Restructuring costs for Ford Motor Co.’s turnaround plan are estimated to be $11.3 billion, said the company in a regulatory filing on Wednesday. As previously announced, Ford is accelerating its “Way Forward” plan, as part of its effort to reduce the number of plants and people in its organization, while pushing ahead with new product introductions.
Ford pointed out that most of the costs associated with the multi-billion expense are related to buyouts and other separation packages. Ford estimates that about $6 billion will be spent on a job bank benefit program, with pension curtailment charges running about $2.7 billion. Both of these items will be cash expenditures, said the company.
In September, Ford announced its intentions to cut the company’s North American salaried work force by about one third, and offer buyout packages to all Ford and Automotive Components Holdings (ACH) hourly employees in the U.S. According to the company’s most recent filing, the cuts will boost ongoing annual operating costs by about $5 billion. In addition, Ford says it will renew 70 percent (by volume) of its North American product lineup by the end of 2008.
The restructuring plan also calls for fixed asset impairment charges of $2.2 billion. In addition, plant closings in the U.S., which will primarily constitute fixed-asset write-offs, will likely cost $280 million, said Ford.
Of the estimated total costs, nearly $10 billion has been accrued in 2006 and the balance, which is primarily related to salaried personnel-reduction programs, is expected to be accrued during the first quarter of 2007. Ford explained in the filing that the company will likely post a curtailment gain for other postretirement employee benefit obligations linked to hourly employees that leave the company, and it plans to recorded that gain in 2007.