Dearborn, Mich. – Ford Motor Co. is staking its future on wrenching cutbacks of its North American operations that will dramatically downsize the No. 2 U.S. automaker.
Mired in one of the deepest crises in its 102-year history, Ford on Monday unveiled its long-awaited “Way Forward” plan to slash up to 30,000 manufacturing jobs, cut 4,000 salaried employees and shutter 14 factories.
“These cuts are a painful last resort, and I’m deeply mindful of their impact,” chairman and chief executive Bill Ford said. “They’re going to affect many lives, many families and many communities.”
The restructuring plan is Ford’s most determined effort yet to stem deep losses in North America and beat back surging foreign automakers. Even so, some investors and analysts said Ford left key questions unanswered Monday and remain skeptical that it is moving quickly and aggressively enough.
Ford’s announcement was another staggering blow to the traditional American auto industry, coming on the heels of the bankruptcy of auto-parts giant Delphi Corp. and moves by General Motors Corp. to cut 30,000 of its hourly workers and idle 10 plants. Since 1979, the traditional automotive Big Three – DaimlerChrysler is the third – have cut more than 600,000 jobs – including 80,000 since 2001.
Bill Ford said the plan represents nothing less than a cultural revolution and a declaration of war – against not only Ford’s competitors but also its own entrenched bureaucracy.
“Today, we declare the resurgence of Ford Motor Co.,” Bill Ford said. “Here is what we will not stand for: incremental change, avoiding risk, thinking short term, blocking innovation, tying our people’s hands, defending procedures that don’t make sense, and selling what we have instead of what the customer wants. In short, we will not stand for business as usual.”
It was a message that the scores of Ford employees invited to hear the announcement in person greeted with enthusiastic applause.
With its U.S. market share on a 10-year downslide, dropping to a historic low of 17.4 percent last year, Ford said Monday that its North American auto operations posted a pretax loss of $1.6 billion last year.
On Monday, Ford committed to returning the business to profitability no later than 2008.
“That’s not a prediction. That’s a promise,” said Mark Fields, president of Ford’s America’s division who oversaw the restructuring plan.
Ford said it expects to cut $6 billion from its annual cost structure by 2010.
But fixing its core auto operations will come at a heavy price.
According to the plan, Ford will reduce its North American production capacity by 1.2 million vehicles – or 26 percent – over the next six years. Ford currently has the factory capacity to build 4.5 million vehicles a year in North America using 43 plants for parts, stamping and assembly, but it sold only 3.3 million last year.
The job cuts will be equally severe. The 25,000 to 30,000 factory cuts combined with the planned 4,000 white-collar cuts amount to up to 25 percent of Ford’s 122,000-person North American workforce. Ford has approximately 87,000 hourly workers and 35,000 salaried workers.
Ford also committed to reducing its 53 corporate officers by 12 percent by the end of the first quarter.
Industry analysts said the moves represented a realistic assessment of Ford’s steadily declining share of the U.S. auto market.
“You have to praise their sense of realism, that they’ll never get to a 25 percent share again,” said David Healy of Burnham Securities. “They have got to do this to survive.”
Some on Wall Street, though, questioned whether Ford has gone far enough given that Ford shareholders have suffered through an alarming drop in stock value in recent years.
“We think (Ford) plans to be more aggressive with design and technology in its vehicles, to be faster in the refreshing of its vehicle lineup and to make added cost cuts that will help improve financial performance over the rest of the decade,” said Efraim Levy, an analyst with Standard & Poor’s Equity Research. “However, we do not believe the restructuring will meet all of Ford’s objectives and we think that not all benefits will accrue to the bottom line.”
The massive restructuring comes four years after Bill Ford announced a similar plan to revitalize the company, which included some 20,000 job cuts and several plant closures.
The new round of job cuts and plant shutdowns also poses a direct challenge to the leadership of the United Auto Workers union, which is already bracing for a fight on similar issues with GM and Delphi.
UAW president Ron Gettelfinger blasted Ford’s plan as “extremely disappointing” and “devastating news for the many thousands of hard-working men and women who have devoted their working lives to Ford.” Moreover, Gettelfinger said a showdown over the wholesale elimination of jobs and factories is coming at the Big Three-UAW national contract talks in 2007.
“Certainly, today’s announcement will only make the 2007 negotiations all the more difficult and all the more important,” Gettelfinger said.
But Ford can ill afford to continue operating at less than 80 percent of its manufacturing capacity, Fields said.
“The hard but simple reality is that Ford has the costs, capacity and staffing of a company that is much larger than our sales and market share can support – even under the best of conditions,” Fields said.
Fourteen Ford manufacturing facilities, including seven vehicle-assembly plants, will cease production by 2012. The first wave includes the idling of five assembly plants and two large component factories by 2008.
Included among the shutdowns are assembly plants in Wixom, Mich.; Atlanta; and St. Louis; a transmission plant in Batavia, Ohio; and a casting plant in Windsor, Ontario. In addition, Ford’s assembly plant in St. Thomas, Ontario, will be reduced to a single shift.
Two more assembly plants will be added to the list later this year. In addition to the facilities named Monday, analysts also have predicted the assembly plant in St. Paul, Minn., could be at risk for being shut down because sales of the Ford Ranger pickup it makes have been falling dramatically. Ford said it was not ready to name the other plants that will be idled.
The automaker also said it plans to build a new low-cost manufacturing site in North America but did not provide additional details.
