Stark Auto Warning: There's No 'Plan B'

Mulally Takes Tactic From Iaccoca

On top of Mulally's pledge to work for $1 a year, a move that echoes that of former Chrysler CEO Lee Iaccoca who also accepted a $1 salary as the automaker lobbied government aid in the late 1970s, Ford would also cancel 2009 bonuses for all management employees and will sell five corporate aircraft to raise cash.

Veteran auto industry analyst Ron Harbour, of the consulting firm Oliver Wyman, said Mulally's paycut pledge is largely symbolic. The CEO will likely get compensated in other ways, such as through stock options, just as Iaccoca did, Harbour said.

Overall, Ford's approach toward a government rescue is different than that of General Motors and Chrysler, Harbour said.

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"Ford's a little bit different than the other two in that they're making the claim that they don't really need (government loans) right now, that'd it be basically a rainy day fund for them should things become more adverse in the marketplace than they are right now," he said.

GM, Ford and Chrysler -- the country's Nos. 1, 2 and 3 automakers -- have all seen their profits and their sales plummet in recent months, as high gas prices earlier this year, financial hardship and the credit crunch kept would-be auto buyers at home.

GM and Chrysler reported today that their November U.S. auto sales tumbled more than 40 percent compared to a year before, while Ford's sales dropped nearly 31 percent. (Japanese automakers also saw double-digits drops with Toyota sales down 34 percent and Honda down 32 percent.)

Analysts have predicted that one or more of the U.S. automakers could run out of cash and face bankruptcy within months. But Ford is in better shape than its cross-town rivals, Harbour said, because it took out loans before the start of the credit crunch, spends less on retirement benefits because it has fewer retirees and, in general, operates more efficiently with fewer brands than GM. Since 2007, Ford has sold off ownership or stakes in several major brands, including Jaguar and Land Rover. The company announced Monday that it was also considering the sale of its Sweden-based Volvo brand.

But, like its rivals, Ford is still burning through cash. Last month, Ford said it had spent $7.7 billion in the third quarter of the year, while GM spent $6.9 billion. (Chrysler chief executive Robert Nardelli has said that reserves for the privately owned automaker are also low.)

The plan GM proposed today includes reducing its workforce by 20,000 to 30,000, closing nine plants and cutting 1,750 dealerships by 2012.

There had been speculation that GM would cut some of its brands. The statement issued by the company today offered some, but not total, clarity on the issue. GM said that it would focus its "product development and marketing efforts on four core brands Chevrolet, Cadillac, Buick and GMC" and that Pontiac would become a "specialty brand" with a smaller line of products. The Hummer brand, the company said, may be sold.

But it remains unclear what will become of GM's Saab and Saturn brands. The company said that Saab will be subject to "a global strategic review" and that it is working with Saturn retailers to "explore alternatives" for that brand.