More information on the Ford Business Plan
By Terry Bresnihan, FCN
Ford Motor Company unveiled a critical and comprehensive plan for its North American automotive operations on Monday and vowed to restore the region's profitability by 2008.
The plan, called Way Forward, stresses stronger and more focused Ford, Lincoln and Mercury brands, achieving a competitive fixed-cost structure and fostering an environment of innovation.
"The automotive market in North America is rapidly becoming as crowded and fragmented as other global markets," said Bill Ford, chairman and Chief Executive Officer. "To meet this challenge, we are acting with speed to strengthen the Ford, Lincoln and Mercury brands, deliver the innovation customers demand and create a business structure for us to compete, and win, in this era of global competition."
Ford and other company executives reviewed the company's business and outlined the Way Forward plan in a global presentation to employees via Web cast and the FCN broadcast network. Also on hand for the presentations at the company's Dearborn Product Development Center were hundreds of media and industry analysts.
Ford noted that the company was solidly profitable overall in 2005, growing in most markets around the world and expected to be profitable again this year. However, the company also disclosed its North American automotive operations would remain unprofitable in 2006, which would bring about a loss overall for the company's global automotive business.
"We must be guided by our long-term goals of building our brands, satisfying customers, developing strong products, accelerating innovation and, most importantly, producing a sustainable profit from our automotive business," Ford said.
One way Ford will move forward is by utilizing the advantages of a worldwide company, said Jim Padilla, president and Chief Operating Officer. "It's … important to understand that Ford as an enterprise will continue to focus on maximizing our global synergies – synergies that will create more new products, more flexible plants, common processes, lower investments. Economies of scale will deliver more new products faster from all our markets and all our brands."
Mark Fields, executive vice president and President of The Americas, detailed specifics of the Way Forward plan, including actions related to the brands, product investment, material costs, marketing initiatives and capacity and employment.
Fields said Ford could stabilize market share and ultimately grow share in North America by making customers central to the company's business model.
" T his clear view of the customer and our brands also improves product quality, as well as the quality of the selling process with straightforward pricing that is clear and simple," Fields said. "It leads to improvements in our cost structure and capacity. And it will unlock the talents and energy of the entire Ford team through bold leadership."
Fields, too, said Ford will leverage its global scale to achieve timing and development costs to rival the company's best competition and ensure adequate funding for broad and aggressive product plans. Included in those plans are more hybrids and increased investment in small cars, while defending leadership in trucks and continuing the company's new momentum on the car side of the business.
Ford also outlined plans for major improvement in its cost structure, including material cost reductions of at least $6 billion after new product costs by 2010 and significantly lower fixed costs.
The company has previously announced plans to reduce salary-related costs by 10 percent, or the equivalent of 4,000 positions, by the end of the first quarter. This is in addition to earlier salaried cost actions.
On the plant side, Fields noted that Ford is running its North American facilities at about three-quarters of capacity, which he called unsustainable. " Obviously, this has significant implications for our labor force," he said. "It’s something we knew we would have to address honestly and with sensitivity to the impact on Ford employees and their families. Our pledge is to address those challenges in full collaboration with our union partners."
Fields said the company will idle and eventually close 14 North American manufacturing facilities by 2012, including seven vehicle assembly plants. This does not include any Automotive Components Holdings actions related to the Visteon deal or any plans announced in the 2002 restructuring.
"These actions will reduce our assembly capacity by 1.2 million units, or 26 percent, by the end of 2008," Fields said. "That will help us improve our assembly capacity utilization rate dramatically."
The actions are expected to reduce plant employment, both hourly and salaried, by 25,000 to 30,000 positions over the 2006-2012 period.
"These cuts are a painful last resort and I'm deeply mindful of their impact," Ford said. "They're going to affect many lives, many families and communities, and we're going to do everything we reasonably can to ease the burdens."
Fields said hundreds of Ford employees have inputted to the Way Forward plan directly and more than 4,000 suggestions have been received from others in North America.
"The comprehensive nature of our plan requires a long-term perspective," he said. "We know it will take time, and we know it will be tough."
Fields also, however, endeavored to instill confidence. "Rest assured, our Way Forward is not a retrenchment," he said. "It's about taking back our future. Cutting our own path. Having a clear point of view, and being bold, American and innovative."
