a tough message is going out to workers.

At Ford’s truck factory in Louisville, Ky., where F-Series Super Duty pickups are produced, a union bulletin in June warned that Ford no longer would wait for a fifth incidence of truancy to mete out punishment.

“You could be subject to discipline on your very first absence,” the bulletin said.

A similar crackdown is expected to spread to the automaker’s nearby Louisville assembly plant, where Ford produces the Explorer and Mercury Mountaineer sport utility vehicles.

At Ford’s Rouge complex, a union update distributed to some workers last month laid out the issue in stark terms.

“The number of employees that are absent in this plant every day is a problem,” the bulletin said. “We have to come to work or we may not have a job to come to.”

Automakers and many UAW workers say there is no excuse for high absenteeism. Line workers receive up to five weeks of vacation and 17 paid holidays. When plants are idled for retooling or slow sales, workers also collect pay. “Sick days” are not provided and are supposed to come out of vacation time unless it’s a prolonged illness that requires a leave.

“I’ve never seen it this bad,” said Rufus McWilliams, a Ford employee for 31 years who now works in the paint shop at Rouge’s Dearborn Truck plant — home of the popular Rouge factory tour. “A lot of younger workers just don’t want to go by the schedule. It’s a different mind-set with some of these guys.”

Ford says absenteeism has remained fairly steady in recent years. But there’s no doubt the automaker is taking a tougher line against the relatively small number of workers who are creating most of the problem. Ford said 12 percent of hourly workers account for nearly half of all absenteeism.

“Management is focusing on absenteeism as one way to help the company,” said Ford spokeswoman Marcey Evans. “It’s not because we think it’s a bigger issue. We’re looking at it as waste in the system. Absenteeism causes a lot of waste.”

Floyd Brooks, a 26-year Ford veteran who feeds parts to main assembly lines at the Rouge truck plant, said absenteeism is nothing new. But Ford has beefed up enforcement by cracking down on bogus doctor notes and questioning suspicious illnesses.

“If you’re not actually real hurt,” he said, “they’re not going to buy it.”

Under a pilot program, Ford is drafting a warning letter intended for chronic offenders at various plants. Such warnings have been effective before, Evans said.

Ford, however, said there it will not factor in absenteeism in determining future production plans.

In an era of paper-thin auto profit margins, absenteeism presents an opportunity to wring out savings. Every percentage point of absenteeism in GM’s factories cost the company $125 million a year, Chrysler said the cost per percentage point is about $60 million year. The story is similar at Ford.

In Norfolk, Va., where Ford builds its popular F-150 pickup, total absenteeism has an annual price tag of $9 million, according to a newsletter distributed to employees in April.

Japanese automakers, which experience less absenteeism on average, employ a carrot-and-stick approach to encourage good attendance, rewarding workers with superior records. Honda Motor Co.’s Ohio plants offer bonuses of up to $2,600 annually, but workers who do not maintain a 98 percent attendance rate are put into counseling programs.

Toyota Motor Co.p.’s Georgetown, Ky., plant conducts drawings for employees with perfect attendance. The prizes: free vehicles.

The labor contract between Detroit automakers and the UAW protects workers stricken with personal crises such as substance abuse — a frequent cause of absenteeism — but can also prolong their problems, said Maryland psychologist Michael Walsh.

“From a social responsibility perspective, trying to deal with these folks is a good thing to do,” said Walsh, founder of the Walsh Group and an adviser on drug abuse policy to the Bush administration. “But from a business perspective, taking a hard line is more reasonable.”

During last year’s contract talks, Chrysler sought and won stricter disciplinary practices to lower absenteeism. The new contract reduced the limit of unexcused absences from 12 to eight before a worker gets an unpaid month off. Previously, it took nine no-shows to get a written warning.

Since the policy went into effect in December, the company has noticed a decline in absenteeism at its Warren truck plant, site of Dodge pickup production. But the reduction in absenteeism is attributed to the establishment of a third shift, which reduced overtime, said spokeswoman Mary Beth Halprin.

Burnout triggered by prolonged overtime is a prime cause of unauthorized absenteeism. Similarly, inexperience with the rigors of factory life can be overwhelming.

The work force at Ford’s Dearborn truck plant has risen by 300 to 2,400 so the automaker could accommodate production of its hot-selling F-150 pickup. But many of the plant’s new workers transferred from component plants where the pace of production is less taxing, said Jerry Sullivan, president of UAW Local 600.

“It’s going to take a while for people to get in the groove there,” Sullivan said, adding the union is working with Ford to smooth the transition for these workers.

Ford’s effort to reduce absenteeism comes at a time when its automotive operations are battling back.

While no one disputes that absenteeism in an issue, some UAW officials challenge the way rates are calculated. Ed Hay, UAW chairman at Ford’s Norfolk plant, said estimates that absenteeism at the plant costs the company $9 million a year are misleading.

“The company’s actual numbers are not an accurate measure of what’s going on,” Hay said. “I’ve looked at (the numbers) very closely. They take into account people’s calendar days off — for personal leave or vacation, as well as medical leaves of absence — and they roll it all into one ball called absenteeism.”



Cost of absenteeism


GM spends $125 million a year for every 1 percentage point change in its rate of absenteeism.

Ford spends an estimated $100 million for every percentage point change in its absenteeism rate.

At the Chrysler Group, the cost per percentage point is about $60 million.

Honda Motor Co. offers bonuses of up to $2,600 a year for workers with perfect attendance.

At Toyota, workers with perfect attendance are eligible for drawings to win a new vehicle.



Detroit News Staff Writer Christine Tierney contributed to this report. You can reach Eric Mayne at (313) 222-2443 or [email protected].

http://www.detnews.com/2004/autosins...a01-268458.htm
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Old 09-09-2004, 02:16 PM
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Hehehe, nice.
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Old 09-09-2004, 02:42 PM
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Must work for Toyota!
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Old 05-05-2005, 01:05 PM
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Ford: Financial Status news **Posts $1B Profit (page 4)**

S&P Cuts GM, Ford Credit Ratings to 'Junk' - - By John Porretto, AP Auto Writer - - Source: Yahoo.com

Standard & Poor's Ratings Services Cuts GM, Ford Corporate Credit Ratings to Junk Status


DETROIT (AP) -- Standard & Poor's Ratings Services cut its corporate credit ratings to junk status for both General Motors Corp. and Ford Motor Co., a decision that will increase borrowing costs and limit fund-raising options for the nation's two biggest automakers.

Shares of both companies fell 5 percent or more after the downgrades.

The credit agency said its downgrade of GM to non-investment-grade status reflects its conclusion that management's current strategies may not be effective in dealing with the automaker's competitive disadvantages, which include rising health care costs and billions of dollars in post-retirement liabilities.

It said its greatest immediate concern for Ford is the prospect that its overall sport utility vehicle business will not be able to generate the profitability it's enjoyed historically. Ford's financial performance has been heavily dependent on the earnings of its SUVs but sales of midsize and large SUVs have plummeted of late, S&P said.

The rating reductions to junk status is significant because some big bondholders are prohibited from buying junk bonds. As a result, the automakers may have to pay higher rates of interest to attract enough buyers for their bonds.

GM's consolidated debt as of March 31 was $291.8 billion, while Ford's outstanding consolidated debt totaled $161.3 billion.

S&P said the outlook was negative for both of the automakers.

GM shares dropped $1.64, or 5 percent, to $31.16 while Ford shares fell 62 cents, or 6.1 percent, to $9.54 in afternoon trading on the New York Stock Exchange.

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Old 05-05-2005, 01:06 PM
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Might be a good time to invest in GM/Ford bonds
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Old 05-05-2005, 01:07 PM
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This is a serious blow and will be another hit for company morale. I want to see them do well and turn around.
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Old 05-05-2005, 01:07 PM
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I was not expecting this to come so quickly. Everyone should know that this is global financial event. This is not just affecting GM and Ford but the whole global economic environment as we know it. This is huge news for the markets. Again, everyone was expecting it but no one was sure but everyone was not expecting it so quickly. Let's see what happens. The market is already started going down since the news came out.
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Old 05-05-2005, 01:08 PM
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Can someone say "fucked!!"
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Old 05-05-2005, 01:10 PM
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Originally Posted by gavriil
I was not expecting this to come so quickly. Everyone should know that this is global financial event. This is not just affecting GM and Ford but the whole global economic environment as we know it. This is huge news for the markets. Again, everyone was expecting it but no one was sure but everyone was not expecting it so quickly. Let's see what happens. The market is already started going down since the news came out.
Great point, this affects millions, suppliers, etc etc worldwide.
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Old 05-05-2005, 01:11 PM
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Market Pulse: Ford Motor disagrees with S&P debt downgrade - - By Carolyn Pritchard - - Source: biz.yahoo.com

SAN FRANCISCO (MarketWatch) -- Ford Motor on Thursday responded to the downgrade to junk status made to its debt ratings by Standard & Poor's by saying its disagrees with the agency's actions. "We're disappointed that it discounts our considerable liquidity and our access to diverse funding sources, as well as the recent successes of our new products," the automaker said in a statement. Ford said it clearly sees the competitive realities and challenges it faces, and said it is committed to addressing them through the acceleration of its business plans, which will include continued cost-cutting, as well as "essential investments" in its future. "While today's development presents a challenge, it doesn't shake our confidence in our future or our determination to achieve continued success as a global automaker," Ford said.
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Old 05-05-2005, 01:14 PM
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Originally Posted by AcuraGT-3
Great point, this affects millions, suppliers, etc etc worldwide.
It's not just that. It's the bearing that F and GM have on the markets across the planet due to their weight on the USA economy overall. A huge part of our GDP is because of F and GM. GM is a dow component, etc., etc.
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Old 05-05-2005, 01:15 PM
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Originally Posted by CGTSX2004
Can someone say "fucked!!"
I say exactly the opposite. THIS is the turning point for the USA auto manufacturing industry. Things had to get worse before they start getting better. This is the beginning of the bottom (there will be more to come) but it will be all up from sometime in the mid-term future.
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Old 05-05-2005, 01:19 PM
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The problem is that both these companies have been mismanaged and their products have been subpar, at best, lately, with only a couple of small exceptions.

There needs to be less concern with the executives at the top, brand image, and price. What both companies need are not halo cars (a la Ford GT) or limited production sportscars (GTO and Corvette) but more on the actual car market.

Better products, better materials, and better quality will naturally bring them out of the slump and allow them to compete with their ever improving foreign competition.

Why is it that we can see this but the Ford and GM big wigs can't?
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Old 05-05-2005, 01:22 PM
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Originally Posted by gavriil
I say exactly the opposite. THIS is the turning point for the USA auto manufacturing industry. Things had to get worse before they start getting better. This is the beginning of the bottom (there will be more to come) but it will be all up from sometime in the mid-term future.
I don't think this is the turning point. The turning point will be when both companies accept the fact that they're in the crapper and start to actually make changes.

Ford, obviously, is still in denial as they are contesting S&Ps downgrade, so until someone in management says "Damnit, they're right", we won't see any change.

It's the beginning of the process, but I'm not ready to call this rock bottom just yet.
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Old 05-05-2005, 01:25 PM
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By JOHN PORRETTO, AP Auto Writer 11 minutes ago

DETROIT - Standard & Poor's Ratings Services cut its corporate credit ratings to junk status for both General Motors Corp. and Ford Motor Co., a significant blow that will increase borrowing costs and limit fund-raising options for the nation's two biggest automakers.
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Shares of both companies fell 5 percent or more after the Thursday's downgrades, and the news sent the overall market lower.

The decision by one of the nation's most respected ratings agencies comes as the two iconic American automakers are losing market share at home to Asian automakers, seeing sales soften for their most profitable models and are facing enormous health care and post-retirement liabilities.

The credit ratings agency said its downgrade of GM's long-term rating below investment-grade status reflects its conclusion that management's current strategies may not be effective in dealing with the automaker's competitive disadvantages.

In a statement, GM said it was disappointed with S&P's decision but that it and its finance arm, GMAC, have adequate cash and liquidity to fund their operations "for the foreseeable future."

"Clearly, GM has many challenges in North America, but the company is moving aggressively to address these challenges," the company said.

It said its greatest immediate concern for Ford is the prospect that its sport utility vehicle business will not be able to generate the profitability it's enjoyed historically. Ford's financial performance has been heavily dependent on the earnings of its SUVs but sales of midsize and large SUVs have plummeted of late, S&P said.

The rating reductions are significant because some big bondholders such as some pension funds are prohibited from buying bonds that are considered by the major rating houses as speculative, or junk. Both GM and Ford had held credit ratings from S&P that were at the lowest level of the agency's investment grade spectrum. As a result of the new ratings, the automakers may have to pay higher rates of interest to attract enough buyers for their bonds.

GM's consolidated debt as of March 31 was $291.8 billion, while Ford's outstanding consolidated debt totaled $161.3 billion.

GM said it had $19.8 billion in cash at the end of the first quarter, and GMAC had $18.5 billion in cash and securities.

S&P said the outlook was negative for both of the automakers.

The announcement came only a day after billionaire Kirk Kerkorian jolted GM shares higher by offering to invest nearly $870 million in the automaker. Kerkorian's Tracinda Corp. offered to pay $868 million for a nearly 5 percent stake, which would boost Tracinda's holdings to about 9 percent and make Kerkorian one of GM's largest shareholders.

GM shares fell to a 10-year low in April after the company reported a $1.1 billion loss for the first quarter. Its sales have slumped in recent months, including those of its most profitable sport utility vehicles, as gasoline prices marched higher. And while GM executives complain about huge increases in medical insurance costs, the
United Auto Workers union has said it's not interested in reopening contract talks before 2007 to address those expenses.

GM shares dropped $1.69, or 5.2 percent, to $31.11 while Ford shares fell 62 cents, or 6.1 percent, to $9.54 in afternoon trading on the
New York Stock Exchange.
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Old 05-05-2005, 01:25 PM
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Originally Posted by gavriil
I say exactly the opposite. THIS is the turning point for the USA auto manufacturing industry. Things had to get worse before they start getting better. This is the beginning of the bottom (there will be more to come) but it will be all up from sometime in the mid-term future.
ya, this is why i think Ford/GM bonds would be a great investment right now. Not without risk of course.
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Old 05-05-2005, 01:25 PM
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...and the "great" news continues.

....but there is a light at the end of the tunnel: Did you see the new face-lift on the Explorer?!?!? .....forget it Ford & GM are screwed!
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Old 05-05-2005, 02:00 PM
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Originally Posted by gavriil
I say exactly the opposite. THIS is the turning point for the USA auto manufacturing industry. Things had to get worse before they start getting better. This is the beginning of the bottom (there will be more to come) but it will be all up from sometime in the mid-term future.

I think this is the beginning of the turning point, but GM and Ford are still going to be in free fall for a while. It will be a while before we hear any consistent good news about them.
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Old 05-05-2005, 02:47 PM
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I say the turning point comes after they emerge from bankruptcy when they reorganize and gain enough bargaining power to renegotiate their labor contracts.
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Old 05-06-2005, 10:54 AM
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Originally Posted by CGTSX2004
I don't think this is the turning point. The turning point will be when both companies accept the fact that they're in the crapper and start to actually make changes.

.
That's why I called this the beginning of the bottom. Because the financial situation will force the comapnies to "accept the fact that they're in the crapper and start to actually make changes".
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Old 05-06-2005, 12:32 PM
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GM, Ford downgrades may cause bond index whiplash - - Reuters / May 05, 2005 - - Source: Autmotive News

NEW YORK -- The downgrades of General Motors and Ford Motor Co. to junk status by Standard & Poor's will force investors to sell bonds of the two largest U.S. automakers, as the debt falls out of the most widely followed U.S. bond index.

Paradoxically, though, those bonds might soon jump right back into the index and prompt renewed buying.

Lehman Brothers in January changed its criteria for inclusion in its U.S. Aggregate Bond Index, which tracks investment-grade credits. It decided to use the middle rating from the three top U.S. credit rating agencies -- S&P, Moody's Investors Service and Fitch Ratings -- to determine what to include.

But that change doesn't take effect until July 1. Under the current guidelines, Lehman uses the lower rating from S&P and Moody's. The latter still rates the bonds investment-grade.

This means the bonds will fall out of the index, forcing sales by many portfolio managers who are not allowed to own junk bonds. But it also means the bonds will jump back in on July 1, if Moody's and Fitch preserve their low investment grades for the automakers.

"The timing is an anomaly, but it's not as though it wasn't in investors' war-game scenarios," said Glenn Reynolds, chief executive of CreditSights Inc., an independent bond and stock research service. "One thing about a rules-based index is you have to be very transparent, clear and objective, so everyone can plan their portfolio decisions accordingly."

Indeed, managers had already sold many auto bonds. GM's 8.375 percent bonds maturing in 2033 closed Wednesday at 80 cents on the dollar, yielding 10.62 percent, according to NASD bond pricing service TRACE. They fell another 6 cents on the dollar after the S&P downgrade.

Nick Gendron, who oversees Lehman's index offerings, was not immediately available for comment.

S&P downgraded GM's senior unsecured debt two notches to "BB" from "BBB-minus," and Ford's debt one notch to "BB-plus" from "BBB-minus." It expressed skepticism that management at either company will successfully address such challenges such as falling market share, high health-care and pension costs, and aging or uncompetitive products.

Ford and GM are the second- and third-largest issuers in Lehman's U.S. Credit Index, after General Electric Co.

When Lehman changed its index criteria, many investors and analysts saw the move as a reprieve of sorts for GM, whose ratings were considered more precarious. It was also considered a status enhancement for Fitch, the smallest of the big agencies.

Reynolds said some GM and Ford bond investors who otherwise would not own junk bonds will sit tight.

He said only a "distinct minority" are obligated to sell upon a downgrade to junk, while others are simply guided by the Lehman index, and still others need not sell at all.

"Insurance companies, for example, are very rarely forced sellers in the wake of a downgrade," he said.
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Old 05-06-2005, 07:34 PM
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Wouldn't be surprised if the turning point was when Toyota takes over the number 1 spot, losing money is going to force GM's hand to downsize and regroup. Eventually the products with turn around since they are putting forth effort and the company will run at number 2 in the Us behind Toyota who has been at full steam since the beginning, unless they(Toyota) falter in the future. Don't think Ford's future is as optimistic.
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Old 07-20-2005, 09:35 PM
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Ford profit drops 19 percent during 2nd quarter

Ford profit drops 19 percent - - Auto division posts pretax loss of $571 million - - Reuters / July 19, 2005 - - Source: Automotive News

DETROIT -- Ford Motor Co., hurt by a steep loss in its North American automotive operations, on Tuesday reported a 19 percent drop in second-quarter profits.

The second-largest U.S. automaker also warned that it expected its global automotive business to post a loss this year and said it would give no more quarterly earnings forecasts, although it affirmed its full-year outlook.

Ford Chief Financial Officer Don Leclair said in a conference call that there was too much volatility in the market to make accurate near-term forecasts. Crosstown rival General Motors in April withdrew its forecasts for 2005 after posting a $1.1 billion loss in the first quarter.

Ford and GM have seen their margins squeezed by hypercompetition in the U.S. vehicle market and by this year's dramatic slowdown in sales of their profitable mid- and large-sized sport-utility vehicles amid high gasoline prices. They are also struggling with higher costs and a cut in their credit ratings to "junk" status this year.

In the second quarter, Ford's finance arm continued to carry results, while its auto operations posted a loss.

Shares of Ford see-sawed between positive and negative territory in Tuesday's trading even though the second-quarter earnings were substantially higher than analysts expected. Ford has beaten Wall Street consensus for 14 straight quarters.

Goldman Sachs analyst Robert Barry said the quality of earnings was poor.

"The better than anticipated result is due largely to tax and interest-related items rather than operational strength," Barry said in a note to clients.

The North American "operating performance was below our expectations and remains our primary concern," he said.

Deutsche Bank analyst Rod Lache said interest-related income boosted Ford's overall earnings per share by 20 cents.

"On a segment level, Ford clearly underperformed in their core auto business," he said in a note to clients.

Ford's second-quarter net income fell to $946 million, or 47 cents a share, from $1.17 billion, or 57 cents a share, a year earlier.

Ford said other automotive financial results, primarily interest income related to tax refunds, contributed $398 million to second quarter earnings.

Ford said charges related to a bailout of former parts subsidiary Visteon Corp. and job reduction programs reduced earnings per share by 18 cents. But the charges were fully offset by a one-time adjustment in the company's taxes.

DRAMATIC SLOWDOWN

Lower earnings at Ford follow a 13-month decline in the company's U.S. vehicle sales. Following the lead of GM, it recently launched a hefty discount program to win back market share and reduce inventories of unsold vehicles. The discounts appear to be boosting Ford's sales for July, Leclair said.

He also said Ford is working to accelerate cost cuts and suggested that the automaker is also looking at ways to reduce excess production capacity.

Revenue of Dearborn, Michigan-based Ford rose to $44.54 billion in the second quarter from $42.87 billion a year ago.

Ford's auto operations posted a loss of $245 million before taxes and excluding charges, while its finance arm contributed a net profit of $740 million.

During the second quarter, Ford's key North American vehicle operations posted a loss of $1.21 billion before taxes and including special charges, compared with a pretax profit of $334 million a year ago. The company blamed lower sales and higher costs for the drop.
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Old 07-20-2005, 09:36 PM
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1 billion lost by GM, half a billion by Ford. Excellent. Steady as she goes ladies and gentlemen.

Pathetic!
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Old 07-21-2005, 08:36 PM
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damn....
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Old 07-21-2005, 08:37 PM
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it's like being in the OR with a trauma case, just when you think you are about done something else goes wrong. MORE BLOOD! MORE BLOOD....NOWW!!!!!!!!!
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Old 07-21-2005, 08:47 PM
  #33  
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Next for GM -- Buy One, Get One Free?: Doron Levin (Correct)
2005-07-15 13:42 (New York)


(Corrects punctuation in 16th paragraph. Commentary. Doron
Levin is a Bloomberg News columnist. The opinions expressed are
his own.)

By Doron Levin
July 15 (Bloomberg) -- The Motor City got a much-needed
lift when last month's sales total confirmed that General Motors
Corp.'s ``Employee Discount for Everyone'' promotion had yielded
results.
By offering buyers the same discount that GM workers
receive on new-vehicle purchases, GM managed to boost June sales
a stunning 47 percent over the same month a year earlier. That,
in turn, raised its U.S. market share 7 percentage points over
the first five months of 2005.
Any celebration is a welcome diversion from what ails the
Detroit-based automakers, which don't seem to be able to build
vehicles that consumers want to buy unless they get ever-bigger
discounts. So this year it's employee price breaks for everyone.
What's in store for next summer: buy one, get one free?
The U.S. auto industry has been waging a losing battle
against Asian and European competitors, ceding sliver after
sliver of the domestic market while spending unprecedented sums
on discounts. Because of the share losses, GM, the world's
biggest automaker, and No. 2 Ford Motor Co. are faced once more
with the need to eliminate jobs and close factories.
June's sale of more than half a million GM vehicles -- at
an average discount of $4,458 per vehicle, according to
Woodcliff, New Jersey-based Autodata Corp. -- shrank GM's
inventory to a manageable size from its previous, swollen level.

Avoiding Closings, Layoffs

Notwithstanding the profit-eroding impact the discounts
will have on second-quarter financial results, GM's June sales
numbers were a relief. A poor response from consumers would have
necessitated immediate, temporary factory shutdowns and layoffs.
Ford and DaimlerChrysler AG's Chrysler Group were compelled
to match GM's discounts with similar programs. They, too, expect
to clear their inventories to make room for the start of model-
year 2006 production this summer.
Chrysler even recruited 80-year-old retired chief executive
Lee Iacocca -- a personality by this time almost unknown to
today's younger car buyers -- to pitch the employee discount in
television commercials.
All three Detroit automakers excluded a few hot-selling
models that consumers will buy without big discounts, notably
Ford's Mustang and Chrysler's 300. If Detroit could build more
desirable cars and trucks like these the companies wouldn't be
forced to resort to the discounts in the first place.
That gets to the heart of Detroit's troubles: Figuring out
what consumers want and how to build those vehicles cheaply
enough and in the right numbers.

Getting Hooked

Detroit has instead hooked consumers on discounts. Worse,
many domestic models now sell as low-price and unprofitable
alternatives to their Japanese counterparts.
The big summer sale likely spurred purchases that probably
would have occurred in August and September anyway. If that's
the case, the U.S. industry may still wind up with a loss in
market share for the year. Through June, Detroit's share was a
collective 58.3 percent, down from 59 percent last year at this
time.
Honda Motor Co., Toyota Motor Corp. and other competitors
so far say that they don't need to match Detroit's promotions to
meet their sales goals. Nor do they have vast lots of unsold
cars.
Toyota's average discount in June was only $1,090,
according to Autodata, while Honda's was $1,248.

`For Employees Only'

Honda says it doesn't give consumers cash rebates, but will
offer subsidized leases or grant dealers the right to lower the
retail price. ``We have employee discounts,'' said Andy Boyd, a
Honda spokesman. ``For employees only.''
Boyd said that GM customers aren't typically shopping for
Hondas, though ``that kind of promotional activity puts
(pricing) pressure on the whole industry.'' He said this June
was Honda's best ever in terms of U.S. sales.
Honda's market share this year in the U.S. is unchanged at
about 8.2 percent. That doesn't seem to bother senior
management.
``Our president, Mr. Fukui, has said we have to pay
attention to profitability, to customer satisfaction, to
quality, rather than get caught in thinking how to drive
sales,'' Boyd said.
Takeo Fukui, Honda's chief executive officer, made his
remarks during a visit to the U.S. two weeks ago to view a
motorcycle race in California. Earlier in his career he
supervised Honda's motorcycle racing program.
Back in Detroit, GM executives have been meeting for the
past three months with leaders of the United Auto Workers union
in an effort to reach an understanding that would allow GM to
reduce health-care costs for workers and retirees. The outcome
will bear on how deeply GM -- with its weakening balance sheet
and junk rating on its bonds -- may have to cut plant capacity
and its labor force.
Unless the automakers and their union reach some kind of
accord that alters the industry landscape, Detroit will be hard
pressed to find a way to avoid another year-end sales
extravaganza.
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Old 08-24-2005, 06:22 PM
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Moody's cuts Ford, GM debt rating to junk status

Moody's cuts Ford, GM debt rating to junk status - - Reuters / August 24, 2005 - - Source: Automotive News

NEW YORK -- Moody's Investors Service on Wednesday cut General Motors' and Ford Motor Co.'s debt ratings to junk status.

For GM, Moody's cited continued operating losses in North America and challenges to restructuring for long-term viability. It also cut GM's finance arm, General Motors Acceptance Corp., to junk status.

The cuts affect about $170 billion of outstanding debt, Moody's said.

Moody's was the last of the three major rating services to cut GM to junk status.

Moody's cut GM's senior unsecured debt rating to "Ba2" from "Baa3," and GMAC's senior unsecured rating to "Ba1" from "Baa2." The outlook is negative on the new ratings.

Moody's also cut GM's short-term rating to "Not Prime" from "Prime-3."

Ford Motor Credit still investment-grade

Moody's move on Ford's debt was the second cut to junk for the automaker as it battles global competition and rising costs.

Moody's also cut its ratings on Ford's finance arm but left them at investment-grade status. Most of Ford's debt is held at its finance arm, Ford Motor Credit Co.

Ford and its finance arm are among the biggest debt issuers in the United States, with about $158 billion of debt as of June 30.

Strong competition, soaring health care and raw material costs and a slide in U.S. market share have forced the second-largest U.S. automaker to slash its profit forecast twice this year.

Ford's financial performance is expected to remain weak because it will take time to improve the company's uncompetitive cost structure in North America, Moody's said in a statement.

"Although the decision Moody's made today is disappointing, it doesn't shake our determination to achieve continued success as a global automaker," Ford CFO Don Leclair said in a statement.

Moody's cut Ford's long-term credit ratings by one notch to "Ba1," the highest junk rating, from "Baa3." It cut the long-term ratings on Ford Motor Credit by one notch to "Baa3," the lowest investment-grade rating, from "Baa2." The rating outlook for both companies is negative, meaning another rating cut is likely over the next 12 to 18 months.

In May, rating agency Standard & Poor's cut Ford and Ford Credit to junk status, citing declining sales of SUVs and trucks.
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Old 08-24-2005, 06:37 PM
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I don't really understand finanacial talk. Could someone please explain what being cut to "junk status" means for the company and how it affects investors?
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Old 08-24-2005, 06:44 PM
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The most important concept in the market is the concept of risk-return. The idea is that the making riskier investments produce higher potential returns. For example, a junk bond might be paying 10% interest when a grade AAA bond might be paying 3%, but the risk you take when purchasing the junk bond is that the issuing company might default on it, causing the entire investment to be lost. The market prices in risk... that is why the junk bond has such a high interest rate, because nobody would buy it otherwise.
In a nutshell (debt/bonds) are rated AAA-junk.
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Old 08-24-2005, 06:47 PM
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Originally Posted by Moog-Type-S
In a nutshell (debt/bonds) are rated AAA-junk.
Okay, I understand now. That wasn't that hard.
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Old 08-24-2005, 09:44 PM
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The lower the rating of a given company's bond, the more expensive for that company to borrow money. However, when we're talking junk status, many institutions are prohibited from buying at that status so it's not hard and expensive to borrow money.
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Old 08-26-2005, 06:18 PM
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means that if it's rated junk it's rated B or lower it's a higher risk and usually would take longer for you to see a ROI (return on investment) if you invested in bonds with that company... in other words GM's credit rating is starting to slip b/c they can't pay back their creditors as fast as they used to laymen's terms
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Old 10-10-2005, 11:40 PM
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Executive Resignations at Ford

Two Ford Executives Resign
Before Expected Revamp
Of North American Group

By JOSEPH B. WHITE
Staff Reporter of THE WALL STREET JOURNAL
October 11, 2005; Page A3

Ford Motor Co. Chairman and Chief Executive William Clay Ford Jr. and his new head of American operations, Mark Fields, are planning another shake-up of the auto maker's North American management, and at least two vice presidents have decided to leave in advance.

Ford said yesterday that Phil Martens, group vice president for product creation for North America, and Matt DeMars, vice president for North American vehicle operations, intend to leave the company.

The departures and impending management shuffle are the latest indication of Mr. Ford's impatience with the faltering turnaround in Ford's North American operations, which had a loss of $907 million before taxes in the second quarter.

Mr. Ford last month abruptly named Mr. Fields, former head of Ford's European and luxury-car operations, to succeed Greg Smith as executive vice president in charge of Ford's Americas operations, including North America. He subsequently signaled that Ford would soon roll out more-aggressive plans to cut costs in North America, including deeper staff cuts and factory closings.

Mr. Ford said during a news conference last month that some announcements could come as soon as Oct. 20, when Ford is expected to release third-quarter results. He also said Mr. Fields had 100 days to produce his own plans for North America.

A Ford spokesman said yesterday that Mr. Ford and Mr. Fields have made an assessment of the management team in the Americas, and that they expect to review "certain leadership changes with our board in the very near future."

Mr. Fields, in a recent message to employees, said one of his first priorities will be "getting the right people working together as a team."

The Ford spokesman said the company "received correspondence" from Mr. Martens and Mr. DeMars indicating they planned to leave the company.


Mr. Martens said in an interview that both he and Mr. DeMars are joining automotive supplier Plastech Engineered Products Inc., based in Dearborn. Mr. Martens said he will be president and chief operating officer of the company. He said both he and Mr. DeMars were recruited by Plastech's chief executive, Julie Brown, separately. Mr. Martens said he left Ford on good terms.

Mr. Martens, 45 years old, worked for Mr. Fields earlier this decade at Mazda Motor Corp., Ford's Japanese affiliate. Since taking full control of Ford's North American product development in 2003, Mr. Martens has been a high-profile member of Ford's executive team. He drove a strategy of spinning a variety of new models, including sedans and crossover wagons, for the Ford, Lincoln and Mercury brands from the basic underpinnings of the Mazda 6 sedan.

Mr. DeMars, 48, was appointed head of Ford's North American vehicle operations, responsible for 19 assembly plants and eight stamping plants, in November 2003. Prior to that, Mr. DeMars was executive director for pickup-truck and commercial platforms, and he led the launch of the redesigned 2004 F-150 pickup.


Write to Joseph B. White at [email protected]3

URL for this article:
http://online.wsj.com/article/SB112896655055064599.html


Hyperlinks in this Article:
(1) http://online.wsj.com/article/SB112731420612947359.html
(2) http://online.wsj.com/article/SB112620006537635393.html
(3) mailto:[email protected]


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