The plan, called The Way Forward and unveiled by the chief executive Bill Ford, involves the company trimming up to 30,000 from its workforce in the US and in Canada by 2012. Fourteen plants will be closed in the US and Canada, half of which are final-assembly factories.
With its debt rating recently reduced to "junk" status and no sign of an end to its woes, the company had been signalling for days that the restructuring effort would be far-reaching. But the cuts, put on the table yesterday, aim to make $6bn (£3.4bn) savings in four years and go further than most on Wall Street had expected.
Ford had earlier announced a surprising 19 per cent rise in revenue in its fourth quarter of last year, fuelled mostly by its financing arm and narrower losses in the North American car division.
The better-than-expected quarterly earnings also showed a move year-on-year from loss into profit for its Ford Europe and luxury divisions comprising Volvo, Land Rover and Jaguar. But they do nothing to hide the problems faced by Ford in its North American home markets.
In 10 years, Ford's market share in the US and Canada has slithered from 25 per cent to about 18 per cent, a level it has not seen since the 1920s. This has left the car giant, which is No 2 to General Motors in the US, with a grave overcapacity problem. Ford is able to build 4.5 million cars a year in North America and plans to shed about 1.2 million of that total.
Like the similarly troubled GM, Ford has been particularly hurt by the success of Japanese rivals, which are exporting models to the US and also making cars in North America with cheaper, mostly non-unionised workers. Toyota recently overtook Ford to become the world's No 2 car maker.
Ford was caught on the hop by rising fuel prices in the US, which significantly depressed sales of its large SUV (sport utility vehicle) models, previously its biggest generators of revenue. Promising a more innovative future for its models, the company also said yesterday it was working to introduce three petrol-electric hybrids. But it will be at least three years before they hit showrooms.
News of the restructuring boosted Ford shares in New York, closing up 5 per cent at $8.32. "This is absolutely what was needed to satisfy Wall Street," noted Csaba Csere, the editor-in-chief of Car and Driver magazine, who predicted most of the job cuts could be achieved by attrition and by workers entering retirement over the plan's six years. Ford is not alone in admitting itself for drastic surgery. In November, GM took similar steps to stem losses and capacity, pledging to cut eight of its plants and eliminate 30,000 jobs on a slightly faster schedule than Ford. GM's plan should be fully implemented by the end of 2008.
Among the cities to be hurt by Ford's down-gearing are St Louis, Atlanta and Windsor in Ontario, Canada. The company, which is based in Dearborn, Michigan, said it had not yet identified seven other plants to be closed down.
While fourth-quarter earnings rose to $124m for the company as a whole, factors reducing earnings included a one-time charge of $1.3bn for a previously announced restructuring at Ford and Jaguar. But the luxury divisions and Ford Europe recorded a combined operating profit of $36m for all of 2005, against a loss of $626m a year before.
"These cuts are a painful last resort and I'm deeply mindful of their impact," Bill Ford said. "They're going to affect many lives, families and communities, and we'll do everything we reasonably can to ease the burdens."
While Wall Street cheered Ford's move, not all industry-watchers were convinced it had found the way out of its troubles. Professor Peter Morici, at the University of Maryland's Robert H Smith School of Business, said the plan looked like preparation for a bankruptcy filing. "Ford will not be able to offer vehicles that are competitive in price, quality and content," he said.Reuse content