Many predicted this and now here it is as Mr. Ford says “We’re going to do what we have to do. It’s just very, very sad…” But on the other hand the economy is ‘great’ and unemployment as an all-time ‘low’ right? R-i-g-h-t….this closure–if you have paid any attention to the news–is just more in a long line of major American manufacturers leaving the country, closing locally, and entering bankruptcy.
Ford Workers Face ‘Black Monday’ with Huge Job and Plant Cuts
CHICAGO (AFP) – Ford Motor Co. workers face a “Black Monday” when the auto giant announces huge job cuts and plant closures in a new bid to counter the loss in market share to Asian rivals.
News reports said 29,000 job cuts and 10 plant closures could be announced by company chairman and chief executive Bill Ford on Monday.
“We’re going to do what we have to do. It’s just very, very sad,” Ford told Time magazine ahead of the announcement.
But he added: “My goal is to fight Toyota and everyone else and come out on top.”
Quoting people familiar to Ford’s “Way Forward” plan, the Detroit News said Sunday that 25,000 factory workers would lose their jobs over five years and 4,000 clerical and managerial jobs would be cut by April.
It said 10 plants could be closed under the plan, which follows a similar huge cost-cutting by General Motors, the world’s biggest carmaker.
Including hourly and salaried job cuts, Ford will commit Monday to reducing its 120,000-member North American work force by about a quarter, according to people familiar with the plan quoted by the Detroit News.
Media reports said unions and workers were already calling it “Black Monday”.
The company chairman told Time there would be greater emphasis on hybrid gasoline-electric engines and other environment innovations and bolder designs.
“The old way of doing things doesn’t work,” Ford was quoted as saying. “Is (this) risky? Of course it’s risky but I tell you what: Going the way we were going is the highest risk of all.”
Analysts said investors are more worried about whether Ford will get its auto operations back to profitability and many have doubts.
“The near-term savings are not going to be as much as it needs to be,” Brian Ropp, an auto analyst with T. Rowe Price brokerage told AFP in an interview.
“What it does is keep them from producing cars they don’t need and they won’t have to discount the cars as much.”
The savings from job cuts are limited by the automaker’s contract with its main union.
Hourly employees who do not take early retirement packages enter the jobs bank retraining program in which they collect full pay and benefits while waiting for a spot to open up on the assembly line.
Cutting production levels also will not help Ford’s declining market share. In the past 10 years, Ford has seen its share of the US market drop from 26.4 to 17.4 percent, the lowest level since the 1920s.
Ford boosted overall sales in the 1990s with sports utility vehicles but its market share in that profitable segment waned as Japanese rivals introduced smaller, car-based crossover sports utility vehicles.
The real trouble hit in 2005 when US gasoline prices topped three dollars a gallon and Ford’s light truck sales — which include the SUVs — fell 8.7 percent.
Ford’s North American unit posted a 1.4 billion dollar loss in the first nine months of 2005 and Standards and Poor’s has warned the unit’s pre-tax losses could reach two billion for the year.
While the company as a whole is expected to announce a 2005 profit on Monday, that is largely due to the money it earned from its loan operations at Ford Credit, said Burnham Securities analyst David Healey.
Healey forecast losses in the North American automotive unit would rise to 2.9 billion dollars in 2006.
The key to Ford’s turnaround will be to make vehicles that are attractive enough on the US market without resorting to costly incentive programs.
But the new products Ford introduced at this month’s Detroit auto show met with a lukewarm reception. Goldman Sachs recently forecast that Ford would see its market share continue to deteriorate with sales down 4.7 percent in 2006.
Even if the plant closures will not lead to immediate savings, they are a necessary step to reduce excess capacity, said Rebecca Lindland, an analyst with Global Insight in Lexington, Massachusetts.
“They’ve got the capacity to build about 4.4 million vehicles a year but they actually only produce 3.3 million,” she told AFP. “They are running at about 74 percent of their capacity utilization, we want to see them at 95 percent or in the nineties.”
The plants considered most vulnerable are in Atlanta, Minneapolis, St Louis and Wixom in the United States, St Thomas in Canada and Cuautitlan in Mexico.