Ford's "Surprising" Announcement, Not Really A Surprise

Implications: Ford's announcement of not being able to meet its profitability goals really amounts to the company admitting they thought they could continue to follow the same path they did in the 1990s in the face of  rising energy prices and dropping truck sales.

Analysis: Ford's sudden announcement of not being able to meet its profitability goal for 2009 tells me that the company was ignoring the obvious with respect to energy prices and hoping to depend on truck sales to save the company. In other words: despite making some positive changes Ford is still trying to improve upon the old ways and depend on what worked in the past, instead of trying to forge a new path to profitability.

Overall I think this isn't just about the negative impact rising energy prices are having on the U.S. automakers as it is about their continued overdependence on a product whose popularity is waning.

If you think about it, the popularity of the SUV temporarily saved the U.S. auto industry in the 1990s, as it provided them with a popular high-margin product that generated enough profit to hide many of their looming financial issues. After all, Detroit's problems didn't just "suddenly" happen, they've been in the works for decades, and present day problems could've easily have happened in the '90s if it wasn't for the SUV.

Ford's announcement basically amounts to the company saying: "Despite all the changes we're making, we figured we could ignore the obvious signs around energy prices and demand for trucks and continue to sell the same product line that worked for us in the '90s. However, as truck and SUV sales continue to decline, we now believe we can't depend on truck sales to save us. Our bad."

If something doesn't change soon, we could very well see a day when there aren't any U.S. automakers. Impossible? Remember what happened to American TV manufacturers in the 80s? its a scary reality that I'm sure many people reading this will scoff at, but when you look at the facts it's pretty obvious that there is a pretty significant chance of it happening.