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.
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.
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