It's been said that "you can't cut your way to profitability." This is especially true in product-related businesses like the auto industry. It doesn't matter how low your costs are if you don't have desirable products that people want to buy. Ford
CEO Alan Mullaly appears to understand this maxim. In spite of financial difficulties, so far Ford has not delayed any new product programs. The retooling of former truck factories to produce the Fiesta
, next generation Focus and other small and mid-sized cars is proceeding full speed ahead. Ford spokesman Alan Hall was asked at a meeting about adding extra production capacity for the new Fusion
in the event that sales take off after it's introduction. Hall said that the factories that are being re-tooled are being switched flexible manufacturing systems that will allow Ford to adjust quickly, much like Honda
has done recently.
This contrasts sharply with General Motors
which has gone into cash conservation mode and delayed virtually every new product
program except the Volt. Unfortunately, given GM's
dwindling cash reserves, they may have no other viable option. Delaying new products is not desirable, but if bills can't be paid, the products won't matter because no one will supply parts. The big question is how long will Ford be able to persist before it has to start cutting?