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Ford faces major test
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January 7, 2002: 12:07 p.m. ET
Plans set to cure financial woes, product weakness; job cuts reported.
By Staff Writer Chris Isidore
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DETROIT (CNN/Money) - At the first Detroit auto show in 1907, Henry Ford revealed plans for his Model T, the car that virtually launched his company and the automotive revolution of the 20th century.
Ford's great-grandson, William Clay Ford, is set at the North American International Auto Show here to reveal plans of how he'll reshape the company at the start of this century. The world's No. 2 automaker is beset by problems the company's founder never contemplated, such as industry overcapacity, guaranteed labor contracts and competition from low-priced imports.
Still, part of the plan apparently involves sharp staff cuts. The Financial Times reported Monday that Ford could seek to eliminate 12,000 union jobs through early retirement incentives and voluntary departure packages.
Ford President and Chief Operating Officer Nick Scheele referred to the published reports of job cuts as "guesses" in a meeting with reporters Monday. He said much of the changes in staffing being contemplated could be handled through attrition of hourly employees, who are guaranteed near-full salary until fall of 2003 under the current labor agreement.
"We've already seen quite a lot of job change in North America," Scheele said. "Last year we cut about 350,000 units of capacity and that had some impact. We've handled that by attrition - we haven't fired people. We recognize that we have a contract and we will honor that contract and those obligations."
Ford executives said they look forward to laying out the plans for both analysts and employees.
"Will this be the end-all? It depends on how the world turns, " said Ford North America Vice President Jim Padilla.
Ford executives said there have been no specific talks with the union about reducing hourly employee head count, but pointed out that the contract does allow some voluntary buyouts and transfers to different plants.
"One thing I am looking forward to is laying this out and getting all of our people focused on delivering this piece of what we have to do. This speculation does not help us with our unions and our people in the development centers," Padilla said.
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CNNfn's David Haffenreffer reports on Ford's restructuring plans.
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The company also is expected to announce deep cuts in the salaried staff, according to the report. The Financial Times estimated the cuts could be as many as 8,000, or 20 percent of nonunion staff, roughly the depth of salaried cuts already announced by General Motors Corp. and DaimlerChrysler (DCX: Research, Estimates). The Ford salaried staff already has been hit with the elimination of matching contributions to their 401(k) plans as well increases in health insurance premiums.
Ford (F: Research, Estimates) has warned it expects to lose 50 cents a share in the fourth quarter, its third straight period in the red, which would give the company a loss of 48 cents a share for the year. Analysts surveyed by earnings tracker First Call are looking at earnings of about 50 cents in 2002, as industry-wide U.S. sales are expected to decline by more than a million vehicles.
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Ford Motor Co. CEO William Clay Ford, shown here at the auto show in Detroit Sunday evening, is set to reveal turnaround plans to analysts Friday. | |
The current CEO's plans, to be disclosed Friday, are certain to be far less dramatic than those revealed by the company's founder 95 years ago. The freedom to close plants or radically reshape the company are extremely limited by the contract with the United Autoworkers union.
Still, certain shifts of hourly workers already have been eliminated and, despite the contract, some cuts are expected to be announced.
Some analysts also have wondered whether the Mercury brand will be eliminated, again following DaimlerChrysler's dropping Plymouth and GM's (GM: Research, Estimates) move to discontinue Oldsmobile.
The middle brands, positioned between the core entry-level brands like Ford and the upper-end brands, have had difficulty competing. Ford has had great success in its top-end brands, both at home and overseas, but analysts say Mercury has not been receiving resources that now are even more scarce at Ford.
Ford executives denied Monday there were any plans to discontinue Mercury.
"Not only are we committed to Mercury going forward, Mercury is a very important part of our brand portfolio," Scheele said. "It has been a very important piece of our profitability."
Ford, who assumed the CEO position in October when Jac Nasser was forced out, acknowledged the difficult time his company faced at an auto show reception Sunday evening that included press and many Ford employees and their families.
"We've faced tough times before and we came out stronger than ever each time," he said. "We're going to do it again.
"I ask you to hang in there with us as we re-polish the oval and get it shining brightly again," he said, referring to the company's famous logo. "Right now we're in the middle of a painful but necessary transformation of our company. We've made some progress already, but we're not finished."
Ford promised that there is a plan among the company's executive team, which includes Scheele, who earlier this summer was brought back from his turnaround efforts in the company's European operations.
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At the same reception, Scheele said stemming the operating losses and improving the financial position would be an important but relatively short-term portion the turnaround plan. He said the real challenge for the company is to improve the quality of its products.
"These [cost-cutting] actions will make the company stronger for everyone," he said. "But those actions are not will sustain Ford Motor Co. in the long run. Our real challenge is putting the product plans in place and executing them in a manner that will ensure the company's competitiveness for decades to come."
Scheele acknowledged that the company has lost its focus when it comes to product development. He said the company plans to unveil an average of 20 new models a year across its various brands in North America for the next several years.
"In the long run it is our product strategy that will determine how successful the next 100 years will be or even if there will be another 100 years," he said.
Separately, a Japanese newspaper reported that Ford Motor and Japan's Bridgestone Corp., which makes Firestone tires, have agreed to move toward reconciliation after breaking off ties last year following the recall of millions of Firestone tires. 
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