Hmm, I see Ford is expecting a V-shaped recovery!<G>
dailynews.yahoo.com
Friday January 11 5:11 PM ET
Ford to Cut 35,000 Jobs, Close Plants
By Tom Brown
DETROIT (Reuters) - Ford Motor Co. said on Friday it would cut 10 percent of its work force, or 35,000 jobs, slash production capacity and close up to seven North American plants as part of a plan to pull the automotive giant out of a stunning tailspin.
The long-awaited overhaul plan, for which the world's second-largest automaker said the company would take a charge of $5.7 billion, or $4.1 billion after taxes, against the fourth quarter of 2001, calls for the closure of vehicle assembly plants in Ontario, Canada, in 2003, Edison, New Jersey, in 2004, and St. Louis, Missouri, later in the decade.
It also calls for the shutdown of two parts plants in Ohio and Michigan and major downsizings, including eliminating shifts, at 11 other plants. Two assembly plants, in Cuautitlan, Mexico, and Avon Lake, Ohio, could also close in the future, Chief Operating Officer Nick Scheele said. This would bring to seven the number of plants Ford eventually shuts.
``It is a comprehensive plan, but it is not a magic wand,'' said Chairman and Chief Executive William Clay Ford Jr. ``It's going to be difficult, and in some cases painful, to turn this company around, but we will turn it around.''
The U.S. auto industry has been reeling from the U.S. recession, quality problems, overcapacity, and stiff competition from Asian and European automakers. While all of the Big Three Detroit automakers have shed jobs, Ford has been hit the hardest by the recession and competition. Its share of the U.S. vehicle sales fell to barely over a fifth in 2001.
The industry layoffs added to the hundreds of thousands of U.S. job cuts amid the recession and the wave of bankruptcies and corporate downsizing that escalated after the Sept. 11 attacks on New York and Washington.
Ford's job cuts include 12,000 blue-collar positions in North America, in addition to 3,000 already eliminated from a total hourly work force of about 115,000 last year.
Scheele said the total number of jobs to be eliminated included 5,000 salaried positions, mostly in the United States, through a voluntary early retirement program announced last summer. Roughly 1,500 contract positions were also cut.
``We will have reached a total of 22,000 positions in North America, within a global total reduction of some 35,000 jobs,'' Scheele said. Ford now has about 345,000 employees worldwide.
Job cuts made outside of North America affected thousands of Ford employees in Europe and South America, Scheele said.
BREAK-EVEN IN 2002
William Clay Ford Jr., the great-grandson of Henry Ford, founder of the company that celebrates its centennial next year, said he would take no salary or bonus as part of the restructuring. He had a net worth estimated two years ago at $185 million, according to the Detroit Free Press newspaper.
Ford and Scheele, along with Chief Financial Officer Martin Inglis, spoke in a conference call for Wall Street analysts and journalists to lay out details of a plan that Ford said would restore it to a position in which it can reap $7 billion in annual pretax operating profits by the middle of the decade.
For the current year, the economic outlook was uncertain and Ford would only break even, Inglis said. And he dodged repeated questions about the company's cash flow, saying only that it had ''an adequate funding plan to deliver the business plan.''
Highlighting its cash needs, Ford said it would raise $3 billion by selling a special class of bonds convertible to Ford common shares, in the third-largest U.S. convertible sale ever.
Photos
Reuters Photo
Ford's contract with the powerful United Auto Workers (news - web sites) union, which remains in effect until September 2003, bars plant closings, as does its contract with the Canadian Auto Workers (news - web sites) union, which expires this fall.
But the plants targeted for shutdown will only close once the contracts expire. The UAW said it would try to minimize the impact of the cuts on its workers. The Canadian union, however, reacted angrily to the prospect of closing a plant there.
``We're angry, we're frustrated, and we don't accept the logic of this decision,'' said CAW President Buzz Hargrove.
The plant closures will cut Ford's total North American production capacity by about 16 percent to 4.8 million vehicles from 5.7 million, Scheele said.
FIRST ANNUAL LOSS SINCE 1992
Ford, which will post its first annual loss since 1992 when it releases financial results next Thursday, cut its dividend for the first time in a decade in October and has suspended matching payments to employee retirement plans and all bonuses for top managers.
In further cost-saving measures on Friday, Ford said it was setting its first-quarter dividend at 10 cents a share, a cut of one-third from the fourth-quarter rate and down two-thirds from the third-quarter payout.
Ford, which has spent $2.6 billion since 2000 on tire recalls and the Firestone tire crisis, is expected to post a net loss of more than $2 billion when it releases its 2001 financial results.
As recently as a year ago, Ford management was hailed by Wall Street under the stewardship of former Chief Executive Jacques Nasser. But Bill Ford, as the family scion prefers to be called, said Ford's fortunes changed overnight, due to a variety of factors including hubris and a failure to recognize the strength of some of its competitors.
``The auto industry is fiercely competitive, and things can change very quickly,'' Ford said.
Despite the turnaround plan, credit rating agencies were not impressed. Standard & Poor's revised their outlook for Ford to ''negative'' from ``stable,'' while Moody's Investment Service put the company under review for possible downgrade.
And some industry analysts voiced skepticism about the turnaround plan, saying its savings were likely to be offset by the costly discounts and cheap loan deals that Ford and other automakers have increased to boost consumer demand in the aftermath of Sept. 11.
``I can't really say I'm coming away very positive,'' said analyst Rod Lache of Deutsche Banc Alex. Brown. ``It's hard to judge what kind of underlying assumptions they're making.''
Ford shares closed up 21 cents at $15.50 on the New York Stock Exchange (news - web sites) on Friday. The shares are well off their 52-week high of $31.42 and have underperformed the Standard & Poor's 500 Index by about 25 percent since the Sept. 11 attacks. The stock has also underperformed shares of No. 1 automaker General Motors Corp. by nearly 19 percent since the attacks. |
