The deep troubles of the Ford Motor Company were laid bare yesterday when it announced it was cutting an extra 10,000 white-collar jobs in addition to offering buyouts to all its 75,000 hourly workers. The company also put back its target date for profitability by a year and for the first time in two decades it has suspended its quarterly dividend.
Responding to a $1.44bn first-half loss, the company said it will complete the closure of 14 plants by 2008 instead of 2012 - part of the third restructuring in five years. The latest cuts will reduce Ford's North American workforce by 29 per cent, from the current level of about 130,000 to about 92,000. Ford's stock fell by almost 15 per cent on the announcement.
Ford's executive vice president, Mark Fields, said: "The simple fact is that the business model that served us in North America for decades no longer works. We must change to a new business model." Ford is not the only US car manufacturer facing troubles. All of the big three - GM and DaimlerChrysler are the other two - have been struck by the falling demand for large SUVs as a result of rising petrol prices and soaring labour costs, caused by pensions and health care benefits to older and retired workers.
Indeed, Daimler cut its full-year profit forecast yesterday to €5bn from an earlier forecast of more than €6bn, because of an anticipated loss at its US Chrysler unit in the third quarter.
Ford appears to be particularly struggling and other steps to restructure the company could be undertaken, though these are likely to be delayed until its new chief executive, Alan Mulally - who has succeeded William Clay Ford Jr - has had an opportunity to study various options for the corporation. Other measures could include selling brands or other assets.
Since 1995 Ford has been losing its share of the US market every year, and yesterday the company said it expected this to continue. Mr Fields said the company expected its share to be in the low 16 per cent range by the end of this year and would fall again in 2007 - possibly down to as little as 14 to 15 per cent. Its target for profitability has been put back to at least 2009.
Yesterday analysts said the company's moves were vital if it was to survive. John Casesa, the managing director of New York-based Casesa Strategic Advisors, told the Bloomberg News Service: "It's an absolutely necessary move. The market has changed so much and this company has lost so much market share that it needs radical surgery, and that's what this announcement is - radical surgery."
Yet Ford continued to say that its hoped-for turnaround would be based on new products. It will introduce a newly designed version of the Super Duty commercial pick-up in the first quarter of 2007 as well as an "all-new" F-150 pick-up. There will also be new smaller and sub-compact cars.
Ford has been working with the United Automobile Workers union (UAW) on the details of the buyout package to workers. As a result, workers will be offered one of a series of options, with workers aged more than 55 and with at least 10 years experience who agree to forgo health care benefits being offered $140,000. Another option offers $35,000 with the right to maintain health care benefits.
It was also announced that European car sales fell in August - the third straight monthly drop - as rising fuel prices discouraged consumers.
Carlos Ghosn's Renault SA and Nissan Motor led the losses, while Fiat SpA and Toyota Motor showed increases.
According to the European Automobile Manufacturers Association, sales decreased 1.4 per cent from a year earlier to 886,824 vehicles. Sales for the first eight months of the year gained 0.4 per cent to 10.44 million units.Reuse content