Ford May Cut Salaried Costs 30% As Restructuring Push Accelerates
By JEFFREY MCCRACKEN
September 13, 2006
Ford Motor Co. will aim to cut white-collar staffing, benefits and other costs by 30% as part of a broader restructuring plan the company's board of directors is expected to begin reviewing today, according to people familiar with the matter.
Ford's board also is expected to hear details about a new vehicle-pricing strategy, which will focus on keeping prices closer to the suggested retail price amid a cut in production, said one of the people familiar with the matter. Details of its cost-cutting efforts could be disclosed as soon as Friday, said people familiar with the matter.
The 30% cut to salaried costs is on the high end of a 10% to 30% cut that had been studied by Ford, which has come under criticism that its first restructuring plan didn't go far enough. The auto maker will aim to cut back mostly on the number of managers and supervisors, with fewer cuts to lower-level, less-expensive salaried workers, said these people. The white-collar cuts will take place through the rest of this year and into 2007, said one Ford supervisor.
Under the plan, Ford managers will be told to look at their operating budgets and figure out how they can reach the 30% target. "It will be very difficult. A lot of people will lose their jobs and the people that stay will be asked to do a lot," said another person who had been briefed on Ford's plans.
Ford would look to make white-collar cuts through early retirement offers, buyouts and attrition before looking to layoffs, these people said. The cuts could include reductions in benefits such as pensions and health-care plans. The company has about 35,000 salaried workers in the U.S., including about 300 senior-officer positions and another 2,000 in director-level posts.
Marcey Evans, a Ford spokeswoman, declined to discuss the company's plans.
Ford is under pressure to speed up cost-cutting efforts after the auto maker -- No. 2 in the U.S. after General Motors Corp. in terms of production -- reported a $254 million loss in the second quarter and worse-than-expected July and August U.S. sales. The meeting is the first for new Ford Chief Executive Alan Mulally, who was hired away from aircraft maker Boeing Co. Mr. Mulally took over days ahead of Ford's deadline for announcing an accelerated restructuring plan to replace the "Way Forward" program announced early in the year. That plan called for cutting 30,000 jobs and closing 14 plants by 2012.
As speculation about restructuring actions intensified, Ford's stock rose 35 cents, or 4%, to $9.06 in 4 p.m. composite trading on the New York Stock Exchange yesterday, while GM shares rose to a new 52 week high of $33.24 before closing at $33.23. Optimism about lower oil and gasoline prices helped the Detroit auto makers, offsetting concerns that new vehicle demand could be slowing as the economy cools.
The auto maker hopes that by lowering production, either by closing plants or idling them for extended periods of time, it can avoid overbuilding vehicles and using big discounts to lure in consumers. Last month, Ford announced it was cutting production by 21%, a move that put it on pace to build fewer vehicles than in any year since 1991. GM has been following a recent strategy of lower production and less reliance on consumer incentives for most of 2006, and executives there credit the new strategy with lifting revenues per vehicle and improving projected resale values for new vehicles.
Separately, United Auto Workers leaders representing about 82,000 Ford workers yesterday were told that the company and union are still discussing a possible plan to expand early retirement and buyout offers. No details were announced, said union members attending the meeting. Ford is considering a move to expand its buyouts or early retirement offers to all of its hourly workers, according to Ford and UAW insiders. Ford has limited its offers to employees at certain stamping, engine and assembly plants.
By JEFFREY MCCRACKEN
September 13, 2006
Ford Motor Co. will aim to cut white-collar staffing, benefits and other costs by 30% as part of a broader restructuring plan the company's board of directors is expected to begin reviewing today, according to people familiar with the matter.
Ford's board also is expected to hear details about a new vehicle-pricing strategy, which will focus on keeping prices closer to the suggested retail price amid a cut in production, said one of the people familiar with the matter. Details of its cost-cutting efforts could be disclosed as soon as Friday, said people familiar with the matter.
The 30% cut to salaried costs is on the high end of a 10% to 30% cut that had been studied by Ford, which has come under criticism that its first restructuring plan didn't go far enough. The auto maker will aim to cut back mostly on the number of managers and supervisors, with fewer cuts to lower-level, less-expensive salaried workers, said these people. The white-collar cuts will take place through the rest of this year and into 2007, said one Ford supervisor.
Under the plan, Ford managers will be told to look at their operating budgets and figure out how they can reach the 30% target. "It will be very difficult. A lot of people will lose their jobs and the people that stay will be asked to do a lot," said another person who had been briefed on Ford's plans.
Ford would look to make white-collar cuts through early retirement offers, buyouts and attrition before looking to layoffs, these people said. The cuts could include reductions in benefits such as pensions and health-care plans. The company has about 35,000 salaried workers in the U.S., including about 300 senior-officer positions and another 2,000 in director-level posts.
Marcey Evans, a Ford spokeswoman, declined to discuss the company's plans.
Ford is under pressure to speed up cost-cutting efforts after the auto maker -- No. 2 in the U.S. after General Motors Corp. in terms of production -- reported a $254 million loss in the second quarter and worse-than-expected July and August U.S. sales. The meeting is the first for new Ford Chief Executive Alan Mulally, who was hired away from aircraft maker Boeing Co. Mr. Mulally took over days ahead of Ford's deadline for announcing an accelerated restructuring plan to replace the "Way Forward" program announced early in the year. That plan called for cutting 30,000 jobs and closing 14 plants by 2012.
As speculation about restructuring actions intensified, Ford's stock rose 35 cents, or 4%, to $9.06 in 4 p.m. composite trading on the New York Stock Exchange yesterday, while GM shares rose to a new 52 week high of $33.24 before closing at $33.23. Optimism about lower oil and gasoline prices helped the Detroit auto makers, offsetting concerns that new vehicle demand could be slowing as the economy cools.
The auto maker hopes that by lowering production, either by closing plants or idling them for extended periods of time, it can avoid overbuilding vehicles and using big discounts to lure in consumers. Last month, Ford announced it was cutting production by 21%, a move that put it on pace to build fewer vehicles than in any year since 1991. GM has been following a recent strategy of lower production and less reliance on consumer incentives for most of 2006, and executives there credit the new strategy with lifting revenues per vehicle and improving projected resale values for new vehicles.
Separately, United Auto Workers leaders representing about 82,000 Ford workers yesterday were told that the company and union are still discussing a possible plan to expand early retirement and buyout offers. No details were announced, said union members attending the meeting. Ford is considering a move to expand its buyouts or early retirement offers to all of its hourly workers, according to Ford and UAW insiders. Ford has limited its offers to employees at certain stamping, engine and assembly plants.
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