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Last Updated: Tuesday, 9 January 2007, 10:27 GMT
Can Bill Gates save Ford?
By Steve Schifferes
Economics reporter, BBC News, Detroit motor show

Ford boss Alan Mulally
Ford boss Alan Mulally wants to wave goodbye to the problems

One hundred years ago Henry Ford launched the Model T Ford at the first ever Detroit Motor Show - setting the city up as the world centre of the motor industry.

Now Detroit's dominance of the world motor industry is under threat as never before.

And nowhere is this more evident than at Ford, the company that built the world's largest factory at River Rouge in the 1920s

That site is also a museum, and there are those who fear that Ford's current status in the global motor industry could be heading the same way.

The company is still controlled by the Ford family, and it was only in October that Bill Ford stepped aside as chief executive and hired Alan Mulally, the former boss of Boeing, to run the company.

Less than four months into the job, Mr Mulally was not giving any press interviews at the motor show.

However, he did tell this reporter, as he went for an early morning stroll through the conference hall, that he was looking closely at the opposition, and then waved to Chrysler boss Tom LaSorda who was doing a BBC interview at the time.

Tie-up

In his first appearance at the show, Mr Mulally did announce with much fanfare that Ford would be collaborating with Bill Gates and Microsoft on a new in-car audio system.

It will allow people to play digital music from devices like iPods in their cars, and also allow hands-free mobile phone operations, all voice activated.

Ford boss Alan Mulally and Microsoft boss Bill Gates
He's behind you! Ford are hoping Mircosoft's support can boost sales

The system, called Sync, is exclusive to Ford for one year, and will be introduced in 12 Ford models across the range next autumn.

As if signalling its intent to still be seen as an industry heavyweight, Ford had the biggest opening launch event at the motor show this year.

It hired the entire Cobo Arena, a huge indoor stadium that used to be home to the Detroit Pistons basketball team and could seat 12,000 people, to showcase its new models that included a dozen new cars and concept models.

The show had a very retro feel, with a remake of the Mustang, a restyled Ford 500, and a new, even bigger truck taking centre stage.

Even Ford's hydrogen fuel concept car was based on the 1950s design of Aerostar mobile homes.

Financial hole

But beneath the glitz and glamour, all is not well at Ford.

Ford lost $17bn (8.8bn) last year - and that is before the results for the final three months of the year have been announced.

It has borrowed $20bn from the banks by mortgaging all its factories to ensure it has enough money in the bank to operate.

These firms are not making products that people want to buy
Professor James Levinsohn of the University of Michigan

The company is losing $4,000 on every car its makes, according to Sean McAlindrin, chief economist at research firm CAR.

And Mr McAlindrin added that the company is 10 to 30 months behind rival General Motors in its restructuring plans, despite having made more than 30,000 workers - one quarter of its workforce - redundant.

Mr McAlindrin believes that Ford can still survive - but only as a much smaller company, and only if can reach a deal with the UAW union this year to reduce or eliminate many of the benefits enjoyed by its retired workers, which the company says puts an unfair burden on its cost structure.

He also believes that if the US economy slows down significantly next year, as many economists predict, then the company could be in serious trouble.

Ford's North American boss Mark Fields told the BBC that the company's recovery plan was on track, despite a further "readjustment" this September when truck sales slumped more than expected.

Mr Fields added that he hoped that the union would accept the need for further restructuring.

Countering critics who claim Ford desperately needs to replace its ageing line-up, Mr Fields said the company was on track to replace 70% of its models by the end of the 2007, and 100% by 2010.

'Usual suspects'

Despite his optimism, auto analysts have not been impressed with the line-up that Ford revealed at the Detroit show.

Rebecca Lindland of Global Insight said that Ford cannot return to profitability just by cutting costs - it also has to make cars that people want to buy.

Ford Airstream Concept car
Ford wants its new models to catch consumers' imagination

"I don't see anything exciting or head-turning in their product range that is going to do it for them," she told the BBC.

Ford may well get through its current crisis - if it can invest in new and better models, if it can get big union concessions, and if it can survive the next recession.

The trouble is, as its cash reserves continue to shrink, the company may be running out of options.

Of course, Ford is not the only US car company in trouble and Professor James Levinsohn of the University of Michigan said the US companies have only themselves to blame.

"Ford and GM regularly round up the usual suspects when searching for a reason for their troubles," the professor wrote in an unpublished opinion piece that was commissioned but then rejected by a US news magazine for fear of losing car-industry advertising.

"But the real culprit is the obvious one. These firms are not making products that people want to buy," he added.

"The responsibility for that lies with what passes for leadership at these firms."

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