No sooner had I posted the last blog on Ford than the company announced its sale of Aston-Martin. My goodness, the ravages of Lock-in are moving swiftly at Ford! (see chart here)
Ford is in deep trouble. The company has announced billions of dolars in losses, and it has had to arrange billions of dollars in financing to cover costs of its "turn-around plan." Ford expects to burn through $17billion during turnaround. What is the turn-around plan? It is to build multiple models worldwide on the same platform. Let’s see, how new is this idea? Oh yeah, that’s been the plan at Ford and GM for the last 2 decades! That’s not a turnaround plan – that’s a disastrously broken Success Formula that hasn’t made any money! (see full article here)
Aston Martin is a much smaller business than the Ford brand. It sells only 7,000 cars. But, let’s see, from total cars sold of 46 in 1992 that represents a growth of 152X (or 15,200% or almost 40%/year for 15 consecutive years). (see article here) While the Ford brand is losing billions, Aston Martin is profitable. What is Ford doing here? Selling a business that works – to support one that clearly doesn’t? As an analogy, isn’t this a bit like selling your child (or at least their labor) in order to purchase some medicine for terminally ill grandpa? We’d never do the latter, so why do the former?
The new Ford CEO said "The sale of Aston Martin supports the key objectives of the company, to restructure to operate profitably at lower volumes and changed model mix and to speed the development of new products." (see full article here) If he wants to accomplish the goals of profits at lower volumes, changing the model and creating new products he should be trying to emulate Aston Martin – learn from it – not sell it. Aston Martin is doing things much more right than Ford is.
Dave Healy, an analyst at Burnham Securities stated "Aston Martin was a prestige item that was a management distraction." (see article here) A distraction? The only way you can take that point of view is if you’re so locked into saving the old Ford Success Formula that you’re willing to do anything, even sell your only and most profitable business, to get 5% of the cash you’ll need in that vain turnaround endeavor.
Aston Martin has been a great success. Growth has been good, profits exist, and the brand has a positive reputation. The company has been a successful White Space intitiative. What Ford needs to do is get more of Ford (including money-losing Jaguar and other brands) to migrate toward the new Success Formula at Aston Martin. Management needs to migrate forward, but instead it is selling what works to try and regain the glory of the past. Ford management is not willing to admit that its Success Formula is seriously broken, and uncompetitive against much more formidable and successful competitors such as Toyota, Honda and Kia. Too bad. Without learning from White Space Ford has practically no hope of surviving this latest competitive onslaught.
