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.
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That's a lot of jobs, but it probably matches the fraction of their business which is missing. I did not realize until recently that their market share had eroded for such a long time. They have been in a 1% per year glide for about 5 or 6 years (starting in the low 20's). You'd think they would have tried to fight back, and maybe they did. But prices have escalated a lot, and that may have cut their volumes a bit. In spite of their loss of share, they still are a little more financially sound than GM, or at least I think so. GM's share was pretty constant in the high 20's over the last decade or so, but financially they are drowning.

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isn't it the union contracts, with hugely liberal retirement and benefits packages, that is killing the us automakers?

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Well they definitely arent helping. The UAW needs to pull there head out, and see how much they are "helping" the american auto industry. Its partially because of them, that this is happening. I am an auto tech student at Pittsburg State University in Pittsburg Ks, and I am hoping to get an internship with TAC automotive group, which is a contracted technical phone hotline for the Ford Dealerships. This has me wondering about my chances at a job with them now...
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If you make a good product for a reasonable price, the market will support it.
There are many auto makers that aren't having bad times. It's easy to blame the grunts on the bottom rung, I'd have to place most of the blame on the Adminstration,
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Yeahbutt. . . I keep reading stuff like "...the workers will be placed in a job bank where they will be on call if needed and will continue to collect full pay and benefits even if they are not gainfully employed..." and "...the average wage and benefits for a US autoworker is around $64.00 per hour..."
Where's the financial advantage to that? Sounds to me like corporate welfare.
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It's not the fault of the "grunts", nor the faults of the management(most of the time LOL) It's the fault of the Unions. Companies are difficult to run. If you have a Union with limitless power you have a problem. I have been both a Vice President and a machinist (when I was a young guy.) Unions are necessary I agree. Companies are without morals. the problem is that Unions are without morals also. They only care about how much money can get from their members. Do I have a solution? NO! I had a non union company and ran it like a union company. No problem. BUT! Managers get greedy.(and owners) I am retired now but really feel sorry for every one in the manufacturing industry, both Management and workers. Good luck Guys!
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| isn't it the union contracts, with hugely liberal retirement and benefits | packages, that is killing the us automakers? | No it is the "American School of Business Thought"
Ideas fostered by the likes of Harvard University and Wall Street ( read that short term stock prices), Jack Welch, (of General Electric Fame) Six Sigma, ( more Jack Welch) and brand managers like the ex GM Brand Manager Ron Zarella.
Guys who came from outside of the auto industry trying to re-invent the American Car Market.
Focus groups run by corporate stooges subscribing to Six Sigma. Cut cut cut, no investment just cut some more costs, cut reinvestment research, etc. and the list goes on.
Look at the Five Hundred. Outstanding concept vehicle. The chassis of a Volvo S80 FWD or all wheel drive. Now the down side. A noisy underpowered (although reliable ) engine. Styled by a Volkswagen Has Been 5 years behind the Passat and Nissan lineups. It also has the "Ford Radio & Heater Stack" common to every vehicle from the Ford Focus to the F150 including the new Fusion.
Why aren't Fords selling?????? Boring styling, ........... underpowered......... no passion........ perceived as old peoples cars. \
The Powertrain managers at Ford have to be replaced. The interior stylists need to be replaced. The Brand Managers need to be replaced.
If William Clay Ford doesn't recognized these three basic facts, he needs to be replaced.
Ford Cars need to have the basic "panache" that the Brand Managers have bestowed upon Lincoln-Mercury - Volvo and Mazda.
The only people looking at Ford's are previous Ford customers, and curiosity seekers justifying their decision to purchase other brands.
Everything in the current line up is ho hum.
Customers looking at the new Fusion never say "Wow, I've got to have this car. "
It's no wonder, Bill Ford couldn't hire Goshn who turned around Nissan. Goshn knew he would have to deal with the uninspired, conservative, boring out of touch Bill Ford who thinks that everyone agrees with his strong environmental outlook on everything.
Mr. Ford needs to think about vehicles with - Power, performance, style, luxury, and economy.
P.S. Please get rid of those oval grilles and the big chrome slats that you are showing on the Chief concept vehicle.
I will now step off of my soap box and like an old soldier, just fade away..............
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How about too expensive?

I like the oval grills but then I'm an old fart.
I looked a new Ford 4WD F150s and they cost about $36,000 with nothing fancy on them. A Nissan Titan 4WD costs about $12,000 less. I'd rather have the Ford but that is a huge difference in price. I cannot quite seem to bring myself to buy the Nissan mainly because I imagine that 15 years from now the Ford will still be a pickup truck and the Nissan will be in the junkyard. Also the Ford has an ashtray. Not sure if that's worth $12,000 or not.

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Yes, naturally - In any shrinking business, retiree costs could bankrupt you. The shrinking is the important part. The retirement costs are big compared to the current size of the business. In fact, GM's pension fund is actually bigger than the GM stock market capitalizaion. The pension fund could buy the company, all of it, and have money left over.
But that has nothing to do with why Ford shrunk, unless you believe retiree costs made Ford products unsellable somehow. I don't think that's it. GM is worse, and GM didn't really shrink at all.

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