Does Ford really have a brighter future than General Motoers?

Implications: The decision by Bear Sterns to recommend Ford Motor Company over General Motors seems very misguided to me. Ford is literally just beginning its turn around efforts and they may not save the company. General Moors has already taken many steps of cost reduction and new product introductions and moreover is investing in many new powertrain technologies for coming years that Ford will find difficult if not impossible to duplicate. I expect GM to benefit and Ford to suffer as a result.

Analysis:  

I have not written many comments on the automotive industry lately, especially those based in Detroit because for the most part the press has got the story pretty much correct. However this position of Bear Sterns make no sense to me. General Motors has done much to reduce its costs in the past few years and the new labor contract with the United Autoworkers is another big step in this process. However in my opinion the most significant progress has been in designing vehicles and the manufacturing/assembly processes in an intelligent lean and nimble manner. The benefits to the company make it much more competitive with the transplants by substantially reducing the gap in its costs compared to their lower retirement and health care costs. Cost reduction by itself, of course does not guarantee business success. You need to offer products that are desirable to your customers. GM has certainly made a major effort in this area and many of its new products are receiving rave reviews and healthy sales. It has made significant progress in shoring up its faltering brands, especially Cadillac, and Chevrolet, and now Buick and Saturn. More importantly it is investing in new advanced technology in the powertrain area. Major new developments in low emission diesel engines, advance hybrid configurations, fuel cell and electric vehicle technologies will be entering the marketplace in coming years. GM has chosen to develop and has invested significant capital in a wide array of these new technologies. As a result it will be a formidable competitor in the global marketplace for a long time to come.

Ford Motor Company, on the other hand, is just beginning to get its hands around its problems. It is years behind GM in its fundamental vehicle platform and powertrain rationalization programs. It lacks the resources, both financial and technical, to develop the powertrain technology necessary to be competitive in the coming years. It is still in the process of selling off its unprofitable prestige vehicle lines and it domestic products, particularly Mercury is in trouble. Based on all this Bear Sterns advice makes no sense to me.