Ford Announces Huge Job Cuts

FORD logo, over workers on assembly line, on texture, 2006/9/15 AP / CBS

Ford Motor Co. said Friday that it plans to cut 10,000 more salaried jobs, offer buyouts to all hourly workers and shut down two more plants as part of a dramatic restructuring plan designed to rein in expenses and restore the struggling automaker to profitability.

The company said in a news release that it would shutter a stamping plant in Maumee, Ohio, in 2008 and an engine plant in Essex, Ontario, in 2007. In addition, an assembly plant in Norfolk, Va., will close in 2007, a year earlier than previously announced.

Ford said it would complete its cuts of 25,000 to 30,000 hourly jobs by the end of 2008, four years ahead of its previous target. Ford also said it already had cut 4,000 salaried positions in the first quarter of this year.

Ford lost $4 billion in the United States in the first half of the year as soaring gas prices sent sales of gas-guzzling trucks and SUVs into a nosedive. They account for a third of Ford's business — but are down 17 percent in 2006, reports CBS News correspondent Anthony Mason.

Ford's union contracts also are a big part of the problem. A Ford worker earns on average nearly $65 an hour. In contrast, Toyota pays its American workers just $45 an hour, Mason adds.

The bottom line is that nearly 45,000 salaried and manufacturing jobs will be gone, with two more plants added to Ford's closing list, reports . Most of the job cuts will be made through early retirements and buyouts, but Ford says there will need to be some "involuntary separations."

The company said the plan would cut about $5 billion in operating costs, mainly by offering early-retirement and buyout packages to all hourly workers and to white-collar employees. Ford plans to expand buyout and early-retirement offers to the company's U.S. hourly work force of more than 75,000 as part of the plan.

"This is an acknowledgement on the part of Ford they simply don't know what they are doing or what to do," Lou Dobbs, host of CNN's "Lou Dobbs Tonight," said on CBS News' The Early Show.

The plan was leaked Thursday when a Ford supervisor who was told of the plan by company officials gave details, and the greatly impacted United Auto Workers made an announcement.

Ford previously had announced plans to cut up to 30,000 hourly jobs by 2012. CBS News correspondent Anthony Mason reports that the 103-year-old automaker began the year with 82,000 employees, 6,500 of whom have already accepted buyouts.

When the dust settles, the change will be dramatic for the company that began as a daring adventure by Henry Ford and 11 business associates, with an investment of just $28,000.

By 2008, North American factory capacity will be reduced by 26 percent compared to 2005 levels, Ford said Friday.

"After this downsizing, Ford won't be the giant it once was," says auto industry analyst John Casesa. "It'll move from the second-largest manufacturer in North America to the third, fighting it out with the Hondas, Toyotas and Chryslers of this world instead of competing with General Motors."

It's also going to affect companies and communities far beyond the automaker.

"The state of Michigan is already hard-pressed. Workers there are simply reeling," Dobbs told Early Show co-anchor Hannah Storm. "The huge auto suppliers, Delphi and Visteon, which supply parts to Ford — we are talking about bankruptcy, rollbacks and the loss of jobs. No state in the union has been hit as hard as Michigan."

Under the buyout and early-retirement plan for hourly workers, detailed in a UAW statement, workers can choose among eight packages that offer from $35,000 to $140,000 depending on their years of service, age and how close they are to retirement age. Some packages require workers to give up health benefits.

Ford's board of directors, including new CEO Alan Mulally, on Thursday wrapped up a two-day meeting in which they considered and approved the latest phase of the company's effort to reduce its size and its costs.

Catherine Madden, an auto industry analyst at consulting firm Global Insight Inc., said although not all 75,000 workers will take the packages, the size of the offer illustrates the magnitude of Ford's troubles.

"No matter what, the number reflects the pressure the Ford Motor Co. is under right now," she said. "That's how significant the mounting pressures are on Ford."

The offers also show a realization of Ford's troubles by the UAW, which said in a statement that it agreed to the packages due to the "extraordinary circumstances in the domestic auto industry."

Ford had about 82,000 workers represented by the UAW at the end of last year, but about 6,500 have taken previous buyout and early retirement offers made mainly at plants already slated for closure, company spokeswoman Marcey Evans said Thursday.

UAW President Ron Gettelfinger said its members have made hard choices under difficult circumstances.

"Now, it's Ford Motor Co.'s responsibility to lead this company in a positive direction — which means using the skills, experience and dedication to quality that UAW members demonstrate every day in order to deliver quality vehicles to customers," Gettelfinger said in a statement.

Ford has been battered by the auto market's shift from trucks and sport utility vehicles to more fuel-efficient cars and crossovers. Its market share and sales have dropped while its Japanese competitors have gained.

The buyouts being offered are similar to those made earlier this year to hourly workers at the General Motors Corp., where 35,000 people have agreed to leave the company. Ford is the second-largest carmaker in the United States after GM.

The announcement also came as UAW local leaders at Ford plants gathered in Detroit to discuss Ford's financial situation and the buyouts.

"I think it's a good package," said Chris Kimmons, president of UAW Local 919 at the Norfolk, Va., assembly plant. "I think they worked real hard on it. They've got to do something to help Ford out of this crisis."

Separately, Ford said Thursday that Anne Stevens, an architect of the company's restructuring effort and one of the auto industry's highest ranking women, is retiring. Stevens, 57, had been at the center of Ford's turnaround efforts since October 2005, when she was named executive vice president.
  • James Klatell

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