Ford to Cut 30K Jobs & Shut Plants

[Keith Browning]

January 23, 2006 <img src="http://www.forddoctorsdts.com/photographs/boards/mr-bill-1.jpg" alt="Ford Chairman and CEO, Bill Ford listens to a reporter's question during a question and answer session in Dearborn, Mich., Monday, Jan. 23, 2006. The automaker will cut 25,000 to 30,000 jobs and idle 14 facilities as part of a restructuring designed to reverse billion-dollar losses in North America. The cuts represent 20 percent to 25 percent of Ford's North American work force of 122,000 people. Ford has approximately 87,000 hourly workers and 35,000 salaried workers in the region." hspace="10" vspace="20" border="0" align="right">

 

 

DEARBORN, Mich. - Ford Motor Co. plans to cut up to 30,000 jobs and shutter 14 plants in a sweeping restructuring that the nation's second biggest automaker hopes will tackle declining market share and rising costs that led to hefty losses in its North American operations.

 

 

Ford shares rose on Monday's news, indicating some investors were pleased with the long-awaited "Way Forward" plan as well as the company's larger-than-expected $124 million overall profit in the fourth quarter. Union leaders called the planned cuts "extremely disappointing."

 

 

Ford shares rose 42 cents, or 5.3 percent, to close at $8.32 on the New York Stock Exchange.

 

 

Ford said the plan will restore profitability by 2008. But some analysts said the plan was short on details, leaving them uncertain if it would boost Ford profits as the company struggles with aggressive competition, higher gasoline prices, rising costs for labor and raw materials and a junk credit rating. Ford named only five of the plants it plans to close.

 

 

"It's a step forward in the culture of Ford. Whether it translates into increased profits remains to be seen," said Brian Johnson, an auto analyst with Sanford Bernstein.

 

 

The cuts represent up to 25 percent of Ford's North American work force of 122,000 people. Ford has approximately 87,000 hourly workers and 35,000 salaried workers. In addition, Ford plans to cut 12 percent of its corporate officers in the next two months.

 

 

Ford's St. Louis plant will be the first plant idled, in the first quarter of this year. A plant near Atlanta will close at the end of this year and a plant in Wixom, Mich., will close in the second quarter of 2007, according to Ford Americas President Mark Fields, the architect of the plan.

 

 

Other plants to be idled and eventually closed through 2008 are Batavia Transmission in Ohio and Windsor Casting in Ontario. Ford will choose later this year two more plants to be idled. The company also will reduce production to one shift at its St. Thomas assembly plant in Ontario. All of the plant closings and job cuts are scheduled to be completed by 2012.

 

 

"These cuts are a painful last resort, and I'm deeply mindful of their impact," Chairman and Chief Executive Bill Ford said in announcing the cuts. "In the long run we will create far more stable and secure jobs. We all have to change and we all have to sacrifice, but I believe this is the path to winning."

 

 

In addition to the facilities named Monday, analysts also have predicted assembly plants in St. Paul, Minn., and Cuatitlan, Mexico could be at risk for closure because of the products they make.

 

 

Under the company's existing contract with the United Auto Workers, workers at the idled plants will continue to get most of their pay and benefits until a new contract is negotiated next year.

 

 

Ford also plans to build one plant in North America, but Fields wouldn't say where it will be located. He would only say that the plant must be a low-cost operation.

 

 

UAW President Ron Gettelfinger and Vice President Gerald Bantom expressed disappointment over the plan.

 

 

"The impacted hourly and salaried workers find themselves facing uncertain futures because of senior management's failure to halt Ford's sliding market share," they said in a statement. "The announcement has further left a cloud hanging over the entire work force because of pending future announcements of additional facilities to be closed at some point in the future."

 

 

The pair said Ford should be trying to gain market share, rather than aligning production capacity with shrinking demand for the company's vehicles.

 

 

Fields said Ford's North American plants have been operating at about three-quarters of their full capacity.

 

 

"That is clearly unsustainable," Fields said. He said Ford's actions will reduce assembly capacity by 1.2 million vehicles, or 26 percent, by the end of 2008.

 

 

In addition to the job cuts, Ford said it plans to achieve $6 billion in material cost savings by 2010 as part of its restructuring. It also plans to revitalize its Ford, Mercury and Lincoln brands by giving them more distinct identities and relying less heavily on costly incentives.

 

 

Earlier Monday, Ford reported earnings of $2 billion in 2005, down 42 percent from last year's profit of $3.5 billion. It was the third straight year the automaker has reported a profit, but gains in Europe, Asia and elsewhere were offset by a loss of $1.6 billion in North American operations.

 

 

The latest results included a 19 percent increase in its overall profit to $124 million, or 8 cents a share, in the fourth quarter thanks to the sale of its Hertz Corp. rental division and improved profits for its luxury brands. That was despite a loss of $143 million in its North American operations, an improvement from a loss of $470 million the same period a year ago.

 

 

Ford said it would no longer provide earnings guidance beginning in 2006.

 

 

"We can't succeed in the long run if we're focused only on the short term," Bill Ford said.

 

 

Ford Chief Financial Officer Don LeClair said employee buyouts and other elements of the restructuring plan could cost the automaker around $500 million this year.

 

 

Fields said half the jobs Ford is cutting will be through attrition, while the rest will be through layoffs. He said the company plans to help workers using buyouts and possible placement in other plants.

 

 

In Wixom, 18-year veteran James Crawford said he is too young to retire and might not have enough seniority to get hired at another plant.

 

 

"This really hits me hard," said the 39-year-old car painter, who listened to the announcement on the radio in a white Ford Probe parked across the street from the plant. "It looks like I'm starting over."

 

 

During the 2007 labor negotiations, Ford will almost certainly try to eliminate the unparalleled job protection that lets hourly workers continue to collect wages and benefits when there is no longer any work for them, said Gary Chaison, a professor of industrial relations at Clark University. The UAW has vowed to keep those protections in place.

 

 

"The announced plant closings and future announcements are the subject of ongoing discussions with Ford," Gettelfinger and Bantom said. "Certainly, today's announcement will only make the 2007 negotiations all the more difficult and all the more important."

 

 

Ford and its larger rival, General Motors Corp., have been hurt by falling sales of profitable sport utility vehicles, growing health care and materials costs and restrictive labor contracts. GM announced a similar restructuring plan in November that will shave its work force by 30,000 and close 12 North American facilities.

 

 

Ford also has seen its U.S. market share slide as a result of increasing competition from foreign rivals. 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 in 2005, down from 18.3 percent the year before and 24 percent in 1990.

 

 

"It's a competitive shootout like we've never seen before," said Fields, who said the number of vehicle nameplates in the U.S. market will reach 300 by the end of the decade, up from 215 in 2002.

 

 

The restructuring is Ford's second in four years. Under the first plan, Ford closed five plants and cut 35,000 jobs, but its North American operations failed to turn around. Bill Ford said this plan makes far more dramatic changes, including changing a stifling corporate culture and focusing more heavily on consumer demands.

 

 

"We're going to be a big company that thinks like a small company," he said.

[gasgasman]

Ford is lacking on product lines.

 

We don't have any small cars like the Aveo, the Ranger is getting long in the tooth.

Chrysler came out with the 300, Ford came out with the 500. 300 out sells the 500 by a huge margin. I wonder why?

What gets me is, styling does not cost any extra.

 

Oh, look at the '06 Explorer inside door pull handle. In all the magazine pre-production write ups, the biggest complaint was the inside door handle. Well guess what makes it to production?

 

Ford is riding on two vehicles right now-the Mustang and the F150.

 

Ford is way late on the Crossover SUV craze.

The Sick O is the biggest automotive blunder in the 21st Century.

 

Ok, I'll get off my soap box.

[Torqued_Up]

Hey soap box or not you hit the nail right on the head! If your FordStar is turned on through the lunch hours they run a lot of their TV commercials. There's one with Mr. Bill himself stating that the design of their cars has been way too conservative and changes were being made to allow for more free thinking concerning styling.

 

With that said then why not offer a Tonka body package? I though that was cool!!! With designs like the 300 and the Charger who would want to look at a 500? I saw a drawing of a concept based on the 1970 Challenger but all modern. It would NOT be hard for Chrysler to come out with it by putting it on a charger or 300 platform. It would be a head turner for sure!