Ford Motor Co. yesterday detailed a sweeping restructuring plan that would shut 14 factories and eliminate as many as 30,000 jobs, or nearly a quarter of its North American workforce, over the next six years.
The announcement at Ford follows a major overhaul by General Motors Corp., which plans to cut 30,000 workers by 2008 and close all or part of 12 plants. Overall, the U.S. auto industry has shed 200,000 jobs, or 15 percent of its workforce, in the past five years.
Despite years of comeback plans and reorganization blueprints, GM and Ford, the pillars of the U.S. auto industry, have decided they have no choice but to shrink their way back to profitability in the face of the unrelenting pressures of a global market. Although Chrysler has had some success in turning around its business, auto experts today focus less on the Big Three and more on what some call the Big Six. Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. have made steady inroads, adding new U.S. plants and hiring thousands of autoworkers into nonunion jobs.
Ford Chairman William C. Ford Jr. said the company has been guided for too long by "business as usual," which he blamed for the company's over-reliance on sales of sport-utility vehicles. "We need to change the business model that's existed for many decades at Ford," he said.
Ford, the nation's second-largest automaker, employs about 123,000 workers in its North American operations. That division lost $1.6 billion pretax in 2005, precipitating its second financial crisis in five years. Ford's U.S. market share declined to 17.4 percent last year, down from 24 percent six years ago.
Mark Fields, the Ford executive vice president who is leading this turnaround effort, said competitors keep pouring new vehicles into the U.S. market, "a competitive shootout like we've never seen before."
The number of Japanese auto plants in the United States has grown. There were 11 in 1993; 28 are expected to be operating this year, according to the Japan Automobile Manufacturers Association. Although foreign companies employ less than a quarter of U.S. autoworkers, their growing presence looms large over the strategic decisions of both the corporate managers and the union officials at their U.S. rivals.
Foreign auto plants have been popping up in Southern states, including Texas, Alabama and Mississippi. Toyota is finishing a new factory in Texas this year that will pump out thousands of pickup trucks. The automakers have been lured there with generous state incentives and by state laws and business culture that make union organization difficult. After years of trying, the autoworkers union has failed in organizing drives at these new facilities. Now the United Auto Workers is looking at the prospect of being forced to give up some of the pay and benefit protections it has fought for over the decades.
UAW President Ronald A. Gettelfinger and Vice President Gerald D. Bantom, who directs the UAW's Ford division, said in a statement yesterday that the Ford restructuring plan is "extremely disappointing and devastating news for the many thousands of hard-working men and women who have devoted their lives to Ford."
The union said workers face uncertain futures because of failures by Ford's senior managers. Additionally, Gettelfinger said Ford's announcement leaves a cloud over its workforce because the automaker did not identify all of the plants it plans to close as part of the announced reorganization.
The reorganization will make contract negotiations between the automaker and the union next year "all the more difficult and all the more important," he said. Autoworkers will be fighting to protect their pay, pensions and health care benefits as the number of jobs in the industry shrinks. The jobs that will be eliminated at Ford and GM are more than the total number of hourly employees employed at DaimlerChrysler AG's Chrysler division in the United States.
"This combined layoff would be comparable to Chrysler shutting down all U.S. manufacturing," said Harley Shaiken, a labor professor at the University of California at Berkeley.
Among the plants listed for closing are the Atlanta assembly plant, which builds large sedans and employs 1,852 hourly workers, and the Wixom, Mich., assembly plant, where 2,600 workers build the Lincoln LS, the Lincoln Town Car and the Ford Thunderbird. Additionally, Ford said it intends to close its St. Louis assembly factory, which builds the Ford Explorer and a similar Mercury SUV. The St. Louis plant was on the chopping block four years ago, in a previous Ford restructuring announcement. The plant got a reprieve after workers pushed to make the plant's operations more efficient, according to Ken Dearing, president of UAW Local 325, which represents the plant's workers.
Dearing said the workers there will continue to fight to save the plant's 1,900 union jobs. "We're not going to give up by any means," he said.
Ford and Fields met with financial analysts and reporters yesterday at the company's Dearborn design facility to outline the plan. Fields, who orchestrated an overhaul of Mazda Motor Corp., said 50 people on 10 teams at Ford developed the plan, working on large sheets of white paper rather than using PowerPoint presentations. The plan is to return Ford's North American auto operations to profitability no later than 2008, although Ford said the company will no longer offer analysts guidance about its annual financial results.
Ford's restructuring announcement came just after Ford reported fourth-quarter profit of $124 million, a 19 percent increase from a year earlier. For the year, Ford earned $2 billion, as gains from the credit arm and in international operations masked the decline in North America. The results sent Ford shares surging 5.3 percent, to $8.32, in New York Stock Exchange trading.
Several Wall Street analysts left their "sell" recommendations on Ford shares unchanged, saying they were disappointed by the lack of financial specifics in the plan, which did not include a headline number estimating total savings. In addition to the job cuts and plant closings, the plan includes savings of $6 billion in material costs by 2010. Ford said it would take $500 million in special charges in 2006, related to the plan.
By themselves, the planned Ford and GM cuts over the next six years are small in a U.S. economy that employed 143 million workers last month. However, the cuts will ripple through the economy because the auto industry supports so many other jobs, such as those producing steel, rubber, glass, electronics and other auto parts, analysts said. The relative high wages of autoworkers, combined with good health and pension benefits, also fuel local spending, which supports retail jobs. As a result, economists estimate that every 100 U.S. auto industry jobs support 460 other jobs, a relatively high "multiplier effect" compared with other industries.