Chief Executive Bill Ford outlined an ambitious plan Monday that includes cutting 25,000 to 30,000 jobs and shuttering 14 plants in an effort to restore the automaker's North American operations to profitability by 2008.
The CEO conceded that the company's product decisions in recent years have been driven by a desire to fill capacity rather than to please customers, and he said that has to change.
"We will not stand for business as usual," he said. "We cannot succeed in the long run if we're focused only on the short-term."
The call for change comes as the No. 2 automaker's market share dwindles in North America at the hands of foreign-based competitors, and its healthcare and legacy costs have soared. Shares of Ford dropped 45% last year, while its credit ratings were cut to junk status. For all of 2005, Ford recorded a loss of $1.6 billion from its North American operations.
The planned job cuts, scheduled to occur by 2012, are the deepest since Ford launched a restructuring program in 2002. The cuts represent 20% to 25% of Ford's North American work force of 122,000 employees. The company also plans to reduce its salary-related costs by 10%.
The move comes on the same day Ford reported a 19% increase in fourth-quarter earnings, aided in large part by the sale of its Hertz division. Ford earned $124 million, or 8 cents a share, in the quarter, compared with $104 million, or 6 cents a share, a year earlier.
The latest period includes a gain of 50 cents a share related to the sale of Hertz; a gain of 12 cents a share for tax adjustments; a charge of 39 cents a share to write down Jaguar and Land Rover; and a charge of 29 cents a share for personnel reductions.
Before the items, Ford earned 26 cents a share, beating the Thomson First Call estimate by 25 cents. Automotive sales rose 8% from a year ago to $41.8 billion, topping analysts' forecast of $37.3 billion.
Overall, Ford's automotive operations lost $12 million before taxes in the fourth quarter, compared with a pretax loss of $470 million a year ago. The improvement reflected "favorable volume and mix, net pricing, cost performance and exchange," with unit sales rising by 102,000 from a year ago to 1.85 million.
Ford's North America automotive operations had a pretax loss of $143 million in the quarter, compared to a pretax loss of $470 million in 2004. "The improvement primarily reflected cost reductions and favorable net pricing, partially offset by operating losses incurred by the former Visteon activities now controlled by Ford." Fourth-quarter sales in the division were $22.1 billion, compared with $21.1 billion in 2004.
All of Ford's profits came from its financial services unit, which includes Hertz through Dec. 21, the date on which it was sold. Overall, the financial unit earned $881 million before taxes in the fourth quarter, down from $1 billion a year ago. At Ford Motor Credit, pretax earnings were $465 million, down $78 million from a year ago.
The decrease reflected lower volumes and margins, partially offset by lower credit losses, Ford said.
Shares of Ford recently were up 63 cents, or 8%, to $8.53.