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Last Updated: Sunday, 6 March, 2005, 17:36 GMT
Ford fighting to keep its shine
By Theo Leggett
BBC World Service business reporter

Ford Mustang Convertible unveiled at the 2005 Los Angeles Auto Show
Iconic cars, such as the Mustang, have made Ford a legend

For over a century, the Ford Motor Company has been a symbol of American enterprise and pride.

Set up by Henry Ford in 1903, it pioneered affordable motoring for the masses with its 1908 Model T.

Over the next two decades, more than 15 million were sold, providing the momentum that helped turn Ford into a household name around the world.

When production of the Model T finally ended, the New Yorker journalist EB White famously mourned its passing.

"It was the miracle God had wrought. And it was patently the sort of thing that could only happen once. Mechanically uncanny, it was like nothing that had ever come to the world before."

Popular culture

Today, Ford is a global giant.

It is the world's third largest carmaker, and sells more than 6.5 million or $140bn (70bn) worth of vehicles every year.

If the name wasn't Ford, it would be filing for bankruptcy by now
Sean Egan, credit ratings analyst

Many of its designs have become icons of popular culture - such as the Mustang driven by Steve McQueen in the cult film Bullitt, or the Thunderbird, a favourite of President Kennedy.

But all is not well at Ford.

Although the company made a $3.5bn profit last year, most of its revenues came from selling car loans and other credit - it made relatively little money from selling cars.

And if interest rates rise, those revenues could dry up.

Slashing prices

In the United States, Ford is struggling to maintain its share of the market in the face of intense competition from Japanese manufacturers Toyota, Honda and Nissan - as well as its traditional rivals General Motors and DaimlerChrysler.

A 1926 Model T Ford
Ford famously made the Model T - earlier versions only came in black

Ford has tried to maintain its market share by offering discounts worth thousands of dollars on new cars. But by slashing prices, the company has cut its profit margins right back.

In Europe, too, Ford has been struggling, while its investments in luxury brands such as Jaguar and Aston Martin have proved less than successful.

And that is not the only problem.

Ford is also hamstrung by the high costs of its retirement and healthcare programmes.

"Ford's total liabilities for healthcare are about $24bn, pensions are something similar," says motor industry analyst Graeme Maxton.

"The total value of the business is only around $17bn. So the liabilities are much, much greater than the value of the business."

'New approach'

Some commentators believe that it is only Ford's iconic status which is allowing it to keep operating in the current climate.

"If the name wasn't Ford, it would be filing for bankruptcy by now," says outspoken credit ratings analyst Sean Egan.

Ford's chairman and chief executive is Bill Ford Jr, the grandson of the company's founder.

He takes a less pessimistic view, but admits that the company's problems need to be addressed.

"We have to have a new approach to healthcare, because there is no bigger issue facing us as we go forward," he says.

The coming year will be vital for the Ford Motor company.

If it can revitalise its car business and fight off the challenge of its Asian rivals, then it could still have a bright future.

If not, it may be on the road to nowhere.

Graeme Maxton, motor industry analyst
"Ford is not in a healthy position in the world's motor industry."

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