Company plans to close 14 facilities by 2012; Gilroy dealership
not expected to feel impact
y Dee-ann Durbin, Associated Press Writer
Dearborn, Mich. – Ford Motor Co. plans to cut up to 30,000 jobs and close 14 plants in a sweeping restructuring that the nation’s second biggest automaker hopes will tackle declining market share and rising costs that led to hefty losses in its North American operations.
Ford shares rose on Monday’s news, indicating some investors were pleased with the long-awaited “Way Forward” plan as well as the company’s larger-than-expected $124 million overall profit in the fourth quarter. Union leaders called the planned cuts “extremely disappointing.”
Ford shares rose 42 cents, or 5.3 percent, to close at $8.32 on the New York Stock Exchange.
Ford said the plan will restore profitability by 2008. But some analysts said the plan was short on details, leaving them uncertain if it would boost Ford profits as the company struggles with aggressive competition, higher gasoline prices, rising costs for labor and raw materials and a junk credit rating. Ford named only five of the plants it plans to close.
“It’s a step forward in the culture of Ford. Whether it translates into increased profits remains to be seen,” said Brian Johnson, an auto analyst with Sanford Bernstein.
Gilroy’s Bob Lynch Ford Lincoln Mercury owner Scott Lynch said new products and economic conditions may arise that will help lessen the impact over the years and doesn’t see any adverse effect on sales.
“We won’t be directly impacted by it,” he said. “I think Ford Motor Company is cutting capacity in respect to market conditions already in place.”
Lynch does not believe consumers will notice.
“The last restructuring of Ford, which occurred within the last six months, they pared down the field personnel, but it did not affect quality,” he said.
The cuts represent up to 25 percent of Ford’s North American work force of 122,000 people. Ford has about 87,000 hourly workers and 35,000 salaried workers. In addition, Ford plans to cut 12 percent of its corporate officers in the next two months.
Ford’s St. Louis plant will be the first plant idled, in the first quarter of this year. A plant near Atlanta will close at the end of this year and a plant in Wixom, Mich., will close in the second quarter of 2007, according to Ford Americas President Mark Fields, the architect of the plan.
Other plants to be idled and eventually closed through 2008 are Batavia Transmission in Ohio and Windsor Casting in Ontario. Ford will choose later this year two more plants to be idled. The company also will reduce production to one shift at its St. Thomas assembly plant in Ontario. All of the plant closings and job cuts are scheduled to be completed by 2012.
“These cuts are a painful last resort, and I’m deeply mindful of their impact,” Chairman and Chief Executive Bill Ford said in announcing the cuts.
In addition to the facilities named Monday, analysts also have predicted assembly plants in St. Paul, Minn., and Cuatitlan, Mexico could be at risk for closure because of the products they make.
Under the company’s existing contract with the United Auto Workers, workers at the idled plants will continue to get most of their pay and benefits until a new contract is negotiated next year.
Ford also plans to build one plant in North America, but Fields wouldn’t say where it will be located. He would only say that the plant must be a low-cost operation.
UAW President Ron Gettelfinger and Vice President Gerald Bantom expressed disappointment over the plan.
“The impacted hourly and salaried workers find themselves facing uncertain futures because of senior management’s failure to halt Ford’s sliding market share,” they said in a statement.
The pair said Ford should be trying to gain market share, rather than aligning production capacity with shrinking demand for the company’s vehicles.
Fields said Ford’s North American plants have been operating at about three-quarters of their full capacity.
In addition to the job cuts, Ford said it plans to achieve $6 billion in material cost savings by 2010 as part of its restructuring. It also plans to revitalize its Ford, Mercury and Lincoln brands by giving them more distinct identities and relying less heavily on costly incentives.
Earlier Monday, Ford reported earnings of $2 billion in 2005, down 42 percent from last year’s profit of $3.5 billion. It was the third straight year the automaker has reported a profit, but gains in Europe, Asia and elsewhere were offset by a loss of $1.6 billion in North American operations.
The latest results included a 19 percent increase in its overall profit to $124 million, or 8 cents a share, in the fourth quarter thanks to the sale of its Hertz Corp. rental division and improved profits for its luxury brands. That was despite a loss of $143 million in its North American operations, an improvement from a loss of $470 million the same period a year ago.
Ford said it would no longer provide earnings guidance beginning in 2006.
“We can’t succeed in the long run if we’re focused only on the short term,” Bill Ford said.
Ford Chief Financial Officer Don LeClair said employee buyouts and other elements of the restructuring plan could cost the automaker around $500 million this year.
Fields said half the jobs Ford is cutting will be through attrition, while the rest will be through layoffs. He said the company plans to help workers using buyouts and possible placement in other plants.
During the 2007 labor negotiations, Ford will almost certainly try to eliminate the unparalleled job protection that lets hourly workers continue to collect wages and benefits when there is no longer any work for them, said Gary Chaison, a professor of industrial relations at Clark University. The UAW has vowed to keep those protections in place.
“The announced plant closings and future announcements are the subject of ongoing discussions with Ford,” Gettelfinger and Bantom said. “Certainly, today’s announcement will only make the 2007 negotiations all the more difficult and all the more important.”
Ford and its larger rival, General Motors Corp., have been hurt by falling sales of profitable sport utility vehicles, growing health care and materials costs and restrictive labor contracts. GM announced a similar restructuring plan in November that will shave its work force by 30,000 and close 12 North American facilities.
The restructuring is Ford’s second in four years. Under the first plan, Ford closed five plants and cut 35,000 jobs, but its North American operations failed to turn around. Bill Ford said this plan makes far more dramatic changes, including changing a stifling corporate culture and focusing more heavily on consumer demands.
“We’re going to be a big company that thinks like a small company,” he said.
Dispatch Staff Writer Kristen Munson contributed to this report.
