TRAVERSE CITY, Mich. | Despite the headwinds of a slumping U.S. economy, tight credit, high gasoline prices and declining home values, Ford Motor Co.'s top American executive said he is confident the company has enough cash to weather losses and make a profit again.
But Mark Fields, Ford's president of the Americas, told reporters at a dinner last week that there will be a lag time before the company can start making profits on the small cars U.S. drivers are now craving.
And although sales of pickup trucks, Ford's old profit center, are starting to improve as gas prices moderate, Fields said the company isn't banking on that. Instead the company is planning to make money on new global models it will bring to the U.S. from Europe starting in 2010, he said.
"We continue to evaluate our liquidity and our alternatives to improve the balance sheet," Fields said. "We'll continue to look at that to make sure that we have adequate liquidity to successfully implement this very significant kind of transformation."
When asked if Ford has the money to cover losses until it starts making money again, Fields said, "That is our intent, but also I don't want to walk away from the fact that there's lots of variables hitting this business every day.
"Our role is to make sure that we're as flexible as we can be to kind of take those things coming at us, both the good and the bad."
Ford burned through nearly $11 billion of its cash stockpile in the past year and reported a second-quarter loss of $8.7 billion. The automaker has about $38 billion in cash and credit lines, including more than $26 billion in cash. It burned through more than $2 billion in the second quarter alone, and it has lost more than $15 billion in the past two years.
But Fields said the company has taken steps to match its factory capacity to demand for its products, shrinking its work force by thousands. It also will save money by designing, engineering and manufacturing its models worldwide instead of developing different vehicles for different regions.
The company has abandoned an earlier forecast that it would return to profitability in 2009 and now has given no forecast. Fields said Ford won't be able to until the U.S. economy stabilizes.
He also conceded that the company has a long way to go to convince consumers that it's making world-class cars again and take buyers from other automakers after focusing for years on trucks and sport utility vehicles.
"What we really need to do is tell people that we're back in the car business," he said.
The Ford Fusion started that, and the new Taurus sedan continued it, Fields said. Coming are a Fiesta subcompact and the European Focus in two years.
The European Focus and the one sold in North America have only 20 percent of their parts in common, but that will change when the European car arrives in the U.S., Fields said in a speech last week. Ford will cut manufacturing and engineering expenses by increasing the number of vehicles with common frames and parts. Within five years, more than 10 body styles will be built globally on the European Focus underpinnings, he said.
The common vehicles should raise small-car profitability by double digit percentages over the current system of developing separate cars for different markets, Fields said.
"We have a real opportunity on our hand over the next couple of years to show people that we have world-class cars that we're bringing here to the U.S.," he said, adding that the company's small cars sell well in Europe where the segment is very competitive.
Fields also said that Ford would form a new 40-person vehicle connectivity team to develop new electronic features and make sure they are easy to use and less distracting.
At Tuesday's dinner, Fields said the tightening of credit standards by banks in the U.S. is becoming more of an issue that could hurt the auto industry because many people who used to be able to get loans can no longer qualify. It could worsen if banks continue to have to shore up capital, he said.
While pickup truck sales are starting to rebound a bit, Fields said Ford's future is tied to a resurgence in homebuilding and home values.
"When those start stabilizing it has a positive effect on consumer sentiment, but it also has a positive effect in the banking community because they know that their asset base, they're not going to have to write it down the next quarter," Fields said.
