Ford's Downsizing News: The "Final" Way Forward?

Last October, I wrote this post predicting one less major car company in Detroit by 2010. Yesterday's WSJ piece announcing Ford's "sweeping production cuts" seems to indicate the pace may have accelerated.

With all the hoopla surrounding GM's possible alliance with Nissan/Renault last month, the spotlight seemed to have left Ford. Now, with the former situation apparently in limbo, or dead, Ford's announcement of severe production curtailment puts it back in the limelight.

When I made my prediction last October, a full 10 months ago, I wasn't expecting the recent rise in oil and gasoline prices to cripple GM and Ford so quickly. I was anticipating something slower, more gradual. Perhaps an alliance or merger of Ford and GM a few years out, to consolidate the last US-based major auto producers.

With last week's announcement, though, I think Ford may soon no longer qualify as a "major" auto producer. Not quite the way I expected my prediction to come true, but close enough.

As Ford shrinks, it's reasonable to expect it to be picked up, either whole, or for the better brand names, by another, larger producer.

Between the "Way Forward" plan of some months ago, then the hiring of the outside consultant/investment banker recently, and now the sizable production cutbacks, one wonders how long Bill Ford is for the company which bears his name.

The article in the Wall Street Journal discusses how Ford should deal with the marketing of brands which it honestly doesn't expect to sell very well anymore, such as SUVs and pickup trucks. So, now we have sales of the most profitable autos slowing, no significant new models to take up the slack, a shrinking production base, and continued high gasoline prices probably modifying consumer behavior for longer than Ford has cash to ride out the unexpected changes.

Energy supply doesn't look to grow overnight, and demand isn't looking to slow markedly. Unless it's through a recession, which, again, is bad for the car companies.

It's now looking like, 10 months after my initial prediction of one less major auto company in Detroit by 2010, it may be more like 2008. A little less than 18 months is now probably time enough for either GM or Ford to merge, enter Chapter 11, or be acquired.