Ford Slashes Jobs, Stock Rises
Now what?
This is the question facing thousands of Ford Motor autoworkers, in the wake of the company's announcement that it plans to close 14 plants over the next six years and eliminate as many as 30,000 jobs, half through attrition and half through layoffs.
Plants to be idled by 2008 include the St. Louis, Atlanta and Wixom assembly plants and Batavia Transmission in Ohio. Windsor Casting in Ontario also will be closed, as was previously announced following contract negotiations with the Canadian Auto Workers. Another two additional assembly plants to be idled will be determined later this year.
"These cuts are a painful last resort, and I'm deeply mindful of their impact," said Ford Chairman and Chief Executive Bill Ford, unveiling the "Way Forward" plan to boost profits. "In the long run we will create far more stable and secure jobs. We all have to change and we all have to sacrifice, but I believe this is the path to winning."
Shares of the nation's second-biggest auto maker rose on Monday's news, indicating some investors were pleased with the announcement, as well as with a larger-than-expected $124 million overall profit in the fourth quarter.
Ford shares rose 42 cents, or 5.3 percent, to close at $8.32 on the New York Stock Exchange. The quarter's profits came in large part because of the sale of its Hertz Corp. rental division.
"It's a step forward in the culture of Ford. Whether it translates into increased profits remains to be seen," said Brian Johnson, an auto analyst with Sanford Bernstein.
The restructuring is Ford's second in four years. Under the first plan, Ford closed five plants and cut 35,000 jobs, but its North American operations failed to turn around.
This time, CBS News correspondent Anthony Mason reports, the company plans to reemphasize design and innovation, and
In addition to the plant closings that have been announced, analysts also have predicted assembly plants in St. Paul, Minn., and Cuatitlan, Mexico, could be at risk for closure because of the products they make.
Some of the changes Ford plans to make are subject to union negotiations.
Under the company's existing contract with the United Auto Workers, workers at the idled plants will continue to get most of their pay and benefits until a new contract is negotiated next year.
Ford also plans to build one plant in North America, at a location yet to be announced, a plant that is being described as "a low-cost operation."
United Auto Workers President Ron Gettelfinger and Vice President Gerald Bantom say Ford's announcement is "extremely disappointing."
"The impacted hourly and salaried workers find themselves facing uncertain futures because of senior management's failure to halt Ford's sliding market share," they said in a statement. "The announcement has further left a cloud hanging over the entire work force because of pending future announcements of additional facilities to be closed at some point in the future."
The pair said Ford should be trying to gain market share, rather than aligning production capacity with shrinking demand for the company's vehicles.
Ford has seen its U.S. market share slide as a result of increasing competition from foreign rivals. The company suffered its 10th straight year of market share losses in the United States in 2005 and, for the first time in 19 years, Ford lost its crown as America's best-selling brand to General Motors Corp.'s Chevrolet. Ford sold around 2.9 million vehicles for a market share of 17.4 percent in 2005, down from 18.3 percent the year before and 24 percent in 1990.
Ford reported earnings of $2 billion in 2005, down 42 percent from last year's profit of $3.5 billion. It was the third straight year the automaker has reported a profit, but gains in Europe, Asia and elsewhere were offset by a loss of $1.6 billion in North American operations.
Ford has been hurt by falling sales of its profitable sport utility vehicles, growing health care and materials costs, and labor contracts that have limited its ability to close plants and cut jobs.
States had been scrambling to offer tax credits and other incentives to keep Ford from closing their facilities ever since the automaker said last fall that it was developing a restructuring plan.
Michigan Democratic Gov. Jennifer Granholm said she and other state officials tried everything they could to keep the Wixom plant open.
"The whole array of tools in our toolbox was brought out," the governor said. "Every kind of tax incentive was out on the table but they had overcapacity issues they had to deal with."
The impending layoffs, said Granholm, underscore "the importance of both diversifying Michigan's economy to make it less reliant on auto manufacturing alone and continuing to do everything we can to be a supportive partner to our state's largest employers."
Granholm at the same time called on the federal government to do more to keep jobs in the U.S.
"The time has long since past for the leaders in Washington to do their part for our American manufacturers. They have the power to enact fair trade policies and health care assistance that will help level the playing field with countries that are competing for our jobs and our business," says Granholm.
Michigan Democratic Sen. Carl Levin is also calling for more government action.
"We must be aggressive in leveling the playing field for domestic manufacturers in areas such as health care and trade," says Levin. "We need an Apollo-type federal program that includes federal R&D (research and development) and tax incentives to encourage manufacturers to continue doing business here and to expand and re-equip existing facilities."
Alan Hallman, mayor of Hapeville, Ga., where the Atlanta Assembly Plant is located, called the news "a setback for the state."
The plant, which makes the Taurus, has about 2,000 employees. Hallman said it accounts for 9 percent of the small city's budget.
"We've got hundreds of man hours and thousands of dollars invested on various plans to keep them here. The fact that they've elected to idle the plant is very disappointing," he said.
For many autoworkers, the uncertainty is just beginning. Those old enough to do so will retire, worried about the security of their pensions. Many younger workers hope to land jobs at other plants, but they're not optimistic.
Watching the layoffs announcement Monday on a big screen TV at the Wixom assembly plant in Michigan, some of the 1,500 workers were stunned and some weren't.
The plant, which makes the slow-selling Lincoln LS, the Lincoln Town Car and the niche-market Ford GT, will close by the second quarter of 2007.
"I thought I'd have some good news," said auto painter James Crawford, who has worked at the plant for 18 years. "It's really depressing."
Crawford, 39, of Wixom, is too young to retire and might not have enough seniority to get a job at another plant.
He just got married and said he's fortunate because he doesn't have a lot of obligations.
"It looks like I'm starting over," he said.
Mike Ryan, 34, of Wixom, has a 9-year-old son to support and isn't sure what he's going to do.
The plant, he said, has a motivated work force that builds high-quality cars. The problem, Ryan said, is Ford's boring designs and its inability to come out with new models quickly.
"Ford has the blah-est looking vehicles. They don't make anything anyone wants to buy. That's why we're hurting so bad," he said.
The Town Car, he said, has not been updated in ten years.
"The market's kind of moved in other directions," he said.
Worker Steve Singer worries about his colleagues, but the timing of the closure works out well for him. With 28 and a half years in, he'll have 30 years in and be able to retire by the time the plant is closed.
"I think I'll be all right in the deal," said Singer, 48, of Novi.
But he worries about the future of Ford and if it will survive to provide him a pension.
Ford's "Way Forward" plan to boost future profits, he said, sounds good and he's optimistic.
"I guess if there's no Ford Motor Company, there's no money coming in," he said. "Hopefully, the company is going to become profitable and life will go on."