Errors End a Good Run
Yesterday saw the Detroit Tigers throw away the World Series. They had a great run; no one picked them to even contend for the playoffs. As late as Memorial Day, I was still hoping that they'd manage to win half their games. Yet they humbled the Yankees, and swept the Athletics to win the American League pennant. I'll spend the winter thinking about that, not the five errors in five games by Detroit pitchers during the World Series (after fifteen the entire regular season), and three more by Brandon Inge. They got through the regular season by winning a bunch of close, low-scoring contests due to solid pitching and defense, and the five cold, wet games at the end are the exceptions that proved the rule established over the first 170.
Yesterday also saw the last Ford Taurus roll off the assembly line at an assembly plant near Atlanta, GA. Ford Motor Company, of course, has been suffering financially for much of the past three decades. Along with fellow automakers General Motors and the former Chrysler Corporation (now Daimler-Chrysler) have served as a symbol for the deterioration of both American heavy industry in general and Detroit in particular. Ford's woes have mounted in the past five years. Part of this is due to demographics, as the increasing ratio of retirees to current workers places large burdens of overhead cost on the company. This is usually expressed in average cost terms, but good economists know that you maximize profits by setting MR = MC. If operating profit doesn't cover fixed costs, that's a problem, and that's just where Ford is right now.
Ford makes some good vehicles. The F-150 is a great pickup (disclaimer: I own one, albeit a 1999 model), the Five Hundred has won Car of the Year awards, and the Mustang has been a huge small-run hit. Yet the Company has been hurt by the Explorer tire problems of a few years back and the on-going problems with Crown Victorias (remember when nearly every police car in the US was a Vic?). Those problems stick in peoples' memory and influences perceptions even after quality has improved. With perceptions suppressing demand, once they've sold the profit maximizing numbers of these cars, the cash pile still ends up short of what's needed to pay off the overhead.
That desperation, plus bad advice from financiers on Wall Street and in the press, has led the company to make some hasty decisions: to pursue E85 vehicles (only of interest in the US market, and only if gas climbs over $3.50 again, and then only until people do the math and find out ethanol isn't the answer); to dive into, then pull out of hybrid and electric car research; to buy up a pile of luxury and Eurpoean brands, and then run them into the ground.
By removing the Taurus, Ford is showing its faith in the Fusion. I'm a little skeptical, as it is a bit smaller than the Taurus (although still officially mid-size), while Americans are getting bigger. It's a nice car for young folks just out of college, but I think they'll want to trade in once the kids come. The Five Hundred can't help out much there either, as it's a bit too pricey to be a working class family car. I fear that Ford's mid-size market might fall through the crack between the vehicles, and end up driving a Camry or a Malibu.
Still though, it was a pretty good run.
Yesterday also saw the last Ford Taurus roll off the assembly line at an assembly plant near Atlanta, GA. Ford Motor Company, of course, has been suffering financially for much of the past three decades. Along with fellow automakers General Motors and the former Chrysler Corporation (now Daimler-Chrysler) have served as a symbol for the deterioration of both American heavy industry in general and Detroit in particular. Ford's woes have mounted in the past five years. Part of this is due to demographics, as the increasing ratio of retirees to current workers places large burdens of overhead cost on the company. This is usually expressed in average cost terms, but good economists know that you maximize profits by setting MR = MC. If operating profit doesn't cover fixed costs, that's a problem, and that's just where Ford is right now.
Ford makes some good vehicles. The F-150 is a great pickup (disclaimer: I own one, albeit a 1999 model), the Five Hundred has won Car of the Year awards, and the Mustang has been a huge small-run hit. Yet the Company has been hurt by the Explorer tire problems of a few years back and the on-going problems with Crown Victorias (remember when nearly every police car in the US was a Vic?). Those problems stick in peoples' memory and influences perceptions even after quality has improved. With perceptions suppressing demand, once they've sold the profit maximizing numbers of these cars, the cash pile still ends up short of what's needed to pay off the overhead.
That desperation, plus bad advice from financiers on Wall Street and in the press, has led the company to make some hasty decisions: to pursue E85 vehicles (only of interest in the US market, and only if gas climbs over $3.50 again, and then only until people do the math and find out ethanol isn't the answer); to dive into, then pull out of hybrid and electric car research; to buy up a pile of luxury and Eurpoean brands, and then run them into the ground.
By removing the Taurus, Ford is showing its faith in the Fusion. I'm a little skeptical, as it is a bit smaller than the Taurus (although still officially mid-size), while Americans are getting bigger. It's a nice car for young folks just out of college, but I think they'll want to trade in once the kids come. The Five Hundred can't help out much there either, as it's a bit too pricey to be a working class family car. I fear that Ford's mid-size market might fall through the crack between the vehicles, and end up driving a Camry or a Malibu.
Still though, it was a pretty good run.
posted by JKH at 10/28/2006 05:45:00 PM
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