CEO: Ford Should Consolidate Dealerships

Ford Chief Executive Alan Mulally said Wednesday the company's sweeping turnaround plan remained on track but the automaker needed to pursue consolidations within its dealership network to improve its fortunes.

Mulally, speaking to reporters at the New York International Auto Show, also suggested "our wages and benefits are not where they need to be to be competitive" in advance of significant contract talks this summer with the United Auto Workers.

"If there is not a competitive Ford, it's not going to be OK for anyone," Mulally said.

Ford Motor  Co., which has announced plans to shutter 16 plants, lost $12.7 billion last year and mortgaged its factories, brand names and other items to secure a $23.4 billion line of credit to fund its restructuring plan and cover losses expected until 2009.

In a speech opening the auto show, Mulally billed it "the biggest home improvement loan in the history of mankind."

Mulally said the company's restructuring was going pretty well, but described some steps the venerable automaker needs to take to make itself more competitive.

He cited "overcapacity in our distribution network" and said when that occurs, "you need to consolidate to match capacity to demand." The automaker has more than 4,000 dealerships across the nation, but Mulally declined to cite a target number of reductions.

Mulally said buyouts would not be a likely option, saying "there isn't enough money in the world to do something like that."

Mark Fields, Ford's president of the Americas, said the company had a "good dialogue" with dealers but asserted that "if you don't have a profitable and healthy distribution network, you're going to see unhappy customers" and lower resale values. "That will trash your brand, trash your product, trash your residuals," he said.

Richard Bazzy, owner of Shults Ford in the Pittsburgh area, recently consolidated with a competitor and said he was supportive of the company's approach. In his first full month following the consolidation, he had his best-selling March ever, even with 8,000 fewer cars and trucks, he said.

Dearborn, Mich.-based Ford announced last month that it was selling a controlling stake in Aston Martin in a deal valued at $925 million. The sale has spawned speculation among analysts that Ford may sell its Jaguar brand, but Mulally said Ford was "100 percent behind it."

Mulally said the ongoing restructuring plan represented a "tremendous upheaval for the employees of Ford," paring its work force from 100,000 to 65,000 to 70,000 workers.

Heading into major contract talks with the UAW this summer, Mulally said he "couldn't be more pleased about the relationship" with union leaders. He said the contract talks need to lead to an "economic element for competition."

His remarks followed comments last week from UAW President Ron Gettelfinger, who said the union had already made major concessions on retiree health care obligations. A message left Wednesday with a UAW spokesman was not immediately returned.

Ford's sales have remained sluggish. The automaker's March sales were down 9 percent, but Mulally noted good sales for its new mid-size cars, including the Ford Fusion, Mercury Milan and Lincoln MKZ, as well as its new Ford Edge and Lincoln MKX crossovers.

Mulally said the company was moving away from its past reliance upon trucks and sport utility vehicles and was stabilizing its market share to about 14 to 15 percent.

During the show, Ford showed off its new crossover vehicle, the Ford Flex, and some limited edition vehicles, including the Shelby GT500KR Mustang, to attract fans of custom vehicles.

Fields said the Flex, featuring three-row seating for seven passengers and unique attributes such as a small refrigerator, would be a "game-changer" in the crossover segment.

"Ford intends to be the defining crossover company this decade, just as we defined SUVs in the 1990s," Fields declared.

Ford has faced increasing competition from overseas rivals and may relinquish the No. 2 sales spot in the United States to Toyota Motor  Corp. Mulally, who studied Toyota's lean manufacturing system while a top executive at Boeing  Co., said he was "in awe" of Toyota and said, "if you're in manufacturing you should be because it is the machine that changed the world. They set the standard on making things that people really want."

Flashing a mischievous smile, Mulally recounted his recent meeting with President Bush at the White House, where he showed the president Ford's Edge HySeries with a plug-in hydrogen fuel cell.

Mulally said, "the most important thing is that I wanted the president to make sure that he plugged into the electricity and not into the hydrogen," he said to laughs. "I'm going to pay for that - this is all off the record, right?"

The former aviation executive also recounted his work at Ford dealerships around the country in the last few weeks to become more intimately involved in the car business. He described winning over a couple who were wary about trading in their F-Series pickup truck for a new one.

"The clincher was that I tossed in the floor mats," he said.