Thursday, January 25, 2007

Ford Twitches and Twists

Ford (NYSE:F) released bad news of course. While the troubles are real much of it reflects a new CEO who needs to clean house, as well as potential pre-merger tweaks and fix ups. A few comments about the excuses.

Overall they partially attribute losses to unfavorable volume and mix. I assume that’s product mix. The excuse is almost standard from company to company. Every company with poor performance has this unfavorable mix. This usually means that the higher margin offerings are not working out which means poor strategy. The plan A had to work because plan B does not make money. This cannot be solved by cost reduction. The market is saying we do not want to buy your products.

Under the Mazda category less than clear language was used to explain a drop in profitability. Have a read .

“Mazda: For full-year 2006, Ford's share of the pre-tax profit of Mazda and associated operations was $168 million, compared to $255 million a year ago. The decline was more than explained by the non-recurrence of gains on Mazda convertible bonds in 2005.” Non-recurrence of gains is an interesting financial concept meaning just what exactly?

Under the financial services sector they served up this convoluted rationale “…These were partially offset by market valuations primarily related to non- designated derivatives and reduced operating costs.” No further comment on the significance of non-designated derivatives.

Ford has serious problems and needs to change its ways. Everyone agrees on this point. In doing this investors do not need convoluted language.