Ford's bold move

Ford's bold decision to name top Boeing executive Alan Mulally as its new chief executive officer may well end up being precisely the wrong move at the wrong time.

Mr. Mulally made his name at Boeing for his strong cost-saving and efficiency program. But he lacks what analysts say are crucial skills in marketing, product development and branding at a time when there's unprecedented competition and pressure, particularly from Japanese and Korean automotive brands.

"It's a very difficult thing for a guy who didn't come up in the auto industry to grasp it,'' Kelley Blue Book's Jack Nerad said yesterday, a day after outgoing Ford CEO Bill Ford Jr. announced the surprise change after the markets closed Tuesday. Ford shares rose 16 cents, or 1.9 percent, yesterday to close at $8.55.

"It's a totally different scale of operation'' in the automotive vs. the aviation industry, Mr. Nerad said. "Lead times are long in both the airplane and auto industries, but in aviation, you have only a few competitors. In the auto industry, you have 15 or so global companies competing and close to 45 brands in the market. It's tough to take all that in for somebody who hasn't made cars their career."

Other analysts, while agreeing that Ford's leadership -- more than General Motors and DaimlerChrysler -- badly needs better product development and marketing skills, cautioned against expecting Mr. Mulally to bring that to the table and to "fix" Ford's product mix. What really matters is whether he can find the people he needs to do those jobs, they said.

"Mulally's role is to get the management team in place so that Ford can get a really exciting product lineup and generate some much needed revenue," said Rebecca Lindland, associate director of the automotive group at Lexington, Mass.-based researcher Global Insight. "It's important that distinction be made. He's not that product marketing guy and he knows that."

The problem, some analysts say, is that they don't believe Mr. Mulally will be left alone to find those people or to make tough but necessary decisions. They think the Ford family will interfere too much and as a result, things at the company will remain much as they are now.

Even Bill Ford, who brought in his replacement, has criticized his company for being too conservative and for repressing creativity and bold moves. When naming Mr. Mulally his successor, he said, "We have a lot of car guys here already. What they need is permission to be bold."

Whatever he does, Mr. Mulally had better do it fast, said George Magliano, director of automotive industry research for Global Insight. "He has a very short time to show that he has a grasp for this and pick it up and improve on it."

Some analysts are troubled that Mr. Ford will still be heavily involved in running the company, thus reinforcing one of Ford's biggest problems. Mr. Ford, who will retain the title of chairman, already has said he wants a strong working relationship with Mr. Mulally. History has shown that he has made similar moves in the past, only to shed executives when they did not live up to his and the family's expectations.

Indeed, Mr. Ford took over the CEO position in the first place because of dissatisfaction with former CEO Jacques Nasser, whom he had tapped for the role in 1999, only to force him out two years later.

"It's great that Bill Ford has stepped aside, but it's terrible that Bill has not stepped aside," is how Mr. Morici, a professor at the Robert H. Smith School of Business at the University of Maryland, characterized the latest move atop Ford. "This tells us that Bill will still be there everyday.

"You remember the relationship [Bill Ford] had with Jacques,'' Mr. Morici said. "They drove [Mr. Nasser] crazy. He had to meet quarterly with the family. Are they really going to let [Mr. Mulally] manage the place? That's not at all clear to me that he will have a free hand."

Mr. Morici suggested that one reason Mr. Mulally was hired was that he made Bill Ford comfortable that he would not think much differently from him but would better execute the comeback plan already in place. "My feeling is that won't be enough,'' Mr. Morici said. "The kinds of things that Bill said Tuesday showed he is not anticipating radical changes in strategy -- and that's not encouraging.'"

In any case, "The family needs to step aside and they need to let the doctors do their job here. Bill Ford needs to get that message to them," Ms. Lindland said, adding: "There's a very good reason why surgeons never operate on their own family members. You're too close and you lose your objectivity."

Mr. Mulally made his name by slashing Boeing's work force as well as the amount of time it takes to manufacture a jet. He also earned plaudits for being a key architect of the resurgence of Boeing's commercial airplanes unit over the past couple of years, fueled by its highly successful 777.

But industry analysts and observers say he has the wrong skills for what really needs to happen at Ford: sell lots of cars and trucks. Ford, whose market share plummeted from 21.9 percent in October 2001 to 16.8 percent this year, has a "Way Forward" plan that would cut up to 30,000 jobs and close 14 plants by 2012. But saving money won't bring people into showrooms, analysts say, unless the savings are used to make better styled, better marketed and better branded cars and trucks.

Fortunately, Ford has the designers, marketers and others that can get the job done. It now has some of the best, most respected vehicle designers in the industry, analysts say. But because most have only been on board for a few years, and because auto design cycles take several years, their best efforts may not be on the market just yet.

Ford: I THINK IT'S A TOUGH SITUATION

Alan Mulally has no experience building cars. He isn't well known in Detroit, having spent more than three decades in Seattle as an engineer and senior executive with Boeing. Up until yesterday, when he was named CEO of Ford Motor Co., replacing Bill Ford, he drove a Lexus-a plush ride, to be sure, but not a car you'd drive to Lions football games as a Motown exec. "That Lexus has been destroyed," Bill Ford joked in an interview with TIME. "We had it vaporized during yesterday's press conference." Mulally, for his part, acknowledges he's a newbie in town. "I asked Bill for his complete assurance that he'd stay as chairman," he told TIME. It's not every day, after all, that an outsider is recruited to run Ford-let alone a guy who used to build airplanes for a living.

But these are desperate times in Dearborn. Since 2001, Ford Motor has suffered more than $9 billion in losses from its North American auto operations. Companywide, Ford lost $254 million in the second quarter. Ford's market share in August, 16.8%, was the second lowest on record. Sales of pickup trucks and SUVs, Ford's only major profitable segments, have plummeted in the last year, hit by high gas prices and stiff competition from GM and Toyota. A 21% production cut is in store for the rest of the year. Any way you slice it, Ford is shrinking fast. And it may be years before the company consistently posts profits again.

Bill Ford, who ran the automaker for the last five years, certainly realized the gravity of the situation, which explains why he brought in Mulally. At Boeing, Mulally had a reputation as an ace engineer and turnaround guy. He helped develop hit models like the 777 jetliner, launched in the early '90s, and the 787 Dreamliner, expected in 2008. After plane orders plummeted following the 9/11 terrorist attacks, Mulally stabilized the commercial aircraft division, which is now earning handsome profits. Nor has he shied from downsizing. Under his reign, Boeing's commercial division layed off 30,000 workers, shuttered factories and killed products that weren't pulling their financial weight, like the 100-seat 717 plane. Says Bill Ford, on his decision to recruit Mulally: "I wouldn't have made this move unless I found the right person...I felt our management team needed a leader who had earned his stripes in a very tough situation."

Not many chief executives would even hint that they aren't up to the job. But Bill Ford never appeared all that comfortable running his namesake company. An avowed environmentalist, he tried unsuccessfully to turn Ford into a green car leader and was forced to backtrack as the company's finances fizzled. In Detroit, the buzz is that he's too nice a guy-unwilling to impose draconian job cuts at the risk of angering the UAW. In an interview last winter with TIME, he acknowledged that he found the CEO's role confining at times. And it has been clear for some time that he wanted out. In a press conference a year ago, he obliquely acknowledged that he had held discussions about a possible job at Ford with two of the industry's premier executives: Carlos Ghosn of Renault-Nissan and Dieter Zetsche of DaimlerChrysler (Bill Ford says "the list was half that long."

The reality is that Wall Street had lost confidence in him. Ford's stock has rallied in recent weeks, rising more than 35% on speculation that Bill Ford might step aside and that his family, which controls 40% of the voting shares, may take the company private. Yet the stock, trading at around $8.50 a share, still indicates that Wall Street takes a dim view of Ford's prospects; the company's market capitalization is just $16 billion, well below the cash value of the firm. (Toyota's market cap, by contrast, is $174 billion.) Ford's debt was cut below investment grade by the major credit-ratings agencies last year. Some analysts say it's only a matter of time before the company goes hat in hand to Wall Street for "bridge financing" to survive the next few years.

Does all this rattle Mulally? "I think it's a tough situation," he says, adding that he thinks the company has a strong lineup of cars and trucks in the pipeline. But he also downplays any suggestions that he'll be Motown's Chainsaw Al-a guy who'll try and slash and burn his way into the black. "A momentum shift is how I'd characterize it," he says. Whether he'll shift Ford into a profitable gear remains to be seen.

My Credit Card Limit

I guess you when you hardly use your credit card, it’s insane to think your credit card company will raise your credit limit. While I’m certainly not interested in spending enough money to get to my credit limit, it sure would be nice knowing I could spend a lot more on my credit card without having to worry about ever reaching the limit. Currently, my Capital One Visa credit card is at $7,500. Since I’ve been trying to get into the “plastic world” and use my card more often, I’m hoping to get it automatically raised to $10,000 by the end of the year.

I have no doubt I could get it raised if I called their customer service, but it’s not extremely important and I’d rather let it take on a natural course. You never really know when you might have an emergency though, so having a large credit limit can have it’s advantages, especially when you’re in the need for some extra cash and the loan process is taking too long. I guess in a worst case scenario, “Check Into Cash” would be another alternative. Who knows, maybe I’ll get to meet Gary Coleman.

PlayStation 3 will be delayed in Europe

The release of Sony's PlayStation 3 will be delayed in Europe until March because of problems with producing a key component, the executive in charge of the project said Wednesday. The much-awaited update to the popular game console will go on sale in November in the United States and Japan as planned, but fewer units will be available for the launch dates.

The company is still sticking to its initial global target of shipping 6 million PlayStation 3 machines by March 2007.

The sales delay is caused by a problem in mass producing a key component in the Blu-ray disc laser part of the machine, the next-generation successor to Sony Corp.'s hit PlayStation 2, Sony Computer Entertainment Chief Ken Kutaragi told reporters.

"We decided to focus on the Japanese and U.S. markets," he said at the gaming unit's Tokyo headquarters. "I am so sorry not to be able to answer to all the expectations."

In the U.S., about 400,000 PlayStation 3 machines will be available when they go on sale Nov. 17. About 100,000 will be available on the Nov. 11 Japan launch date.

The production problem is causing about a one-month delay that will reduce the company's supply capacity by about a million machines from the original plan, he said.

"We've been working hard to try to tackle the problem, but we see the delay is inevitable," he said.

James Hong, Head of Equity Derivatives Trading at Dresdner Kleinwort in Tokyo, said the news may put another dent in Sony's stock. The company's U.S.-shares fell $1.03 or 2.4 percent to $42.84 on the New York Stock Exchange Wednesday.

"This seems to be the continuation of a series of bad news. People were prepared to wait for the PS3, but delaying its European launch so they miss the Christmas season is just so not good," Hong said. "This is a crucial product given its Blu-ray features, and they need to get it out fast."

The setback is the latest to hit Sony, which is has been overhauling its electronics operations to catch up in key electronics products such as MP3 digital music players. Last month, its shares tumbled after Dell Inc. and Apple Computer Inc. issued huge recalls of defective laptop batteries made by one of Sony's subsidiaries, Sony Energy Devices Corp.

Kutaragi said other preparation work on the machine was going smoothly, including the "cell" next-generation computer chip. Mass production is set to start end of September, he said.

Although Sony had initially counted on shipping 4 million PlayStation 3 machines worldwide by the end of the year, that will likely fall to 2 million, he said.

The exact European sales date will be announced later, but it will likely be in the early part of March, he said.

Blu-ray disc is the next-generation video format for the latest DVD recorders and players, but also an essential part of the PlayStation 3.

TRY to raise my credit score

In a continued effort to try to raise my credit score, I’ve switched a monthly automatic debit charge (cable bill) that used to be debited from my bank account to my credit card now. This’ll increase my monthly charges on my card even more. It’s still nowhere near the heights I want to be at, but it’s a start.

It was always a hassle to make sure that specific bank account had enough funds to pay the cable bill every month. Now with the credit card I’ve eliminated yet another hassle from my life and can increase my credit score all at the same time. And as I’m sure you’re aware, time is money.

All of these are just small steps I have been taking and will continue to take, to lead to a better, stable and a more secure financial future.

Cigarette smoking causes disease

U.S. District Judge Gladys Kessler found that the government had proved its case that accused cigarette makers of a decades-long conspiracy to hide the dangers of smoking.

But Kessler said a previous ruling by an appeals court prevented her from slapping the companies with monetary penalties such as funding a large anti-smoking campaign, as the government had sought.

"Cigarette smoking causes disease, suffering, and death. Despite internal recognition of this fact, defendants have publicly denied, distorted, and minimized the hazards of smoking for decades," she said in the 1,653-page opinion.

She ordered the companies to make corrective statements about the health effects and addictiveness of smoking, and banned them from using terms describing cigarettes in ways that convey health claims.

Targeted in the 1999 lawsuit were Altria Group Inc. and its Philip Morris USA unit; Loews Corp.'s Lorillard Tobacco unit, which has a tracking stock, Carolina Group; Vector Group Ltd.'s Liggett Group; Reynolds American Inc.'s R.J. Reynolds Tobacco unit and British American Tobacco Plc unit British American Tobacco Investments Ltd.

Several tobacco stocks rose in extended trading after the ruling came out. "Although they lost, they won. It's a victory for the tobacco companies," said Tim Ghriskey, chief investment officer at Solaris Asset Management.

The ruling was seen as the last major hurdle to be cleared before Altria decides when it will spin off its Kraft Foods Inc. business.

During an eight-month trial that ended in June 2005, the government called scientists, economists and tobacco industry whistle-blowers who described a decades-long campaign by tobacco companies to deny or obscure the hazards of smoking -- even as its ill effects became increasingly clear.

Tobacco companies offered testimony from their own scientists, economists and company executives. They denied any conspiracy to promote smoking and said the government had no grounds to pursue them after they drastically overhauled marketing practices as part of a 1998 states' settlement.

Kessler ordered each company to post on its Web site all documents it submitted to prosecutors in the case and transcripts of letters and depositions of former employees about the health impacts of cigarette smoking or research. The material must remain on their Web sites until 2016.

In February 2005, the U.S. Court of Appeals for the District of Columbia Circuit barred the government from seeking $280 billion in past industry profits, depriving the government of its biggest potential weapon in the case.

The appeals court said civil racketeering remedies must focus on the prevention of future misconduct, not punishment of past misdeeds.

Lawyers for the Justice Department eventually asked the judge to require tobacco companies to fund a 10-year, $14 billion anti-smoking program if the government prevails.

But tobacco company lawyers argued proposals such as requiring their clients to finance a stop-smoking program were still beyond the bounds of the appeals court ruling.