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Ford downsizing will cut deeper than expected

Restructuring plan will include at least 10 plant closures and loss of at least 25,000 hourly jobs

Bryce Hoffman / The Detroit News

DEARBORN -- Ford Motor Co. will unveil a restructuring plan Monday 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, first reported by The Detroit News on Dec. 7, 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 will affect all levels of the company. As such, the automaker will announce plans to reduce the number of top executives on Monday. One of those will be sales and marketing vice president Steve Lyons.

The broad outlines of Ford's plan -- dubbed the "way forward" -- were approved last month by Ford’s board of directors.

Mark Fields, Ford's new president of the Americas division and the architect of the "way forward" plan, 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.

Ford would not publicly comment on its plans.

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 in November 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 last 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. Ford plants in St. Louis, Mo., St. Paul, Minn., and Wixom appear to be in jeopardy.

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.

Sources familiar with Ford's strategy said the company may only announce a few specific plant closures on Monday.

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 — likely about 25 percent. 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.

Ford's restructuring announcement comes 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.

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.

As The Detroit News reported in November, 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.
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