The Latest Turn in Ford’s Death Spiral

May 29, 2008

This artice details a plan released by Ford Motor yesterday to lay off 2,000 salaried workers.  Ford actually acknowledges that this is an unexpected departure from their “turn-around” plan, necessitated by rapidly falling sales volume. 

With U.S. auto sales expected to drop to around 15 million this year, down from 17 million as recently as 2005, Ford needs to cut costs to help pay for new technology and stay afloat until the market recovers, said Kevin Tynan, an auto analyst with Argus Research in New York. Ford and other automakers are investing in costly hybrid and electric vehicle technologies but won’t see the benefits for several years, he said.

Tynan said Ford wouldn’t be able to reach its layoff targets without involuntary layoffs. But he also noted the company and its U.S. competitors have weathered downturns in the past.

“If history is a guide, we’ve been through it before. You get to these points where you restructure, then you start to recover,” Tynan said. “It’s at least an industry and a group of companies that have proved they can get pretty creative when the back’s against the wall.”

It’s absolutely amazing to me that these executives just don’t get it.  After decades of this slow downward spiral, they still cling to hope of a big turn-around.  But without a dramatic shift in U.S. trade policy – the implementation of the tariff structure on manufactured goods, indexed to population density, which I outlined in Five Short Blasts – American auto manufacturers are doomed to continue their descent into bankruptcy and oblivion.  Check out my “2008 predictions” in which, back in November of 2007, at a time when the “experts” were hailing Ford’s turn-around plan, I predicted the bankruptcy of either Ford or Chrysler in 2008.  It’s an easy call when you understand the role of our misguided trade policies in destroying our economy. 

It’s going to get worse instead of better as the U.S. sinks deeper into recession.  The “experts” are now forecasting an early end to a shallow recession.  Don’t believe it.  This isn’t just a normal business cycle.  Overpopulation and an idiotic trade policy that imports the effects of overpopulation even faster are all coming home to roost.