Ford (F) Plans To Cut To The Bone

Ford (F) had another bad month in November with US vehicle sales falling almost 10%. The double-digit monthly drops are now a bad habit.

The company has also indicated that it is not meeting its cost cutting goals. Revenue trouble and high costs are usually a poor mix.

The Wall Street Journal reports that Ford is now about $400 million a year shy of its expense goals. The paper writes "a combination of sick parts suppliers and rising costs for commodities such as steel has hindered those cost-cutting efforts in Ford’s purchasing departments."

Chrysler today announced that it would take about 12,000 more people out of its corporate headcount. The calculus of cutting costs in Detroit is now entering another brutal stage GM (GM) appears to have met most of its cost cutting goals and is happy with its new UAW contract. But, Ford and Chrysler are not holding their own on the sales front. That bleeding may not be staunched for some time.

Ford’s material costs per vehicle are higher than its direct competitors. So are its engineering costs. Of course, selling fewer cars does not help the numbers.

Ford will need another big round of cuts. The UAW is not going to want to hear that, but they have some leverage. Ford’s white collar workers and temporary staff don’t hold any cards.

Douglas A. McIntyre