US:Ford's fix-it plan
Ford's fix-it plan
Up to 30,000 workers to be eliminated and at least 10 factories to close
Bryce G. Hoffman / The Detroit News
DEARBORN-- Ford Motor Co. executives will present a restructuring plan to the company's board of directors today that calls for closing at least 10 assembly and component plants and eliminating 25,000 to 30,000 hourly jobs in North America within five years, according to people familiar with the plan.
The cuts would be deeper than many had expected, signaling the urgency of Chairman and CEO Bill Ford Jr.'s push to restore the automaker's ailing North American operations.
Bill Ford has promised the impending moves, expected to be announced Jan. 23, will affect all levels of the company. As such, the automaker will announce the departure of as many as seven top executives in the coming weeks, according to the people familiar with the plan.
The broad outlines of Ford's plan -- dubbed the "way forward" -- were approved by directors at an off-site meeting in October with top executives in South Carolina.
In meetings today and Thursday, Mark Fields, Ford's new president of the Americas division and the architect of the "way forward" plan, will walk board members through the fine points, including budget projections for 2006 and 2007, capital expenditure requests and other details, sources said.
Fields also will present his blueprint for revitalizing the Ford, Mercury and Lincoln brands, which includes a new strategy to attract young buyers for the Blue Oval brand.
"That scale of action by Ford would be perceived as a very aggressive right-sizing move and would go a long way toward Ford getting its cost structure back in line with its much-diminished market share," said Glenn Reynolds, an analyst with Credit Sights, a New York-based research firm.
Ford would not publicly comment on its plans. "Our work continues," said spokesman Oscar Suris. "These plans will be final when they're ready to be shared publicly."
Ford's upcoming turnaround plan appears to be more far-reaching than the one Bill Ford launched after he became CEO four years ago. That plan called for 20,000 job cuts in North America, several plant closures and the elimination of vehicles like the Mercury Cougar.
At the time, Bill Ford set a goal of making $7 billion in annual pretax profit by the middle of this decade. Ford has since abandoned that goal. The company is likely to earn about $2.5 billion this year after taxes, but has struggled with falling sales and deep losses in North America.
The new plan, which will guide the company through 2011, calls for 25,000 to 30,000 blue collar jobs to be eliminated in North America. Ford had 87,000 UAW-represented workers in North America at the end of 2004. It has about 11,600 union workers in Canada.
The cutbacks in the works at Ford appear to be similar in scope to those outlined last month by General Motors, which said it will cut 30,000 jobs and close nine plants.
Ford will make the case that its hourly work force won't be alone in accepting sacrifices. The automaker already has announced plans to cut about 4,000 salaried jobs in the first quarter of 2006 on top of 2,750 white-collar cuts made this year.
United Auto Workers President Ron Gettelfinger has made it clear that his members won't abide suffering cutbacks alone. Nevertheless, Ford's plan to close at least 10 assembly and component plants over the next five years in the United States, Canada and Mexico will be a bitter pill for the union.
Sources familiar with Ford's strategy said the decision about which plants to close has not been finalized, adding that Ford may only announce a few specific plant closures in January.
Those are likely to include Ford's assembly plants in St. Paul, Minn., and St. Louis, Mo. The St. Louis plant's prospects have been hurt by a dramatic decline in demand for Ford's once best-selling Ford Explorer SUV, which is also built in Louisville, Ky. The St. Paul factory produces the Ford Ranger pickup, which has not been redesigned in several years.
The fate of Ford's underused Wixom plant, the subject of much speculation in recent months, is still up in the air, as is that of Ford's Atlanta assembly facility.
Ford is likely to hold off on naming all the plants slated for closure. The company is already negotiating with state and local authorities around the country, and the outcome of those talks could go a long way toward determining which plants stay open and which ones close. However, Ford also wants to keep its options open in order to adjust to changing market conditions.
While Ford may not specify all of the plants it intends to close, it will estimate the amount of production capacity it plans to eliminate. Its goal is to boost capacity utilization to at least 95 percent. Global Insight Inc. estimates that Ford's North American factories are currently running at 72 percent capacity. Anything less than 90 percent is considered to be operating at a loss.
Ford cannot afford for its North American factories to operate inefficiently. Over the past year, Ford's pretax profits in North America have fallen from almost $1.8 billion in the first nine months of 2004 to a loss of nearly $2.2 billion for the same period in 2005. Ford, Lincoln and Mercury's share of the domestic market has dropped to 17.4 percent, compared to 25.6 percent in 1995.
'A super plan'
On Tuesday, Ford board member Kimberly Casiano told Dow Jones News Service that she and her colleagues will pore over the details of the proposal this week. "The plan is a super plan," Casiano said after speaking at a luncheon in Detroit.
She cautioned that the board may not approve every aspect of the "way forward" plan. "You can't always make every detail of a plan possible."
UAW Vice President Gerald Bantom said Tuesday that the details of Ford's restructuring plan will be released Jan. 23, but said he did not know the extent of Ford's planned cuts. "We're hoping that nothing happens," said Bantom, who heads the UAW's Ford bargaining unit. "But we know that's not going to happen."
Ford is already in negotiations with the UAW and hopes to receive concessions on health care costs similar to those the union recently negotiated with GM. Ford hopes a deal can be ratified by union members by the end of the year.
In a recent interview with the Detroit News, the UAW's Gettelfinger said he has had several meetings with Fields since he took over as head of Ford's Americas division in October and feels comfortable working with him.
Speaking at a press conference Tuesday, Gettelfinger said the UAW has hired an outside firm to review Ford's finances. "We're still in the process of analyzing the data," the union leader said.
Ford's restructuring announcement will come on the heels of a series of new product and brand revelations at both the Los Angeles and Detroit auto shows. The timing is designed to demonstrate that Ford's "way forward" plan is about not only closing plants and cutting jobs, but also expanding the company into new markets.
Fields' biggest challenge will be to stop Ford's 10-year market share slide.
Fields to detail plan Jan. 4
On Jan. 4, Fields is likely to outline Ford's new brand strategy in his keynote address at the Greater Los Angeles Auto Show. While the details are still being worked out, Fields is expected to outline a comprehensive strategy to attract young buyers to the Ford brand.
"Ford definitely needs a youth strategy," said Jim Sanfilippo, an analyst with AMCI Inc. in Detroit. "Ford can't continue to operate without more volume at the low end of the market."
While Ford once had a solid hold on the bottom of the market with vehicles like the Fiesta and Escort, that grip has been broken in recent years as competitors have rolled out more targeted products. Toyota Motor Corp. has led the charge with its new Scion brand.
Jim Hall, an analyst with AutoPacific in Southfield, said Ford has several interesting international designs that could appeal to younger buyers in its home market, but most do not meet U.S. safety standards.
"There's nothing that's an easy pull off the shelf," Hall said. "Expediency will be difficult."
Ford may unveil a youth-oriented concept car at the Detroit auto show, but that will take some time to develop into a production vehicle.
"There are some products that would fit with a youth strategy that Ford has in its pipeline," said Michael Robinet, an analyst with CSM Worldwide in Farmington Hills. In the meantime, Ford will likely use new marketing strategies and trim lines to draw younger buyers to its existing products.
As The Detroit News reported last month, Fields took a hard look at killing the Mercury brand. However, that study concluded that Mercury brings in more money than would be saved by eliminating it. Instead, the company will try to reenergize Mercury by giving the brand new product designed to appeal to women and more youthful buyers.
Fields would also like to expand Mazda's presence in North America by encouraging more Lincoln Mercury dealerships to add Mazda franchises.
Some dealers, like Jerry Reynolds in Dallas, already have side-by-side Lincoln Mercury and Mazda dealerships. "It really is a good mix," Reynolds said, though he stressed he has heard nothing about Fields' plan. "You get the younger buyers with Mazda, the older with the Lincoln and hopefully some in the middle with Mercury."
Sanfilippo said Mazda has struggled to expand its sales channel in North America. "Lincoln Mercury might be a way to get that going faster," he said."First you've got to fix Mercury and Lincoln."
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.....