Troubled automaker

Ford

(F) - Get Report

rolled out a restructuring program Friday that was more aggressive and comprehensive than many observers had anticipated.

The No. 2 automaker set plans to slash its worldwide workforce by 35,000 jobs, or about 10% of the total, and announced the closure of five plants and downsizing at 11 others, resulting in a 16% decline in annual capacity to 4.8 million vehicles. Ford also said it will take a $4.1 billion charge in the fourth quarter, and it plans to sell noncore assets for close to $1 billion.

In addition, Ford unexpectedly cut its dividend for the second time in a year, reducing its quarterly payout to 10 cents from 15 cents in the preceding quarter and 30 cents in the third quarter. The company also said it plans to raise additional funds with equity offerings. Last month, Ford filed a shelf registration with the

Securities and Exchange Commission

covering around $10 billion in debt and equity securities, including a $3 billion offering of trust-preferred convertible securities set to be completed in the first quarter.

"A lot of people were concerned that they would come in with a tepid plan, and that didn't happen," said Scott Hill, automotive analyst at Bernstein.

CEO Bill Ford, who took the helm when Jacques Nasser was ousted last fall, has promised to re-establish relationships with the company's employees, and some worried he would have trouble being both fair and tough. Speculation about the details of the restructuring plan had been building all week.

"The stock would have been crushed if they came out with an anemic plan," Hill said. "But it's very well-structured." After dropping in morning trading, Ford finished ahead by 21 cents to $15.50.

While the dividend reduction and the looming securities offering are short-term negatives for shareholders, the dramatic cuts to production combined with a focus on core businesses and product quality makes Ford's announcement a solid long-term plan, analysts said. "It's a very well-balanced with short-term and medium-term costs and longer-term product and quality objectives," Hill said.

Ford's current crunch stands in sharp contrast to the company's situation just a few years ago. Ford was then widely viewed as the best-managed of the Big Three, owing to the success of its wildly profitable sport utility vehicles. In June 2000, Ford was swimming in so much cash that it decided to give shareholders a $5.7 billion handout through a cash and stock dividend payout.

"They returned cash to shareholders, who have been able to employ that outside of Ford," said Hill, who, called the payout in 2000 an "inappropriate" use of cash. Nonetheless, he thinks overspending on some noncore brands and acquisitions, such as additional shares in Hertz, was probably worse.

In hindsight, Ford might wish shareholders would give back all that cash.

"Quite frankly, I, like very many people, can't really fathom how the prospects of Ford changed so dramatically," said Richard Henderson, an analyst at Pershing. "Unfortunately, the economy softened and the Japanese came on like gangbusters. The foreigners have done better than people expected, partly because of better products and partly because of a strong dollar."

Some analysts fear the job cuts may be difficult to achieve because of Ford's strong unions. In the last round of contract talks in 1999, U.S. and Canadian unions were able to prevent the company's outright closure of plants for the length of the contract.

The plants Ford is closing are located in Michigan, Missouri, New Jersey, Ohio and Canada, while the job cuts will cover about 22,000 workers in North America. Ford also plans to eliminate four "low-margin" vehicles in the next few years, including two from its

suffering Mercury brand.

If all goes as planned, Ford's restructuring program is designed to return the company to normal profitability levels by 2006, and CEO Ford said the automaker would generate a $9 billion profit improvement by the middle of the decade.

Money, Money, Money

The moves come as Ford scrambles to generate cash amid a recession and a price war with rivals

General Motors

(GM) - Get Report

and

DaimlerChrysler's

(DCX)

U.S. operation, Chrysler. The Big Three have been battling since mid-September, when GM launched its interest-free financing program, forcing Ford and Chrysler to follow suit.

The financing incentives are scheduled to end this month, but the price war clearly won't. On Jan. 1, GM said it would begin offering $2,002 cash rebates on most 2001 and 2002 models of cars and trucks. The company, which has been winning market share from its rivals, said Thursday that it intends to pick up additional share this year. Ford countered with its own rebates of up to $2,500 on some vehicles and a scaled-back version of interest-free financing.

GM is clearly reaping rewards from the price war. The company

raised its fourth-quarter and full-year 2002 earnings estimates. By comparison, Ford expects to post a loss for 2001 when it reports earnings next Thursday -- its first full-year loss since 1992 -- and Daimler Chrysler said that its Chrysler group might have trouble breaking even in 2002.

Partly because of the incentives programs, last year was the second best sales year for the automakers in U.S. history at 17.2 million vehicles. But while enticement programs moved cars off lots, they also caused marketing costs to soar. Meanwhile, analysts estimate some of last year's sales were taken from 2002, and the automakers are projecting that sales will drop by 10% or more this year.