Thread: Ford to Cut Up to 30,000 Jobs and 14 Plants in Next 6 Years

The New York Times
January 23, 2006
http://www.nytimes.com/2006/01/23/bu...rtner=homepage
Ford to Cut Up to 30,000 Jobs and 14 Plants in Next 6 Years
By VIKAS BAJAJ

The Ford Motor Company said today that it would eliminate 25,000 to 30,000 jobs and close up to 14 manufacturing plants in the next six years in an extensive restructuring that executives said would make the company's North American division profitable by 2008.

The job cuts and restructuring plan, which the company dubbed "Way Forward" and "Ford Fights Back," were larger than what many auto industry analysts had been expecting. Seven of the 14 plants Ford is closing are vehicle assembly plants, but the company identified today only five plants in Michigan, Georgia, Missouri, Ohio and Ontario representing 26 percent of its production capacity, or 1.2 million cars and trucks, that would be closed through 2008. Officials said it would identify two other assembly plants later this year.

The job cuts are in addition to the 4,000 managerial positions, or 10 percent of its management staff, that Ford has previously said it would eliminate. The company also said today that it would trim the number of corporate officers by 12 percent.

Ford employs 122,000 people in its North American operations and the cutbacks would represent 20 to 25 percent of its work force.

"I appreciate the fact that winning will require sacrifice for the people of Ford and that there will be fewer of us here than there are today," said William Clay Ford Jr., the company's chairman and chief executive who is also the grandson of the company's founder.

"But we must press ahead for the good of all," he added.

Shares of Ford were trading up 49 cents, or 6.2 percent, to $8.39 on the New York Stock Exchange early this afternoon.

The United Auto Workers called the job cuts "extremely disappointing and devastating" and said the company was focusing too much on reducing capacity and not enough on designing more appealing cars and trucks. "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 union's president, Ron Gettelfinger, said in a statement.

Television news crews lined up this morning outside Ford's product development center, which is across the street from Henry Ford Museum in Dearborn, Mich., in anticipation of the announcement, which was broadcast worldwide. Unlike its cross-town rival, the General Motors Corporation, which announced that it would close all or parts of a dozen plants in November with little advance notice, Ford had telegraphed its intentions months ago.

Like G.M., Ford's is struggling with falling sales of sport utility vehicles, high pension and medical costs, and intense competition from ever stronger foreign automakers like Toyota. Last year, Ford controlled 17.4 percent of the American car and truck market, its lowest market share since the early 1980's.

In the last few years, Ford has employed numerous cost-cutting strategies including reducing the ranks of management and cutting benefits for its union employees. Analysts, however, have said those cuts did not go far enough to pull the company out of a sustained decline.

It is unclear whether today's plan will be sufficient to revive Ford, given that the automotive industry is changing rapidly, said Efraim Levy, an equity analyst at Standard & Poor's. The company's ability to increase sales by designing and building better cars will be more important than the cutbacks, he added.

"There is always room for more," Mr. Levy said. "There are always challenges in terms of executing on plan and the competition doesn't stand still. They have to start somewhere and this is their base."

Earlier today, Ford reported better-than-expected fourth-quarter earnings largely because of the sale of its Hertz car-rental business and gains at its financing division, Ford Credit. Losses at the company's main automotive division were larger than a year earlier, and the North American auto business slipped into a loss from a profit in the fourth quarter of 2004.

Over all, the company reported its net income rose 19 percent, to $124 million, or 8 cents a share, in the fourth quarter, compared with $104 million, or 6 cents a share, a year earlier. Excluding onetime items, Ford said it earned $511 million, or 26 cents a share, in the most recent quarter.

Revenue rose 6 percent, to $47.6 billion, from $44.9 billion in the fourth quarter of 2004.

For the full year, Ford's profits fell 42 percent, to $2 billion, in 2005.

Mark Fields, who heads Ford's North American business, said the company had no choice but to close plants and cut staff because its plants were running at three-quarters of their capacity. The company said it would build a new "low cost" manufacturing plant somewhere in North America, but declined to provide details.

Acknowledging the widespread skepticism about the company's ability to grow, Mr. Fields said the company's new sedans, gasoline-electric hybrids and crossover vehicles, which share features of a sports utility vehicle and a car, were a significant departure from past models and would allow it to reclaim lost market share.

Beginning this year, the company said it would no longer provide Wall Street with financial forecasts because it does not want to focus on the "short term."

"It's time to play offense," Mr. Fields said. "It's time to fight back."

Micheline Maynard contributed reporting from Dearborn, Mich., for this article.