Ford to Cut Capacity, Shut Up to 5 Plants

DETROIT Reuters Reports that Ford Motor Co.will announce on Friday it is slashing production capacity by 1 million units, shuttering up to five North American assembly plants, and cutting thousands of jobs as part of a sweeping restructuring plan, union and other sources said on Thursday.

``Their argument is they need to cut 1 million units throughout Ford Motor Co. and everyone knows that's a lot of jobs,'' Buzz Hargrove, president of the Canadian Autos Workers union, told reporters after meeting senior Ford executives in the Canadian city of Windsor across the river from Detroit.

A source close to Ford said the production capacity cuts would be made in North America. Ford's chief of operations for the region, Jim Padilla, said earlier this week that cutting the company's excess capacity was key to long-term survival.

Ford's meetings with Hargrove came on the eve of a briefing for Wall Street analysts and journalists, set to start at 9:15 a.m. EST on Friday, when it will unveil details of a long-awaited turnaround plan aimed at returning the world's second-largest automaker to profitability.

A company spokesman said Ford would have no comment on plants closings or capacity cuts ahead of its announcement on Friday.

Following a meeting with Padilla late on Thursday, George Spadoro, the mayor of Edison, New Jersey, where Ford has an assembly truck for Ranger pickup trucks, told Reuters that Ford officials had said the turnaround plan would have a ''significant effect'' on four or five plants in North America.

``I expect that the announcement is not going to be good news for Edison,'' Spadoro said. Ford last month said it would eliminate one of the plant's two production shift, cutting about 600 blue-collar jobs

Ford's contract with the powerful United Auto Workers union, which remains in effect until September 2003, bars plant closings.

Ford, however, is widely believed to have targeted some assembly plants for shutdown once the union contract expires. Industry insiders say assembly plants likely to be shut include Edison, New Jersey, Ranger plant, the F-series pickup truck plant in Oakville, Ontario, and a joint venture assembly plant in Avon Lake, Ohio, which makes the Mercury Villager and Nissan Quest minivans.

Ford produced a total of 7.4 million vehicles worldwide in 2000.

Speculation has centered on reports Ford will eliminate about 12,000 of its estimated 115,000 blue-collar jobs in North America through layoffs and attrition over the next two years. It is also likely to make deep cuts in its contract work force of about 6,000.

The Canadian plant is governed by a contract between the CAW and Ford that expires later this year.

MOUNTING LOSSES

Ford's layoffs would come on top of its elimination of 4,000 white-collar jobs through a voluntary early retirement program last year and add to the hundreds of thousands of U.S. job cuts last year amid the slowing economy and the wave of bankruptcies and corporate reorganizations that escalated after the attacks of Sept. 11.

Ford's Padilla said that automakers have a combined total of up to 5 million units of excess North American capacity.

A year ago, the Chrysler arm of DaimlerChrysler announced the elimination over three years of 26,000 mostly U.S. jobs, as part of its own turnaround plan. Even the resurgent General Motors Corp. , the only of Detroit's Big Three automakers expected to book a profit for full-year 2001, plans to cut its North American white-collar work force by about 5,670 jobs, or about 10 percent, this year.

Ford also cut its dividend for the first time in a decade in October and has suspended matching payments to employee retirement plans and suspended all bonuses for top managers.

Ford's shares, which have plummeted from a 52-week high of $31.42, closed down $1.02 on the New York Stock Exchange on Thursday at $15.29.

``Our view is that whatever is announced Friday will have to be only phase 1 of a multi-stage process,'' analyst Saul Rubin of UBS Warburg said of Ford's turnaround strategy in a research note.

He said Ford would ultimately have to remove about 25 percent of its blue-collar work force, or up to 30,000 jobs, and shutter five or six assembly plants to get its cost structure in line with a diminished market position.

``We fail to see how such a move can be made in one go, given the power of the UAW. We therefore believe that the whole restructuring will have to be phased in stages over a lengthy period of time.''