Ford cuts info tech $300 million
Jobs of 2,800 contract workers are at risk as automaker continues hunt for cost savings
By Mark Truby / The Detroit News
DEARBORN -- Ford Motor Co. is slashing its information technology budget by $300 million a year, or 20 percent, as part of the company's cost-cutting efforts.
The automaker has lost $6.4 billion in the past two years and CEO Bill Ford Jr. has asked his top managers to scour the company for cutbacks that won't hinder Ford's ability to build high quality vehicles.
Ford has cut $2 billion in overhead costs in the past year or so. Late last year, Bill Ford ordered another $1 billion in cuts.
Ford is trying to become lean and competitive enough to earn $7 billion a year in pretax profits by mid-decade.
"There's a huge effort going on right now to cut costs," Ford spokesman Jim Bright said. "We are looking at every staff and every operation. This is certainly not limited to information technology."
Ford spokesman Paul Wood said an unspecified number of Ford's 2,800 information technology contract workers would be cut. The contract employees are employed by companies such as IBM Corp., Compuware Corp. and Kelly Services Inc., but work at Ford.
The cutbacks should not affect full-time Ford employees.
"This is completely in line with how we are attacking costs in other parts of the company," Wood said. "Nothing is off the table."
Information technology is a huge expense for every automaker, accounting for $350 to $500 of the cost of each car built, estimates the Metta Group, a technology research and consulting company in Stamford, Conn.
Ford's information technology department -- which has 6,000 full-time and contract workers and a $1.5 billion annual budget -- manages the automaker's complex network of computers and software programs, oversees Internet applications and handles any number of logistical issues.
Ford executive vice presidents Jim Padilla and David Thursfield informed 13 Ford vice presidents of the information technology cutbacks in a memo distributed last week.
The memo, obtained by The Detroit News, called for a company-wide review of information technology projects to determine where cutbacks can be made.
Final decisions will be made in April, the memo said. Some initiatives were excluded from review, such as "Project Orange," an effort to separate Ford and Visteon's information systems.
"It's healthy for companies to slice some projects," said Howard Rubin, an executive vice president of Metta Group.
"But you want to make sure you leave room for innovative projects that give you a competitive advantage. The big risk is cutting too deep."
Ford is also taking a hard look at other nonproduct areas such as its marketing operation, public relations and legal staffs and governmental affairs office.
Teams composed of finance and operations staff have been assembled to identify potential savings. The company declined to give specific cost reduction goals for departments other than information technology.
Ford intends to implement the cuts without laying off full-time employee or reducing compensation, Bright said.
The company last week told white-collar employees and retirees they would be paying more for medical coverage and prescription drugs beginning this summer.
Ford said its health care tab grew 13 percent to $2.5 billion last year and employees would have to share the burden of the increase.
In addition, Ford has targeted its $37.5 billion global tab for most parts and materials as a potential area for major savings.
Thursfield, who heads purchasing and international operations, said he hopes to cut the purchasing bill by 15 percent within two years.
Ford plans to achieve the savings by working more closely with suppliers to eliminate waste, share more parts across model lines and remove or change some features in cars and trucks.
Where Ford has cut costs
Ford reduced overhead costs by $2 billion last year and plans to slash an additional $1 billion in 2003. Actions this year include:
Cutting $300 million in information technology expenses, which will include contract job losses.
Raising medical and prescription drug costs for about 93,000 salaried employees and retirees and their families.
Continuing the suspension of company matching funds for 401(k) programs. Ford will, however, give merit raises to salaried workers this summer.
My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.
My next Ford.....