Ford Credit expands cutbacks
Chief of finance arm outlines in memo that 74 sales offices will merge; 78 was original target.
By Brett Clanton / The Detroit News
In a memo to employees, Ford Credit CEO and Chairman Mike Bannister announced the consolidation of more regional sales offices and said more restructuring moves could be on the way.
• Ford Credit said it would cut North American sales offices from 163 to 78; now the target is 74.
• Ford Credit is cutting manager bonuses and 401(k) matches.
Source: Ford Motor Credit Co.
Ford Motor Credit, the finance arm of Ford Motor Co., has expanded a plan to consolidate its branch sales offices in North America and is mulling additional cutbacks to restructure its business amid challenging industry conditions.
Ford Credit said it will reduce to 74 the number of sales offices it has in North America, down from an earlier target of 78, according to an internal memo to employees from Ford Motor Credit Chairman and CEO Mike Bannister that was obtained by The Detroit News.
The action represents an expansion of a plan announced in May 2004 to consolidate 163 smaller sales offices into 78 larger offices that will offer loans through all Ford brands, including Volvo, Jaguar, Mazda and Land Rover.
More cuts could be on the way. Ford Credit has reduced its global salaried and contract personnel 8 percent this year through attrition and voluntary buyouts and is on track to cut its total global expenses 5 to 10 percent, Bannister wrote in the memo.
He is also evaluating the company to determine if more restructuring is needed, despite having made progress this year toward reaching internal cost-cutting targets.
"Different times require a different company, and that is what we must become," said Bannister, who presides over the finance company, which has cut 28 percent of its work force since 2001 and now has 16,500 employees.
The memo highlights how Ford's struggle to reverse falling U.S. sales is affecting every aspect of its business, including its mighty finance unit, which has helped prop up the automaker's profits while vehicle sales are down.
The letter, if it results in more job cuts, could also signal more bad news for Michigan, where auto industry job losses have kept the state's unemployment numbers among the highest in the nation.
The memo follows Ford Motor's announcement in June that it would cut 1,750 white-collar positions by Oct. 1 and eliminate bonuses for managers and suspend 401(k) matches for salaried workers.
Ford Credit was not affected by the job cuts outlined in that announcement, but it did slash manager bonuses and freeze retirement fund matches along with its parent company.
"Basically, Ford Motor's management wants everyone to drown in the same two inches of water, and share the burden equally," said Jim Sanfilippo, analyst with industry con******t AMCI Corp. in Detroit.
He believes Ford Credit's warning of more restructuring could be an attempt to create a "softer landing" for future moves to cut jobs and a signal to employees to step forward if they're interested in early retirement or buyout offers.
Ford Credit spokeswoman Chris Solie said employees who are affected by the consolidation of regional sales offices in North America will be offered positions elsewhere in the company. But those who don't take it have access to buyouts or early retirement offers.
But weakening Ford vehicle sales could put more pressure on the finance unit to go further since roughly 40 percent of Ford Credit's business is with customers who are financing new Ford cars and trucks. Through June, Ford sales were down 4.4 percent and its U.S. market share was 17.6 percent, down from 18.8 percent a year ago, according to Autodata Corp.
A downgrading of Ford Motor Co.'s debt to junk status this year has also increased borrowing costs for Ford Credit.
"In uncertain times like these, the best way to navigate the sea of change we find ourselves in is to keep our focus on our ultimate goal -- our true North -- which is to support Ford Motor Co. vehicle sales and consistently add shareholder value," Bannister said.
In June, Ford lowered its 2005 earnings guidance to a range of between $1.84 billion to $2.3 billion, down from the automaker's previous target of $2.3 billion to $2.76 billion.