Ford's restructuring plan is likely to cost $11.18 billion
WASHINGTON: Ford said its restructuring plan would likely cost $11.18
billion, with more than half of the expenses devoted to programs for
In a filing with the Securities and Exchange Commission on Wednesday, the
No.2 U.S. automaker estimated that it would spend $5.96 billion on a jobs
bank and other "personnel-reduction programs," $2.74 billion to scale back
its pensions, $2.2 billion for fixed asset impairment charges and $281
million to idle plants.
The company also disclosed that it had pledged all its buildings,
trademarks, intellectual property, shares in the main company, and shares in
Volvo, Jaguar, Aston Martin, Ford Motor Credit and other operations as
collateral for a $23.4 billion line of credit to fund its restructuring plan
and cover losses expected until 2009.
Ford said in the filing that it had already accrued $9.9 billion in 2006 and
that the balance, mostly related to salaried personnel-reduction programs,
would be accrued during the first three months of 2007.
In a separate move, the company said it had changed its performance bonus
plan for senior executives to better reflect its team approach under Chief
Executive Alan Mulally.
The automaker's board of directors agreed Tuesday to give executives cash
payouts to settle the current program established in 2005, when managers
working on the restructuring plan set up criteria by which executives would
be measured in 2006 in order to receive bonuses.
"The program was viewed as inconsistent with Ford's strategic need to have
our executives work together to achieve common goals as a team," the company
Under the new program, the company said its compensation committee would
provide bonuses for executives of eight times their base salary. The
individual amounts, which were not disclosed by the company, would be
reduced by their cash payout from the settlement.
It was not immediately known how the plans differed in terms of payout, but
the new plan aimed to reward team performance rather than individual
achievement, a Ford spokeswoman, Becky Sanch, said.
Ford said the value of the bonuses would be paid in an equal share of stock
options and performance-based restricted stock units.
Ford's change in bonuses comes as the struggling automaker moves into
contract talks later this year with the United Auto Workers union, which is
expected to receive requests from Ford for concessions.
The union president, Ron Gettelfinger, has criticized executive bonuses
proposed by the auto parts maker Delphi, which is operating under bankruptcy
Ford reported a record loss of $12.7 billion for 2006 and has said it
expected to lose money until sometime in 2009. The automaker is working
through a major restructuring plan to reduce its manufacturing capacity to
better match lower demand for its vehicles.
Sanch said the cash payouts under the settlement were "based on actual and
expected achievements of select goals."
The committee decided to give stock options next month and annual
"performance-based restricted stock units" through March 2009 to some
officers under the company's long-term incentive program.
Detailing litigation involving the company, Ford said it was the subject of
a purported class action lawsuit in Michigan alleging violations related to
the Employee Retirement Income Security Act.
The lawsuit contends Ford failed "to prudently and loyally manage funds held
in employee savings plans" by letting employees buy Ford stock in the plans.
Ford denied any wrongdoing and said it would "defend this matter
Navistar shipments ordered
A Michigan court has ordered Navistar International to resume shipping to
Ford the diesel engines that power the automaker's key F-Series Super Duty
pickup trucks, Reuters reported from Detroit.
Navistar this week had stopped building the 6.4-liter diesels for the Super
Duty models, saying Ford had stopped honoring terms of their agreement.
Navistar is the only supplier of diesel engines to Ford's Super Duty pickup
truck, one of the automaker's most profitable vehicles and a key model this
year as it tries to rebound from billions of dollars of losses in recent
The Ford spokeswoman Becky Sanch said in a statement Wednesday, "The judge
granted the motion, and Navistar was ordered to resume production and
shipment of engines."
"If they pull a knife, you pull a gun. If they put one of yours in the
hospital, you put one of theirs in the morgue."
Sean Connery, "The Untouchables"