Ford Expected to Announce Restructuring
Ford Motor Co. is expected to announce Friday a sweeping restructuring plan to shed costs, production capacity and as many as 20,000 workers amid its first year of losses in nearly a decade.
The plan comes after a wrenching year at the world’s second-largest auto maker, which has been dogged by red ink, shrinking market share, the Firestone tire recall and the ouster of its chief executive.
Ford officials have been tight-lipped about the details of the plan, to be announced after it is approved at a board meeting this week. Industry analysts have said Ford needs to eliminate 20,000 jobs, and even Ford’s top executives say the auto maker must reduce its production capacity.
“I think you have to right-size. You have to evaluate what capacity you need going forward,” Chief Operating Officer Nick Scheele told reporters Monday at the North American International Auto Show in Detroit. “There’s no magic about it. You’ve got to be capacitized to what you’re going to sell.”
Ford has the capacity to build 5.7 million units a year in the U.S., even without going to a third shift, Scheele said. “I can’t remember when we sold 5.7 million units, ever,” he said.
Ford’s U.S. sales fell 5.5% last year to 3.96 million, down from 4.19 million in 2000.
The auto maker lost $1.4 billion in the second and third quarters of 2001, and is expected to have a loss of about $2 billion for the year, largely due to the $3-billion pretax charge it took in the second quarter to replace potentially defective tires.
Ford cut 5,000 salaried jobs through voluntary early retirements last summer, eliminated bonuses to managers and has suspended matching payments for employees’ 401(k) retirement plans.
But executives say they need to undertake more fundamental reforms. “We don’t come at this from the perspective of what will sound good on Wall Street. We say, what are we going to do for the long run that will make the company healthy, and what will be good for us going forward to our second century,” Scheele said.
“We’ve got the opportunity here to put in place something that will be sustained for a considerable period in the future,” he said. “We want enduring profitability.”
Ford executives have not said whether they will close plants or reduce shifts to reduce capacity, but Scheele said Monday that union contracts would keep Ford from shutting any plants in North America.
David Littmann, chief economist for Comerica Bank, estimated that Ford will need to cut 7% to 12% of its work force. “In Ford’s case--in terms of actual, hard-nosed job cuts, I’m talking 12,700 to 14,000,” Littmann said.
But Kevin Tynan, auto analyst with Argus Research in New York, said Ford is facing a dire situation. “It should be relatively dramatic, and I would say if I had to ballpark on the high end, I’d say 20,000” job cuts, Tynan said. “I think 15,000 to 20,000 is where it should be.”
The new chief executive, 44-year-old William Clay Ford Jr., Henry Ford’s great-grandson, took over in October after firing Ford’s feisty and ambitious chief executive, Jacques Nasser, who was criticized for his grand plans to make Ford a sprawling consumer services company.
“Right now, we are in the middle of a painful but necessary transformation of our company,” Ford told some 2,000 employees Sunday night at a raucous introduction of the Ford GT40, a concept super-car.
“We’ve made some progress already, but we’re not finished. We’ll be making more announcements later this week,” Ford said. “We thank you for your hard work and dedication--and ask you to hang in there with us as we repolish the oval and get it shining brightly again.”
Ford shares fell 44 cents to close at $16.50 on the New York Stock Exchange.
Ford is not the only domestic auto maker planning cost-cutting moves.
General Motors Corp. is expected to announce Thursday an early-retirement offer for thousands of salaried employees in order to eliminate more jobs and prepare for its toughest sales year in a decade.
GM will offer select groups of white-collar employees, age 50 years and older, an early-retirement package effective April 1 as part of efforts to cut its 360,000 global work force through attrition, buyouts and reducing contract employees.
The new offer is similar to a package announced in December 2000 aimed at cutting salaried and contract jobs by 10%, Chief Financial Officer John Devine told reporters.
Also Monday, BMW Group said it sold a record 213,127 vehicles in the U.S. market last year, a 12.5% increase. BMW now is the No. 2 premium brand in the country, after Toyota’s Lexus division.
Among small luxury importers, Rolls-Royce and Bentley Motor Cars Inc. said combined sales of Bentley and Rolls-Royce models declined 6.7%, although Bentley brand cars grew 6%. Other auto makers reported their U.S. sales results last week.
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Times wire services were used in compiling this report.
