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Ford to slash jobs, close factories

1/23/06 Reuters Ford Motor Co. on Monday said it would slash up to 30,000 jobs and shed more than a quarter of its production capacity as it moves to cut costs and stem losses in market share, building on a surprising 19 percent gain in fourth-quarter earnings.

Ford's bonds rose and its shares gained 6 percent after quarterly results topped Wall Street expectations on strength at its finance arm and a narrower loss in the crucial North American market.

Ford, which has struggled with a junk bond rating on its debt, said it would shut down 14 manufacturing sites, including seven assembly plants, and cut between 25,000 to 30,000 jobs from plant payrolls.

Ford's larger rival, General Motors Corp. (NYSE:GM - news) said in November that it would cut 30,000 manufacturing jobs and close a dozen North American plants. Both automakers are struggling against high pension and health care costs and increased Japanese competition.

The company said those steps, which will idle plants in St. Louis, Atlanta, Michigan and Canada, would cut 26 percent of its production capacity by the end of 2008.

Ford also said it would cut material costs by $6 billion, vowing to streamline parts purchasing, even as it rolls out more fuel-efficient hybrid vehicles and small cars to respond to consumer concern over high gas prices.

"We must reduce capacity in North America," Chairman and Chief Executive Bill Ford said. "From now on our products will be designed and built to satisfy customers, not just fill a factory."

Union leaders, who must negotiate a new contract with the car maker in 2007, called Ford's restructuring "extremely disappointing and devastating news for the many thousands of hard-working men and women who have devoted their working lives to Ford."

"Certainly today's announcement will only make the 2007 negotiations all the more difficult and all the more important," UAW president Ron Gettelfinger said in a statement.

Analysts said the fourth-quarter results showed Ford had made some progress stemming losses in North America even before its sweeping restructuring, which it dubbed "The Way Forward."

Ford projected that its market share would stabilize or improve in 2006, but suspended its practice of providing full-year financial forecasts, saying it wanted to focus investors and staff on its longer-term turnaround effort.

It forecast that its North American operations, which lost $143 million during the fourth quarter, would be profitable again by 2008.

For the fourth-quarter, losses at Ford's auto operations shrank to $12 million, before taxes and excluding special charges, from $470 million a year ago, while its finance arm contributed a profit of $737 million versus $859 million.

Ford earned 26 cents per share, excluding special items, soundly beating the average analyst expectation of 1 cent a share.

UBS auto analyst Robert Hinchcliffe called the result "much stronger than expected," saying better North American performance and improved results in Europe for the automaker's luxury division had made the difference.

Ford cited cost cuts and pricing, partially offset by operating loses at the Visteon Corp. car parts business it now controls for its narrower loss in North America.

Ford ended 2005 with a market share of 17.4 percent, excluding its luxury brands, the lowest level since the late 1920s.

BIG HERTZ GAIN

Dearborn, Michigan-based Ford said total fourth-quarter revenue rose to $47.56 billion from $44.92 billion a year earlier. Automotive revenues jumped to $41.82 billion from $38.87 billion.

For the full year, Ford's North American vehicle operations lost $1.6 billion before taxes. Its worldwide automotive operations swung to a pretax loss of $1 billion from a profit of $850 million in 2004.

Despite the loss, Ford was profitable for the full year, earning $2 billion in 2005 as its finance arm posted a net profit of $2.5 billion.

During the fourth quarter, Ford reported a pretax gain of $1.08 billion on the sale of Hertz, which was completed in December. The automaker sold the unit to an investor group in a transaction valued at about $15 billion, including the assumption of debt.

The automaker also took a charge of 68 cents per share for personnel reduction programs and impairment of Jaguar and Land Rover assets.

The company said it would invest $7 billion in plants and equipment in 2006 and end the year with over $20 billion in cash.

Shares of Ford rose 47 cents to $8.37 on the New York Stock Exchange. Ford's

7.450 percent bond due 2031 rose 1 cent to 71 cents on the dollar, according to MarketAxess.
Reply to
Grover C. McCoury III
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it is interesting co's talk about billions lost but nothing about the employee. investing 7billion in plants/equip. it makes one wonder what the focus is... . to say that ford had no idea of the 5,10 yr plan is ridiculus.the only other conclusion is they waited for it to happen! dont they have analysts? what were they doing? how many explorers,f110,mustangs can you make before someone goes" i dont want one"? anybody can figure that out? regardless of asia. ford is bloated and will suffer the serious consequences. i think henry is turning is his box.

Reply to
harrisonpearson

wrote in message news: snipped-for-privacy@g43g2000cwa.googlegroups.com...

Interesting comments on the surface that don't show much thought. What strategy has almost every other manufacturer selling cars in America followed? What is so different in Ford's strategy than in Toyota's? Like Ford, Toyota has pursued a strategy of refreshing tired old car designs while pouring the majority of their US development money into trucks and SUVs (and most of those are second rate copies of GM designs that are far from state of the art). With the possible exception of the Prius, the whole Toyota car line is a collection of well assembled but boring designs that haven't substantially changed in 15 or 20 years. Even the "new" Camry is just an update of a design that was little more than a bad copy of old US FWD designs. And even the Toyota juggernaut is starting to fray around the edges. Toyota recalled more cars last year than GM. Even the interesting Prius is plagued by glitches and many owners are expressing disappointment with the performance. We just learned that the Japanese have been over stating the horsepower of their engines. Even the opinion survey results (like JD Powers) are starting to turn against Toyota. Toyota is trying to shed their stodgy (Buick-like) image with the Scion brand. However, I have yet to see anyone under the age of 35 driving one. I asked my 16 year old Son about Scions, and he just said they were "stupid." Oh what a feeling. I suppose Lexus is a hit - but sooner or later I suspect people will get tired of paying 20% more for a thinly disguised Toyota.

Now maybe Ford will go under. Certainly the vultures are circling (Renault has been trying to pry Jaguar away from Ford for at least a year), but I suspect in the end Ford will be OK. They only have to take a look at Chrysler to see that exciting products can bring Customers back. Ford is likely to be more willing to change directions than Toyota. Sooner or later I suspect people will grow tired of second rate boring designs.

Ed

Reply to
C. E. White

I left the 'yota camp more than 30 years ago after having a less than satisfactory Corona and 2 Hilux trucks the first of which I only had 19 months and put 19k miles on it. It was in the shop a total of 5 1/2 months for warranty repairs which included 2 differentialls, 2 transmissions and 5 paint jobs. The last paint job was pealing when the engine split #3 cylinder wall. The radio was never in it after the first month and it vibrated like a SOB at highway speeds. Total warranty repair cost over the time I had it was over $7200US in 1973 on a $2400US truck. The second Hilux was much better being almost average in reliability but still riding rough and vibrating at highway speeds with brakes that made you wonder if it was ever going to stop and acceleration that could have been timed with an hour glass. I went to a Datsun 510 after that. It was above average compared to the 'yotas and I drove it over 200k miles with only a head gasket job, timing chains and a new trans after my MIL put it in reverse w/o the clutch. I put over 200k on a 1986 Escort which was at least as good as the Datsun before going to the F150's which I have driven since then along with a couple of CV's, a Taurus or two and a Sable. All at least as good as the 'yotas I had. I am firmly convinced that 'yota owners cannot bring themselves to publicly admit any problem whatsoever.

Lugnut

Reply to
lugnut

....while in Iraq:

"Halliburton, under a no-bid contract with the government, has $300 million worth of Mercedes trucks sitting idle at Camp Anaconda, Iraq. We pay taxes and Washington's inefficiency wastes our hard earned money."

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Reply to
pushdamagicbuttondude

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