It doesn't get much more obvious than this...
Toyota appeared to be on track to overtake General Motors as the world's No. 1 automaker as it boosted vehicles sales around the world and reported a 39 percent jump in profit in the first fiscal quarter Friday.
...and this.
Ford Motor Co.’s second-quarter loss more than doubled from what the No. 2 U.S. car maker previously reported because of higher-than-expected pension costs. In a second piece of weak news, the company said its luxury car division won’t be profitable this year.
Is this just a case for better a business model, or an out-of-date mentality getting its lunch handed to it?
One factor:
"Everything is going well for Toyota, especially in North American sales," said Koji Endo, auto analyst at Credit Suisse First Boston Securities in Tokyo.
Endo said that in addition to robust sales of Toyota's smaller models such as the Corolla, the company's light trucks and Lexus luxury models — which tend to produce healthier profit margins per vehicle — have also been doing well, boosted by the perception that they're more fuel efficient than rival offerings.
Both perception and reality, apparantly. But Ford's reality is much bleaker.
In a filing with the Securities and Exchange Commission Wednesday evening, Ford said it revised its loss to $254 million, or 14 cents per share, from the previously announced loss of $123 million, or 7 cents per share.
That contrasts with a profit of $946 million, or 47 cents per share, posted in the second quarter of last year.
Dearborn, Mich.-based Ford attributed the revision to an increase in full-year 2006 pension curtailment expenses to $1.2 billion, up from its previous projection of $1 billion. Full-year special items are expected to total $3.8 billion.
"Special items". My guess those are not costs to actually build cars and trucks. And that may be the problem.
Old school vs. new school. If someone doesn't watch out, the old school may soon be closed.
Does Ford have higher than expected pension costs? They can say that, but I do not think so. Ford is laden with obligations from previous CEO's settlements with the union. They knew about these obligations for years, decades in fact and yet did not deal with their unfunded pension plan obligations.
That said, Toyota is a company whose focus on innovation and quality has created momentum that has overtaken Ford not to mention GM and Daimler- Chrysler.
In 1996 Toyota Motor Corporation had $604,346 sales per employee and $14,489 after tax earnings per employee. In 2005 sales per employee was $578,005, but after tax income rose to $36,493 per employee.
Compare that performance to $650,000 sales per employee for Microsoft whereas Google has $1,500,000 sales per employee (2005).
Whereas Fords 5 year annual average net income dropped -16.5% and its return on assets droped almost 50% between 1996 and 2005.
Tough days to be a Ford CEO.
Nice blog, keep up the good work.
Posted by: Greg Balanko-Dickson | August 16, 2006 11:47 PM | Permalink to Comment