Struggling Ford to fire 400 managers
Automaker says terminations are needed to reduce salaried work force by 8%; further cuts are possible.
By Christine Tierney / The Detroit News
Detroit News staffer Brett Clanton contributed to this report.
Ford Motor Co. estimates it will fire 400 U.S. white-collar employees -- the first time in about 30 years the company has forced out professional staff in substantial numbers -- as part of a plan to thin its salaried ranks by 2,750 jobs in 2005.
"Initially, we hoped to achieve our goals through attrition, reduced hiring and other voluntary means," Ford President and Chief Operating Officer Jim Padilla said in an e-mail to midlevel and senior managers earlier this month. "Despite our best efforts, it became clear that getting to our targets required a number of involuntary separations."
Ford is not ruling out increasing the number of U.S. white collar job cuts -- now set at 2,750 by the end of 2005 -- as it drafts its second major restructuring in four years. The reductions represent 8 percent of Ford's U.S. salaried work force.
The Dearborn-based automaker is under growing pressure to slash costs after reporting a $907 million loss before taxes in North America for the second quarter.
Chief Financial Officer Don Leclair said during the quarterly conference call in July that everything was on the table.
"If you're asking, could there be more separations coming up? The answer is, we wouldn't speculate," said Ford spokesman Tom Hoyt.
In his memo, Padilla said it wasn't clear when the layoffs would end. "There is no easy answer."
"We all need to ensure that we achieve an affordable business structure that delivers a sustainable and acceptable return on the business," Padilla said.
The company faces enormous difficulties, he stressed. "In the U.S., the challenge isn't simply an economic downturn. It's a new, rapidly evolving, brutally competitive marketplace," Padilla said.
"We plan to be among the successful automakers in the long term, and we are taking some of the tough decisions needed today to lead us into tomorrow."
Like its larger rival General Motors Corp., Ford is struggling with soaring health care and pension obligations as well as high production costs, relative to its diminishing share of the U.S. auto market.
Ford CEO Bill Ford Jr. recently abandoned his objective to generate $7 billion in annual pre-tax income at the company by 2006.
Last week, Moody's Investors Service lowered its rating on Ford and GM credit to junk, underscoring the U.S. industry's difficulties.
In recent weeks, Ford has cut executives in its public relations department after offering buyouts. In addition to shedding salaried employees, by up to 30 percent in some departments, Ford is preparing to negotiate plant closures with the United Auto Workers union.
The industry has too much production capacity overall, Greg Smith, Ford executive vice president for the Americas, said Monday. "The external environment is much more difficult."
Speaking with reporters last week, Bill Ford said the company's recovery effort entailed more than just "cutting, cutting, cutting," and some aspects of the plan, expected to be announced in the fall, would surprise people positively.
But the job cuts are taking a toll on morale at the automaker, prompting Padilla to clarify the "separation" procedures.
In making the selections, the company will weigh employees' performance, treating seniority as a secondary factor. He said that after a long debate, Ford felt it was best for employees to leave the day they are told they are being let go, but Ford retains con******ts to offer support and assistance. Padilla said security guards were not escorting the newly unemployed off the premises.
Padilla said he did not have an exact figure for the forced departures, but "we expect it to be roughly 400 salaried people overall for U.S. automotive operations and corporate staffs." The cuts outlined so far target U.S. workers, but are in line with plans in Europe, at Ford's Premier Automotive Group of luxury brands and Ford Motor Credit, he said.