Cost cutting falls short, Ford says - Ford Forums - Mustang Forum, Ford Trucks, Ford Focus and Ford Cars

Stacy94PGT · 03-03-2003, 23:23

Stick to the budget, managers told

By Mark Truby / The Detroit News

Tight budget
For the third time in the last year, Ford is reminding employees of expenditures that are off-limits as it battles to restore profits. Examples:

Discretionary training and travel.
New computer equipment and software.
Racing sponsorships.
Palm pilots, mobile phones, pagers.
Consulting contracts.
Building improvements.

DEARBORN -- Ford Motor Co. officials -- disappointed that cost cutting dictates aren't being consistently followed -- are cracking down harder on discretionary spending.

In a terse memo to executives Monday, Ford North American Chief Jim Padilla said the company is at risk of going over budget this year and demanded strict adherence to a spending freeze in effect since last year.

"Recently, it has come to our attention the freeze has not been consistently implemented," Padilla wrote in the memo, which was obtained by The Detroit News. "To be clear, there will be no exceptions to this policy."

Ford, which has lost $6.4 billion in the past two years, is struggling to carve out billions of dollars in operating costs without hindering new car and truck development.

Expenditures that are prohibited range from the relatively inexpensive -- magazine subscriptions, Franklin planners and refills, pagers and flowers for employee anniversaries -- to big-ticket expenses such as consulting contracts, racing and community event sponsorships and computer equipment and software upgrades, according to documents The News obtained.

For example, all salaried, hourly and supplemental hiring must be approved by a vice president-level executive. All discretionary training and travel is prohibited, along with recruiting dinners and company-sponsored employee events.

Although the freeze was first unveiled in February 2002, and reiterated in August, Ford has been frustrated that it isn't being adopted across the board.

"As you are aware there are risks to the 2003 budget, and continued improvements are required to achieve our 2003 commitments and accelerating our revitalization goals," Padilla wrote. "Achieving our goals will only be accomplished with a continued focus on costs in all we do."

Crosstown rival General Motors Corp. said it is accelerating its own cost-cutting program, spokesman Jerry Dubrowski said.

"We're looking to cut spending wherever we can, particularly discretionary spending such as travel and off-site meetings," Dubrowski said. "In light of all the economic uncertainty, we think it is the prudent thing to do."

DaimlerChrysler AG's Chrysler Group is cutting costs, too, but has not implemented a specific plan to freeze spending, spokesman Dave Barnes said.

With Ford under pressure to restore profits, Chairman and CEO Bill Ford Jr. has called on senior managers to intensify cost cutting. Ford's goal is to build pre-tax earnings back to $7 billion a year by mid-decade.

The automaker stripped away $2 billion in overhead costs last year and Bill Ford called for another $1 billion in cuts this year.

So far this year, the company's information technology budget has been slashed by 20 percent or $300 million and Ford's salaried employees and retirees will see their medical coverage costs rise starting in the summer.