confirmed Friday a sweeping expansion to its restructuring as it looks to revitalize a North American business that has been slammed by competition, soaring costs and higher gas prices that crippled demand for its big trucks.
The Dearborn, Mich., automaker said it will cut its salaried workforce by a third, or 14,000 jobs. Ford will also offer buyouts to all of its unionized hourly workers, as reported Thursday, accelerate its job cuts for manufacturing employees by four years and close two additional plants. The company also will suspend its quarterly dividend.
However, Ford also backed away from its pledge to turn a profit on its core North American operations by 2008, instead predicting profitability in 2009. Shares of the company were trading down $1.24, or 14%, to $7.85.
Ford's new moves are aimed at helping it cut annual operating costs by a whopping $5 billion.
The new restructuring plan dramatically accelerates Ford's "Way Forward" strategy launched in January, which called for the elimination of 30,000 jobs and the closure of 14 plants by 2012. But Ford has seen its financials continue to deteriorate throughout the year as higher gas prices crippled demand for its big vehicles.
"A lot has changed since January," said Mark Fields, Ford's president of the Americas, in a conference call. "Now it is clear we were too optimistic." In particular, declining truck sales have hit the company hard, with demand for Ford's trademark full-size pickups being hurt by higher gas prices.
"The fundamentals of our Way Forward plan have not changed, but our timetable has changed dramatically," said Fields. "We've taken a sobering look at the industry and our own business, and the entire team in North America has a renewed sense of urgency and a clear view of what it will take to position this business for profitability.
The 14,000 salaried jobs to be cut include the equivalent of 4,000 positions eliminated in the first quarter of 2006. The additional reductions will be achieved through early retirements, voluntary separations and, if necessary, layoffs, Ford said, with most employees expected to depart by the end of the first quarter of 2007.
The remainder of the 25,000 to 30,000 manufacturing job cuts will be sped up until the end of 2008. Ford executives said on the call they expect most of the unionized workers who accept buyouts to leave by September 2007.
Ford, which has already set plans for a 26% drop in North American manufacturing capacity, said it will shutter nine plants rather than the earlier seven it planned and will accelerate the closing of another facility. The two additional plants are a Maumee, Ohio, stamping plant and an Essex, Ontario, engine plant.
Taken together, 16 plants will stop production by 2012.
Market Share Declines
Fields characterized the turnaround as both cost and product-driven. He said the company plans to focus in particular on expanding in growth segments, such as crossovers and small cars, which are expected to be in the highest demand over the next 10 years.
The company said 70% of Ford, Lincoln and Mercury products by volume will be new or significantly upgraded from today through the end of 2008.
Ford will introduce an all-new full-size crossover based on the Ford Fairlane concept in 2008. Ford also plans a new Super Duty pickup confirmed to go on sale in early 2007 and an all-new F-150 pickup that will hit the market in 2008. In addition, the company is introducing redesigned gas and hybrid versions of the Ford Escape and Mercury Mariner.
Despite the new product plans, the company said it expects its U.S. market share to continue to decline. Ford now sees its U.S. market share for Ford and Lincoln Mercury to be in the low 16% range this year, before dropping to 14% to 15% in 2007.
Such a decline would potentially eliminate Ford's status as one of the "Big Three" automakers, with
quickly gaining market share in the U.S. market.
"Our ranking doesn't matter," said Chairman Bill Ford on the call. "Companies chase market share with sometimes disappointing results."
Bill Ford last week relinquished his CEO title to
Alan Mulally to bring in a fresh perspective to aid with the turnaround.
Market rumors have been flying in recent weeks about Ford's restructuring plans, ranging from reports that the Ford family would take it private to a potential sale of its luxury brands.
Ford has already said that it is
looking to sell its Aston Martin brand, which is part of its stable of "premier" brands. The group also includes Jaguar, Land Rover and Volvo, and Jaguar, in particular, has been viewed as a sale candidate.
On the call, Mark Schultz, president of international operations, said Ford "continues to be encouraged by the progress at Jaguar" and believes the brand is on the right track.
The company also shot down the idea of selling its profitable credit operations, unlike
, which sold a majority stake of its financing unit GMAC. Ford concluded that its credit company is an integral part of its business, the company said on the call.
Profit Picture Darkens
Ford Chief Financial Officer Don Leclair said on the call that the company only recently pushed back its profit forecast.
"The issues of returning North America to profitability is a very serious commitment on our part," Leclair said. "Really it wasn't until we reviewed our plans with our board that we agreed it was the right thing to delay
the profitability forecast to 2009."
On Thursday, the
reported that the No. 2 U.S. automaker is on course to record a pretax operating loss of $5.6 billion to $5.9 billion at its automotive operations for 2006. Including all charges, that number could swell to $8 billion or $9 billion.
Ford officials declined on the call to comment on the report.
"Clearly, we could have cut product programs and maintained our goal of North American profitability in 2008," Fields said. "But, even as we further reduce our costs and capacity and make tough-but-necessary decisions throughout our business, we cannot and will not retreat from the critical investments to deliver the right products for our customers."