Ford Announces Huge Restructuring

Automaker will eliminate as many as one-quarter of domestic jobs over six years ''to prepare Ford's North American business for global competition.''
Stephen TaubJanuary 23, 2006

Ford Motor Co. stunned employees Monday when it announced plans to eliminate 25,000 to 30,000 jobs — between 20 percent and 25 percent of the company’s North American workforce, according to The Wall Street Journal — and idle 14 plants.

The job cuts will take place over a six-year period ending in 2012. The company will also reduce capacity by 1.2 million units, or 26 percent, by 2008.

The company will also cut salary-related costs by 10 percent in North America due to a previously announced reduction of the equivalent of 4,000 salaried positions by the end of the first quarter. On that same timetable, Ford will thin the ranks of its officers by 12 percent.

Ford also plans net material cost reductions of at least $6 billion by 2010.

In a press release, chairman and chief executive officer Bill Ford stated that the company “was solidly profitable in 2005 and growing around the world.” He maintained, however, that the sweeping changes were necessary “to prepare Ford’s North American business for global competition.”

In a statement, executive vice president and chief financial officer Don Leclair added, “Our cost structure will improve as we progress through 2006 and increasingly thereafter, and we’ll return to profitability in our North American automotive business no later than 2008.”

The company also informed the investment community that it will no longer provide earnings guidance, but rather that it intends “to keep the company and investors focused on one goal: sustainable profitability over time in all regions.” As a sort of final guidance, Ford announced that capital expenditures are expected to total about $7 billion in 2006, and that it expects its year-end cash balance to exceed $20 billion.

The company will concentrate most closely on its Ford, Lincoln, and Mercury brands, it added. Ford also plans to deliver more new products faster, including more crossovers, hybrid vehicles, and small cars, and to increase spending on trucks.