Ford to Announce Restructuring Plan

DETROIT Jan 20, 2006; Dee-Ann Durbin writing for the AP reported that in a survey released this week, Ford Motor Co. ranked last among major automakers in the use of its North American plant capacity. The company aims to change that with a restructuring plan to be announced Monday that likely will include closing some U.S. plants, cutting jobs and changing the company's product lineup.

Already some are wondering if shutting 10 plants and laying off 25,000 hourly workers, as The Detroit News and the Wall Street Journal reported Friday, will be enough to reverse the automaker's billion-dollar losses in North America.

Ford spokesman Tom Hoyt refused to comment Friday on details of the plan, including the number of jobs that will be cut from Ford's North American work force of 122,877. Catherine Madden, an auto analyst at the consulting firm Global Insight Inc., said earlier this week the plants most at risk for closure because of the products they make, including sport utility vehicles and outdated sedans, are in St. Louis; St. Paul; Atlanta; Wixom, Mich.; St. Thomas, Ontario; and Cuatitlan, Mexico.

"Ford is in a very tough position with the amount of cash they have and the changes they need to make," Madden said.

Ford is under pressure to make a dramatic announcement after watching Wall Street's lukewarm response to General Motors Corp.'s restructuring plans in November. GM's shares fell after it announced plans to cut 30,000 jobs and close 12 facilities.

Ford's plan "is going to have to be different," said Detroit restructuring consultant James McTevia. "I think the time for any of these domestic automobile manufacturers to procrastinate is over with."

Both Standard & Poor's Ratings Service and Moody's Investors Service lowered Ford's credit rating further into junk status this month in spite of the upcoming restructuring.

"The Ford downgrade incorporates the view that the company's financial and competitive position will remain under considerable stress through 2007," Moody's said.

Unlike GM, which lost $1.6 billion in the first three quarters of 2005, Ford is a profitable company. At the North American International Auto Show this month, Chairman and CEO Bill Ford said the company expects to report a profit when it releases full-year 2005 earnings Monday. Ford's trouble has been in North America, where it lost more than $1.4 billion in the first nine months of last year.

Bill Ford said the No. 2 U.S. automaker took a bigger hit than competitors when oil prices rose, since Ford relies disproportionately on sales of trucks and sport-utility vehicles.

As SUV sales slid, production fell at Ford's North American factories. Ford used just 79 percent of its plant capacity in the region in 2005, down from 86 percent in 2004, according to preliminary numbers released this week by Harbour Consulting Inc., a firm that measures plant productivity. By contrast, Toyota Motor Corp. was operating at full capacity, while DaimlerChrysler AG's Chrysler Group was running at 93 percent.

Ford's labor agreements with the United Auto Workers make it difficult for the automaker to cut excess capacity and jobs. The company currently has 1,100 workers on indefinite layoff in a jobs bank, where they get full pay and benefits. While UAW members did vote last year to require workers and retirees to pay more for their health-care coverage, the deal will shave only about $850 million off Ford's $3.1 billion annual health-care bill.

UAW President Ron Gettelfinger said earlier this week that he hadn't seen details of the plan.

"You're talking about people, communities, hopes and dreams and aspirations, and it's very difficult and trying for our membership," Gettelfinger said. "We don't like to see any jobs go away. We're always in hope that down the road we'll be able to reverse some of those decisions."

Ford also has been criticized for inconsistency in producing hit vehicles. The Ford Mustang pony car and Ford Fusion sedan were strong sellers last year, but minivans and the redesigned Ford Explorer SUV were flops.

As a result, the company suffered its tenth straight year of market share losses in the United States in 2005, and for the first time in 19 years, Ford lost its crown as America's best-selling brand to GM's Chevrolet. Ford sold around 2.9 million vehicles for a market share of 17.4 percent, down from 18.3 percent in 2004.

The restructuring is Ford's second attempt to overhaul its North American operations in four years. Under the first plan, launched in January 2002, Ford cut 35,000 jobs and closed five plants, but North American operations failed to turn around.

Jim Padilla, Ford's chief operating officer, said this plan is different. Last time, he said, Ford didn't consider any changes to its product lineup.

"We treated the situation not too dissimilar from what happened in the early '90s and the early '80s, which was, 'Batten down the hatches, cut the costs and things like that, and we will come out of it,'" Padilla told reporters at the auto show. "The realities are much more harsh than that. This is not just what you would call a cyclical change. This is a secular change."

The plan's chief architect, Ford's Americas President Mark Fields, said consumers are at the core of the new plan. Fields also says the company needs to dump the sense of entitlement it has held because of its long history.

"You start with, what does your brand stand for, who are the target customers you're going after, and then executing a product philosophy and a design philosophy that will bring that to the marketplace," Fields said.