Ford Cuts 10,000 More Salaried Jobs, 2 Plants, Suspends Dividend in Bid to Cut Costs
DETROIT September 16, 2006;Tom Krisher writing for the AP reported that -- Ford is putting its "Way Forward" restructuring plan on fast forward. Eight months after the automaker unveiled its original plan to become a smaller, more competitive company, Ford Motor Co. announced Friday that it will slash thousands of jobs and shutter two additional plants with hopes of returning to profitability sometime in 2009.
The company announced it would cut 10,000 more white-collar positions in addition to offering buyout and early retirement packages to all of its 75,000 hourly employees. It also suspended its dividend.
Wall Street seemed unimpressed. Ford's shares slumped nearly 12 percent amid disappointment that the automaker didn't do more to address rising health and pension costs, falling market share and intense competition from Asian manufacturers whose models have enthralled buyers looking for gas-sipping cars and trucks.
The announcement came as Chrysler's parent said it would cut U.S. production through the end of 2006 and follows big cutbacks at General Motors earlier this year. The cuts can be traced to consumer demand shifting from trucks and sport utility vehicles to smaller, more fuel efficient cars and crossovers.
The blue-collar cuts at Ford, the second-biggest U.S. automaker, are another blow to organized labor, which has been losing members as the auto industry reshapes itself to battle lower-cost, nonunion rivals.
Ford said it would shutter a stamping plant in Maumee, Ohio, in 2008 and its Essex engine plant in Windsor, Ontario, in 2007.
It will also close an assembly plant in Norfolk, Va., in 2007, a year earlier than previously announced and will cut a shift in January. An assembly plant in St. Paul, Minn., which is scheduled to close in 2008, also will have a shift reduction in 2007.
The new cuts bring the total number of plant closures to 16, adding to the 14 plants announced in the previous restructuring plan. The company has identified nine plants to be closed through 2008, but Ford officials would not talk about which facilities would be shut down after that.
Ford said it would complete its cuts of about 30,000 hourly jobs by the end of the 2008, four years ahead of its previous target. The company said it had cut 4,000 salaried positions in the first quarter of this year.
The new cuts would reduce Ford's total North American work force by 29 percent, from the current level of about 130,000 to about 92,000 by the end of 2008. The salaried job cuts represent about a third of that work force.
Ford's method of slashing its labor force is similar to cuts made earlier this year by larger rival General Motors Corp. At GM, 34,410 hourly workers have accepted buyouts or early retirement offers, and the company cut 2,000 salaried workers.
Ford, GM and DaimlerChrysler AG's Chrysler unit are struggling with the need to reduce their so-called "legacy costs" of big pay and benefits packages for workers and retirees.
DaimlerChrysler said Friday that its Chrysler division will make additional production cuts in the third and fourth quarters to reduce dealer inventories.
Ford said by 2008, its North American factory capacity will be 26 percent lower than 2005 levels.
It said the plan would cut about $5 billion in operating costs, mainly by offering early retirement and buyout packages to all hourly workers and to white-collar employees. Ford plans to expand buyout and early retirement offers worth up to $140,000 to the company's U.S. hourly work force of more than 75,000 as part of the plan.
"The simple fact is that the business model that served us in North America for decades no longer works," Mark Fields, Ford's president of the Americas, said during a morning teleconference.
Also during the teleconference, Executive Chairman Bill Ford said there were no plans for the Ford family to buy back stock and take the company private.
Todd Wiech, a 46-year-old Ford worker in St. Paul, Minn., said it would be hard to leave the company where he's worked for 18 years, but he's weighing options that include a buyout, returning to school or transferring to another Ford plant.
"Myself -- people that were hired in 1988 -- it hits us pretty hard because we've got a lot of time invested with Ford and we're getting a little older to go out looking," said Wiech.
At a plant in Dearborn, carpenter Brent Orr, a 12-year veteran, said he probably would take a buyout offer.
"For me, I'm a skilled trade. So I can probably go out and get a job somewhere," Orr said. "It will probably be out of state. There isn't a lot of work right now in Michigan."
Ford said that by the end of 2008 it would close or sell all facilities that it took back as part of a bailout of Visteon Corp., a supplier that was spun off from the automaker.
The company also said it expects to achieve full-year profitability in its North American automotive operations no earlier than 2009. The company had previously pledged to make money in North America in 2008.
It also plans to suspend the quarterly dividend on its common and Class B stock in the fourth quarter of this year.
Some Wall Street analysts said the plan did not go far enough.
"We had hoped Ford would close additional assembly plants and make remaining ones highly more flexible, announce the exit-sale of several brands" and take other steps, said Ron Tadross, analyst for Bank of America.
Merrill Lynch analyst John Murphy downgraded the company's stock from neutral to sell and said the plan focuses on buyouts and doesn't address other issues.
"It does not materially accelerate product introductions. It does not provide a solution for the troubled facilities assumed from Visteon. It does not cut capacity deeper. It's missing a lot," he said. Visteon is Ford's former parts unit.
But Morgan Stanley maintained its equal-weight rating.
"While we are pleased to see greater cost reduction and more acknowledgment of the reality/gravity of the situation, we remain concerned that current results are worse than we think," analyst Jonathan Steinmetz said in a note to investors.
Ford shares fell $1.07, or 11.8 percent, to close at $8.02 on the New York Stock Exchange. Its shares have traded in a 52-week range of $6.06 to $10.09.
The company lost $1.4 billion during the first half of this year.
In July, Ford pledged to accelerate its "Way Forward" restructuring plan, which when introduced in January called for up to 30,000 job cuts as well as closing 14 facilities by 2012.
The company indicated Friday that it is ready to accept a smaller slice of the market, focusing on profitable sales instead of volume. It said it expects its market share to slip to 14 percent to 15 percent, down from about 26 percent in the early 1990s.
Ford said it would get out of the minivan business. But it will add a new full-size, seven-passenger crossover for sale in 2008, based on the Fairlane wagon concept. The Fairlane will be produced in Oakville, Ontario.
"The most important thing we do is to size our company and our capacity to the current demand and, on top of that, to continue to invest in the products and services -- the cars and trucks -- that the customers really, really want," Chief Executive Alan Mulally said. Mulally, who was named to the post last week, led a turnaround at the commercial jet-making division of Boeing Co.
Ford also said it would roll out new or significantly upgraded cars and trucks in 70 percent of its Ford, Lincoln and Mercury brands, expanding in growing areas such as car-based crossovers. At the same time, Ford said it will try to maintain its lead in the truck segment by introducing a completely reworked F-150 that will go on sale in 2008.
Associated Press videographer Mark Carlson and writers Sarah Karush in Detroit and Martiga Lohn in St. Paul, Minn., contributed to this report.
Ford Motor Co.: http://www.ford.com