Ford Motor Co. to cut 35,000 jobs

By Ed Garsten
Associated Press Auto Writer

DEARBORN, Mich. — Apologizing to employees losing their jobs, Ford Motor Co. Chairman William Clay Ford Jr. laid out a restructuring plan Friday that will cut 35,000 positions, or 10 percent of the company's work force, close five plants and eliminate four models.

The Ford Motor Company Edison, N.J., Assembly Plant is one of the five plants that will close down. Associated Press

"We strayed from what got us to the top of the mountain, and it cost us greatly," he said.

Several thousand of the 35,000 jobs already have been cut through voluntary buyouts, early retirements, shift eliminations and procedural changes at plants, according to chief operating officer Nick Scheele.

Speaking after the announcement, Scheele said of the 21,500 jobs to be eliminated in North America, 6,800 had already been cut through assembly line speed reductions and shift eliminations at the Edison, N.J., plant and the Michigan Truck Assembly plant in Wayne, Mich., and through a voluntary buyout program. The remaining job cuts would be accomplished this year, he said.

The voluntary program offered to white collar employees last year had a goal of cutting 5,000 salaried positions, but only yielded 3,500 takers, Scheele said. The program is being extended in hopes of reaching the goal, but Scheele said if there aren't enough volunteers, some employees would be fired.

The automaker said it was taking a $4.1 billion one-time charge to pay for its plan and hopes to reach $9 billion in profit improvement by mid-decade. That is more than $2 billion more than it earned in 2000.

Ford shares rose 21 cents Friday to close at $15.50 on the New York Stock Exchange.

For Ford, the need to restructure so severely represents a complete change from its position just a year ago, when it reported a $6.67 billion profit for 2000.

In the third quarter of 2001, Ford lost $692 million, and when it releases its fourth quarter financial statement Jan. 17, it is expected to report its third straight losing quarter.

"For most of the last decade the Ford Motor Company was on a roll," Ford said. "The great success we enjoyed may have caused us to underestimate the strength of our competitors."

"We realize that some of the things that must be done will be painful," Ford said. "I can't begin to describe how sorry I am about that."

The automaker also will reduce manufacturing capacity from 5.7 million vehicles worldwide to 4.7 million. Ford will close the Edison Assembly Plant in Edison, N.J., and the Ontario Truck Plant in Oakville, Ontario by 2004; the Cleveland Aluminum Casting in Brook Park, Ohio, in either 2003 or 2004; the St. Louis Assembly Plant in Hazelwood, Mo., by a date to be determined; and the Vulcan Forge in Dearborn, Mich., as soon as possible.

The automaker will stop making the Ford Escort, Mercury Cougar, Mercury Villager and Lincoln Continental this year.

The Escort at one time was Ford's best-selling car, but has been overshadowed by the subcompact Focus, which managed to lure a far younger audience and is the world's best-selling car. The Cougar, with its cat-eye headlights and wedge-shaped body, never reached any significant sales volumes.

The Continental, with its history of trendsetting and design, had survived for more than 60 years. In recent years Ford had tried to market the vehicle, which had appeal among the 60-and-up driver, to a somewhat younger driver. The Lincoln LS sedan, which has been out about a year, is replacing the Continental as the automaker's top luxury model.

The Villager was built under a joint manufacturing arrangement with Nissan and at one time was Ford's luxury minivan. Its demise was previously announced.

Ford, the first family member at the top of the automaker in 22 years, also said he wouldn't accept any salary for the next year, but would hold on to his stock options.

"They're hitting all the bases they need to hit. To effectuate a turnaround you can't get it all from one source," said Van Conway, president of Conway, MacKenzie & Dunleavy, a Birmingham, Mich., firm that specializes in corporate turnarounds.

The Canadian Auto Workers union is threatening a potential strike to protect the 1,500-worker pickup truck factory in Ontario.

"The only weapon workers have . . . in bargaining is our right to withhold our labor," CAW President Buzz Hargrove said shortly after Ford announced the restructuring.

"We will go to the bargaining table with Ford Motor Co. with a strike deadline, with one of our key demands being a continuation of the operations of Oakville Truck."

The cuts also include 1,500 agency employees and 13,500 employees outside of North America.

Ford will shed approximately 8,100 employees in Europe, 2,100 in South America, 400 in Asia, and 2,500 in "the rest of the world," Scheele said.

United Auto Workers Vice President Ron Gettelfinger said Ford's restructuring will respect previously negotiated contract rights, including job placement rights and other protections.

"Ford has great strengths and resources to draw upon — most importantly, an experienced, highly skilled work force that's committed to improving product quality and customer satisfaction," Gettelfinger said.

Analyst David Healy with Burnham Securities said the restructuring plan goes further than Wall Street anticipated.

"My impression of the overall program is it goes a lot deeper than I had expected and I think the long term results will probably be greater," Healy said. "I think the news from now will be much better."

The plan also includes the suspension of bonuses for company managers and the elimination of 401(k) matches for employees.

Ford employs approximately 345,000 people worldwide, including 170,000 employees and 47 plants in North America.

"I don't want to see plants closed. I want to see plants open, but I have to look at it from the company's perspective as well," said Tony McKinnie, 47, an assembly worker at the Wayne plant. "Nobody wants this to happen, but unfortunately with the economy the way it is, you don't have much of a choice."

The automaker was hit hard in 2001 when it launched a $3 billion program to replace 13 million Firestone tires that were not recalled in the original recall that began in August 2000. The move resulted in the severing of Firestone's almost century-old relationship with Ford.

In July, much of Ford's top management was shaken up, with Scheele, the man known for turning around Ford's European operations, taking over North American operations.

The next month Ford announced it hoped to cut 4,000 to 5,000 salaried positions by offering early retirement and buyout packages.

By October, president and CEO Jacques Nasser was forced to resign and Ford replaced him as CEO. Scheele was elevated to chief operating officer.

Both Scheele and Ford said Ford's future is based on "getting back to basics," in product development and improvements in quality and productivity.

"Great products made us who we are and great products are going to take us where we're going," Ford said Friday.

Ford officials also have blamed high marketing costs related to a fourth-quarter incentive war for its difficult financial position.

Other automakers have gone through tough times as well.

At the North American International Auto Show earlier this week, General Motors Corp. vice chairman Robert Lutz said GM wants to cut 10 percent of its North American white collar work force, or about 4,700 people through attrition and buyouts, part of its ongoing cost-cutting efforts. The No. 1 automaker also said it will delay handing out annual merit raises to employees until late 2002. GM traditionally gives out pay raises at midyear.

Last January, DaimlerChrysler AG announced it would cut 26,000 jobs, or about one-fifth of the work force of its financially troubled Chrysler Group, over three years. The company also said it would idle six plants.