Ford reportedly mulling plant closings, more job cuts

Nov. 14, 2001
Ford Motor Co. is considering another round of massive job cuts, and possible plant closings, as part of a restructuring plan to pull the world's second-largest
Ford Motor Co. is considering another round of massive job cuts, and possible plant closings, as part of a restructuring plan to pull the world's second-largest automaker back to profitability, according to a source close to the company's new management team. Ford has played its cards close to the vest in the high stakes turnaround game, with executives saying only that "everything is on the table." Details of the restructuring plan, which was first announced in August, will not be made public until January, company officials say. But industry analysts, who dispute whether plant closings are possible, say the odds are that the team led by William Clay Ford Jr. will adopt as dramatic a plan as possible to reverse the recent turn of fortune at the company his great-grandfather founded in 1903.While coaxing the corporate giant back to health, the plan could also breathe new life into Ford's shares, which have been outperformed by those of larger rival General Motors Corp. by about 24 percent since the start of the year."They're going to make some big announcement in January and they're going to have to be pretty dramatic to impress Wall Street," said JP Morgan Chase analyst David Bradley.It is no secret that Jacques Nasser, who was ousted as Ford's chief executive on Oct. 30, left a company saddled with many problems, highlighted by its $1.4 billion in losses over the previous six months.But there is little consensus on how to get Ford back on track at a time when analysts say auto sales are poised to fall to their lowest levels in years in 2002 and a recession has been all but officially declared in the United States. That probably explains why the internal review of Ford's operations is taking so long.PLANT CLOSINGS? According to the industry source, who is close to Ford's leadership but requested anonymity, recent talks at the automaker have centered on the possible closing of up to four of Ford's 21 North American assembly plants and job cuts targeting about 10,000 hourly workers. Another 3,000 white-collar jobs may also be cut, said the source, who added that the salaried cuts would come on top of the 5,000 Ford announced in August, when Ford said it was trimming up to 10 percent of its salaried North American jobs.Plant closings could help ease the burden of carrying excess production capacity at Ford, which has seen its U.S. market share erode steadily this year. They also make sense at a time when Ford needs to slash spending on marketing incentives and stop chasing an overly ambitious market share, in the face of relentless foreign competition.The problem, however, is that there is a moratorium on plant closings in the United States under the contracts between Detroit's Big Three automakers and the powerful United Auto Workers union. Those contracts are is binding until September 2003.CHANGE AT UAW UAW President Stephen Yokich has made it clear that he would fight any move to shutter a U.S. auto plant, union sources say. Ron Gettlefinger, nominated just last week to succeed Yokich after a vote at the union's convention in June, is seen as equally resistant to plant closures.Ford could shut down some plants unilaterally, risking a high-stakes battle with the UAW and a possible strike. But most analysts say such a move is unlikely to come from Bill Ford, the Princeton-educated family scion who has stressed harmony in relations with dealers, employees and other key constituents since he took over as CEO from the rough-and-tumble Nasser."It would be out of corporate character for Ford to go to war with the union on this one," said Richard Block, a professor of labor and industrial relations at Michigan State University.However, he stressed that the Dearborn, Michigan-based automaker has a good relationship with the UAW and that Ford might not find it too difficult to negotiate an early retirement program for some of its UAW workers. The Chrysler side of German-American automaker DaimlerChrysler AG won just such an agreement when it announced the elimination of 19,500 hourly jobs early this year.Salomon Smith Barney analyst Michael Ward said Ford could take other moves, such as cut assembly line work shifts and slow line speeds to reduce excess capacity and trim its U.S. hourly work force of 103,000. For Ward, the key to Ford's restructuring is Nick Scheele, the company's affable chief operating officer, who restored the Jaguar name to auto industry prominence and led the revamping of Ford's European operations before being called back to Dearborn last summer."They brought Scheele over here for a reason," said Ward, who added that the revenue side of Ford's turnaround was just as important as the cost side and the "one big ax that falls" in massive job cuts."The European restructuring involved product flow, capacity reductions, more efficient purchasing, and my guess is that you will see a pretty similar type of strategic plan in the North American market."