Ford: Production Cuts Key to Survival

DETROIT Reuters reported that Ford will cut back on production capacity. It went on to quote Ford executives: "No automaker can survive, let alone prosper, with excess production capacity" warned on Tuesday, setting the stage for thousands of job cuts the company is expected to announce later this week.

``We'll take actions as appropriate,'' Jim Padilla, Ford's chief of North American operations, told reporters when asked about the restructuring plan that the company says it will unveil in a conference call for journalists and Wall Street analysts hosted by Chairman and Chief Executive William Clay Ford Jr. The call will start at 9:15 a.m. EST on Friday.

``What you can't do is you can't survive in the long term with excess capacity. And we have some of that,'' said Padilla, speaking on the sidelines of the North American International Auto Show, the industry's premier annual event.

Ford's turnaround plan was initiated under its former chief executive Jacques Nasser, who was ousted in October amid mounting losses and the company's worst financial crisis in at least a decade.

The timing of its announcement, after its directors meets to approve the plan possibly as early as Wednesday, has marred the usual carnival-like atmosphere at the Detroit auto show, as worldwide automakers rolled out shimmering new models of car and trucks amid growing angst about the global economic slowdown.

Adding to the somber mood at this year's auto fest, and to concerns about the recession-bound U.S. economy in particular, General Motors Corp. said on Monday that it too plans to announce job cuts this week. Hundreds of thousands of U.S. jobs were cut last year, in a wave of bankruptcies and dreaded corporate restructurings that escalated after the attacks of Sept. 11.

Spokesman Tom Wickham said GM, the world's largest automaker, would offer select groups of white-collar employees aged 50 years and older an early retirement package effective April 1 as part of efforts to cut its enormous global work force of 360,000 through attrition, voluntary buyouts and cuts in contract employment.

Those plans pale compared with those of Ford, which cut about 4,000 white-collar jobs through a voluntary early retirement program last year, or just under 10 percent of its salaried North American work force. Last month, Ford also announced it was cutting 600 hourly workers by eliminating one of two shifts at a Ranger pickup truck assembly plant in Edison, New Jersey.

The world's No. 2 automaker, which employs roughly 119,000 hourly workers in North America, is now expected to cut much deeper. It has said it expects to post a fourth-quarter operating loss of about $900 million, stemming in part from a jump in bad loans and customer credit problems.

Analyst Saul Rubin of UBS Warburg said he sees Ford eliminating about 10,000 to 12,000 blue-collar jobs and an additional 3,000 to 4,000 salaried positions along with a few assembly plants.

TOO MANY CARS

Padilla would not confirm the size of the cuts in his comments on Tuesday, or say what plants may have been targeted for possible shutdowns or more shift eliminations.

But he stressed that all automakers need to take an axe to excess capacity in their North American plants, including those operating in Canada and Mexico.

``There's 22 million units of capacity hung out there, and we think that demand long-term will be in the range of 16 to 17 million units,'' said Padilla, referring to annual U.S. vehicle sales rates and the joint production capacity of all automakers with North American assembly plants.

Ford Chief Operating Officer Nick Scheele told reporters on Monday that the company had no plans to violate its contract with the powerful United Auto Workers union, which bars plant closings until September 2003.

``We have a contract. We're not about to abrogate a contract or anything else,'' Scheele said.

But comments by Padilla have strongly suggested that the New Jersey Ranger plant may eventually be shut down, and industry insiders say Ford's truck plant in Oakville, Ontario, may also be on the cutting block as part of a long-term overhaul of the automotive giant.

``WORRIED SICK''

``We're worried sick, of course,'' Buzz Hargrove, president of the Canadian Auto Workers union, said when asked about possible plans to shutter the Ontario plant just outside Toronto.

``They certainly are going to feel a lot of pressure from us if they announce that they're going to close our plant,'' Hargrove told Reuters.

Padilla said last month that Ford has been operating at less than 80 percent of its manufacturing capacity in North America. To make money, he said, the automaker has to work at more than 90 percent of capacity.

Wall Street analysts are generally skeptical about Ford's turnaround plan, and Ford executives themselves have conceded that it may not return the automaker to profitability anytime soon.

``We really think we're into a three-year or more proposition,'' said Padilla, referring to the timeframe for full implementation of Ford's restructuring.

``We believe Ford's restructuring announcement set for Friday will not be dramatic and will lack specifics,'' Michael Bruynestyn, an analyst with Prudential Securities, said in a research note on Tuesday.

``(It) will rather be the first in a series of announcements over the next 12-18 months that will gradually reveal details of the company's turnaround plan,'' he said.