|
Ford cutting 35,000 jobs
|
 |
January 11, 2002: 2:53 p.m. ET
No. 2 automaker also closing plants, cutting dividend; sets $4.1B charge.
By Staff Writer Chris Isidore
|
NEW YORK (CNN/Money) - Ford Motor Co. said Friday it is cutting 35,000 jobs worldwide and closing five plants in North America as the No. 2 automaker struggles to cut costs and boost profits.
The Dearborn, Mich.-based automaker also slashed its dividend for the second time in a year and said it will take $4.1 billion in charges as part of the plan, mostly for the write down of assets.
The company also announced a new series of incentives in response to the move by General Motors Corp. (GM: down $0.30 to $49.77, Research, Estimates) last week to offer $2,002 rebates on virtually all its models. The high costs of incentives has been blamed by Ford executives for much of their loss in the fourth quarter.
Ford's response is somewhat more generous than GM on some models, offering $2,500 on the top selling sport/utility vehicle Explorer and most versions of the F-150 pickup, the nation's best selling vehicle, and it offers a $2,000 incentive on many other models.
But some other models, including the compact Focus, the Mustang sports car and the super-cab version of the F-150, have only a $1,000 incentive available. Customers can also chose zero-interest or below-market financing instead of the cash incentive. Some particularly popular models, such as the Thunderbird and Escape, do not have incentives, though.
As to the restructuring plans, Ford announced that the Ford Escort and Mercury Cougar compact cars, Mercury Villager minivan and the Lincoln Continental will be phased out by the end of this year. In addition, CEO William Clay Ford Jr. said at the news conference that he would take no salary or bonus this year other than stock options.
Restructuring won't be a quick fix
Company executives said the restructuring should produce $9 billion in annual savings by the middle of the decade.
"We strayed from what got us to the top of the mountain, and it cost us greatly," Ford told a news conference at the automaker's headquarters in Dearborn, Mich. "These problems didn't happen overnight and they're not going to go away overnight."
Some of the initial reaction to the plans were positive. After trading lower immediately after a delayed opening Friday, shares of Ford (F: Research, Estimates) rebounded and traded slightly higher for much of the rest of the day, closing up 21 cents at $15.50.
Credit rating agency Fitch downgraded Ford's various debt, citing "continuing decline in Ford's competitive position, weak operating profitability,(and) a decline in the company's liquidity outlook." But Standard and Poor's gave Ford a negative outlook on its debt, although that is a less severe step than either a downgrade or putting the company on creditwatch, a move that would suggest a downgrade was likely.
"These actions should be sufficient to maintain positive net liquidity in 2002, even with weaker earnings performance," said Scott Sprinzen, an analyst with S&P's auto group, referring of the cut in dividend and planned assets sales. "But those aren't actions that can be relied on indefinitely. The future of the company relies on an earnings rebound."
John Casesa, Merrill Lynch's auto analyst, termed the plan encouraging.
|  | |
 |
|
|
| |
Ford CEO William Clay Ford Jr. discusses the company's restructuring.
| |
|
"The plan, in our view, is comprehensive and credible," he said in a note to clients. "We have more work to do to fully understand the implications of this restructuring plan, but our first impression is positive."
Still Casesa warned that Ford shares are above valuations seen in previous recessions and that further declines in price is possible.
The company has been struggling with too much industry capacity, restrictive labor contracts and an incentive war that has attracted buyers but also fueled rising losses. The company's involvement in the Firestone tire recall has also raised questions about quality.
Click here for gallery
Ford, whose great-grandfather Henry founded the company, said the cuts were painful but necessary. He assumed the CEO job in October when Jac Nasser was forced out of the top jobs, and said he was pleased with the progress made since then, but that much more needed to be done. He admitted some of Ford's problems came from strategies that were poorly conceived or executed.
Plant closings not immediate
The 35,000 jobs includes some already eliminated through attrition and early retirement last year.
Ford officials expect another 13,000-to-14,000 job cuts in North America, with about 12,000 of them hourly employees. Those cuts come on top of about 6,500 positions eliminated last year. But the plant closures and many of future job cuts are years away. Ford did not give details on when the plants will be closed other than to say it will occur by mid-decade.
The current labor contract with the United Autoworkers union, which runs through fall of 2003, does not allow plant closings and laid-off employees would have to be paid near full salary.
|
|
|
Rick McMichael works on a Ford Escort in this file photo. The Escort will be discontinued, although McMichael's plant in Wayne, Mich., is not one of five plants slated for closing. | |
"The closures that are indicated are further out because of those commitments," said Jim Padilla, president of Ford North America.
Ford Motor said its plan announced late last year to cut up to 5,000 salaried staff through voluntary packages had been accepted by only 3,500 employees. Ford President Nick Scheele said the program will be extended and that terminations will be used if the 5,000-job target is not reached with volunteers.
The plants identified for closings are the Edison Assembly plant in New Jersey, Canada's Ontario Truck Plant, the St. Louis Assembly plant, Cleveland Aluminum Casting, and Vulcan Forge in Dearborn, Mich.
Ford had already announced it would eliminate a shift at the Edison plant, where about 1,700 employees make the smaller Ford Ranger pickup. George Spadoro, the mayor of Edison, N.J., told CNNfn that he traveled to Dearborn this week to plead the plant's case with Ford officials, and that the plant's pending demise comes as a shock.
| |
|
|
The Lincoln Continental is one of four models Ford will discontinue by the end of the year. | |
"This plant has been here 70 years," Spadoro said while standing in front of the facility. "It's been through so many difficult times. Each time the plant was on the edge but it always survived. So I don't believe any the workers really believed this day would come."
The UAW issued a statement saying it will use the months before any of the plant closings take place to make a case for the employees at the affected locations. But it did not directly criticize the overall restructuring plan.
"The UAW's history of using constructive relationships with employers to get through tough times has been proven many times over," said UAW President Stephen Yokich in the statement. "Despite its current problems, Ford is a fundamentally healthy company, and we are confident that it will be around for a long time to come."
|
|
|
Edison, N.J., Mayor George Spadoro, standing in front of one of five plants Ford intends to close, says that employees at the plant thought the facility would again escape closure plans as it had in previous difficult times. | |
Eventually, the plant cuts will cut Ford capacity by about 1 million vehicles a year. William Ford said there was no way to avoid the plant closings if the company is to remain competitive.
"We realize that some of the things must be done are painful and will impact people's lives in an adverse way," he said. "We have to do what brings about the most good for the most people in the long run."
A number of other plants are also at risk in the long term. No new products have been identified for two other plants -- the Ohio Assembly in Avon Lake, Ohio that makes vans, including the soon to be discontinued Villager, and the Cuautitlan Assembly in Mexico which makes the F-series pickup truck.
Ford plans asset sales
In addition Ford said it is looking to sell a number of what it termed non-core assets, eliminating some operations such as forging parts. It expects the sales will raise $1 billion this year. The Woodhaven, Mich., forging plant is one identified for possible sale. Other cost-cutting measures include everything from the sale of some of its corporate jets to eliminating food and beverages at many internal company meetings.
Wall Street has been expecting a broad restructuring plan for weeks after Ford said it would unveil one this month. Last year's job cuts as well as cost savings programs, such as ending matching contributions to its salaried staff's 401(k) retirement plans, freezing salaries for many executives, and increased health insurance premiums, had already saved the company about $1 billion, executives said.
Ford's first-quarter dividend on its widely traded Class B stock will be 10 cents a share, down from 15 cents in the fourth quarter and 30 cents a year ago. Ford also said it plans to sell $1 billion in non-core assets this year.
Despite all the cuts, Ford executives insisted the cost-cutting measures are only a small part of their turnaround plans for the company. They said that they are maintaining investment in research and development in order to meet goals of an average of 20 new models a year for the next several years. There will also be an increased emphasis on product quality.
"We know we can't cost-cut our way to a product-led recovery," William Ford said. "Great products made us who we are and it's going to take us where we're going."
Check auto stocks here
Ford stock fell after a delayed open on the New York Stock Exchange but later climbed into slightly positive territory. 
|
|
|
|
|
|
|
