US:Ford cuts 1,750 jobs, won't pay bonuses
Ford cuts 1,750 jobs, won't pay bonuses
Weaker sales outlook also prompts carmaker to cut back on contractors, suspend 401(k) matches.
By Eric Mayne / The Detroit News
Slumping U.S. sales prompted Ford to lower its 2005 earnings guidance Tuesday and undertake more aggressive steps to lower operating costs: The moves include:
• Cut 1,750 positions, or 5 percent, out of 35,000 salaried jobs in North America by Oct. 1.
• Reduce by 10 percent the use of outside, contract and purchased services in North America by July 1.
• Eliminate 2005 bonuses for salaried management employees around the world.
• Suspend Ford's 401(k) matching grant for salaried employees effective July 1.
• Evaluate options to cut personnel costs outside of North America.
Ford Motor Co., anticipating weaker U.S. sales, will cut another 1,750 white-collar jobs across North America and slashed its 2005 earnings forecast for the second time this year.
The automaker also is planning to eliminate 2005 bonuses for management employees worldwide, suspend 401(k) matching funds for salaried employees and reduce by 10 percent the number of contractors it has by July 1.
The latest drastic cuts are another major setback for Michigan, where Ford employs thousands of white-collar workers and state officials are grappling with one of the nation's highest jobless rates and stagnant economic growth.
Ford's U.S. sales have dropped 5.6 percent this year in an overall market that has declined 1 percent. Demand for some of Ford's most profitable vehicles -- pickups and large SUVs -- has dropped sharply, in part because of high gasoline prices.
The cuts, representing five percent of Ford's North American white-collar work force of 35,000, will occur by Oct. 1 and come on top of another 1,000 white-collar cuts this spring, Ford said.
The latest downsizing moves underscore the competitive challenges and growing financial woes facing Detroit automakers and auto parts makers as Asian and European rivals make more inroads in the U.S. market.
Ford's six brands -- Ford, Lincoln, Mercury, Jaguar, Land Rover and Volvo -- controlled 19.1 percent of the U.S. market through May, down from 20.1 percent in the first five months of 2004.
"Ford has lost a lot of market share and they're carrying too much overhead for their volume," Burnham Securities analyst David Healy said.
The automaker also blamed "continued supplier-related challenges" for the latest moves. Ford is in the process of taking control of 24 North American plants from former parts unit Visteon Corp.
Because of the sales slump, Ford lowered its full-year earnings guidance to a range of between $1.84 billion to $2.3 billion this year, down from a previous target of $2.3 billion to $2.76 billion.
The earnings announcement came after the close of trading Tuesday, when Ford shares closed up 6 cents at $11.17 a share in New York Stock Exchange trading.
"Challenges continue to mount, especially in our North America automotive operations," Don Leclair, Ford's executive vice president and chief financial officer, said in a statement. "We said we'd be adjusting our cost structure going forward. (These cuts) are one step along the way."
The automaker warned in April it would accelerate cost-cutting efforts after first-quarter profits dropped 38 percent to $1.21 billion, down from $1.95 billion in the first three months of 2004.
In addition to weak sales, the company is blaming higher raw material costs, high gas prices, spiraling employee health care costs and unfavorable currency rates for the drop in earnings.
"We remain committed to improving our cost structure, optimizing our global footprint, and making essential investments for the future," Leclair said.
The elimination of white-collar bonuses and suspension of matching 401(k) payments is expected to save the automaker millions of dollars a year.
Ford restored 401(k) employee matches in July 2004 after suspending them in 2002 because of financial woes.
Earnings have suffered because its high-margin products, sport utility vehicles such as the Ford Explorer and Expedition, are selling poorly.
In addition to the latest cutbacks, Ford Chairman and CEO Bill Ford is forgoing all salary, bonus and stock compensation until the company restores the profitability of its car and truck business. He has not collected a cash salary since he became CEO in 2001. Last year, though, he was awarded stock options, restricted stock and other compensation valued at $22 million.
In 2004, Ford's automotive business earned pretax profits of $850 million. Ford expects its automotive operations to break even at best this year, largely due to lower SUV and pickup sales in the United States.
The latest cutbacks are also considered a pre-emptive move as Ford prepares for crucial contract talks in 2007 with the United Auto Workers union, whose negotiators often point to fat executive paychecks when pressed for concessions.
The automaker is expected to press the union, which represents 110,000 Ford factory workers in the United States, for relief from rising health care and pension expenses.
A new study released Tuesday underscores the ongoing problem facing Ford and rival General Motors Corp., which have relied on robust profits from large SUV sales.
CNW Marketing Research said SUV buyers are migrating to smaller vehicles such as sportwagons and crossovers. The percentage of SUV buyers switching to a different type of vehicle has risen steadily since 1999.
Through May, some 50.3 percent of SUV owners have switched, compared with 38.2 percent for all of 2004.
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.....