30,000 workers at Ford to get ax

Employees leave the Wixom Assembly Plant in Wixom, Mich., on Monday.

The Associated Press
Published: Tuesday, January 24, 2006 at 6:01 a.m.
Last Modified: Monday, January 23, 2006 at 11:32 p.m.
DEARBORN, Mich. - The Ford Motor Co. said Monday that it would close as many as 14 factories and cut up to 30,000 jobs over the next six years. It was the latest move in a fundamental restructuring of Detroit's traditional auto companies, hit hard by foreign competitors who have taken more than 40 percent of the American market.
The moves by Ford, the second-largest automaker in the United States, come two months after General Motors, the industry leader, said it would close all or part of a dozen factories and eliminate a similar number of jobs.
Including cuts that took place at the Chrysler Corp., the Big Three automakers have eliminated or announced plans to eliminate nearly 140,000 jobs since 2000, including salaried positions. That is about one-third of their North American payroll, a rollback to a workforce size not seen since the end of World War II. "This may not be the end, but it is certainly the beginning of the end of the automobile industry as we knew it," said Gary Chaison, a professor of industrial relations at Clark University in Worcester, Mass.
While the Big Three are visibly shrinking, their combined moves do not spell the end of automotive manufacturing in the United States. But the geographic footprint has largely shifted south, where a new auto industry is flourishing.
Japanese, German and South Korean companies now employ 60,000 people, or about the same number by which Ford and GM have said they will shrink. But foreign makers are creating a younger, cheaper work force, side-stepping Detroit's cast-offs and the higher pay and benefits packages that Detroit workers have been getting.
The United Automobile Workers union, which represents workers in the United States, said the announcement by Ford was "deeply disappointing and devastating" for its members.
Ford's share price closed up 42 cents, at $8.32, on the New York Stock Exchange. The cuts at Ford are taking place under a turnaround plan it is calling the Way Forward, marking its second attempt to restructure the company in the past four years.
Ford's goal is to become as nimble as Toyota and Honda, cutting through layers of bureaucracy that have stymied the development of innovative vehicles like hybrid electric cars. The plan also highlights Ford's American roots and aims to create clearer identities for its Ford, Lincoln and Mercury brands.
Rising gas and steel prices and strong competition from abroad have intensified the challenge to Ford and GM, already burdened by rising health care costs and a legacy of promising rich pension packages and other retirement benefits. More important, both companies have failed to find the right formulas to satisfy the American car buyer.
The result has been a swift slide in market share. Ford, which held about 25 percent of the car market in 2000, held only 17.4 percent in 2005. Much of the drop is due to the decline in popularity of big sport utility vehicles, which fueled profits and market share at Ford during the 1990s, when it had about 100,000 hourly workers.
Today's cuts at Ford affect about a third of its hourly payroll in North America, where it has 87,000 workers. The company also is cutting another 4,000 salaried employees, or about 10 percent of its white-collar force, and has pledged to reduce its executive ranks by 12 percent.
Foreign manufacturers, which now sell more than four of every 10 cars and trucks in the United States, have created tens of thousands of jobs at new factories from Ontario to Ohio, across the American South and in Mexico.
Because of their growth, there has been no net loss in American automotive jobs over the last 10 years, according to James P. Womack, an author and expert in manufacturing efficiency. Auto industry employment has held steady at about 1.1 million workers, including those at parts companies, he said.
In fact, those foreign companies, which collectively employed about 60,000 workers at the North American plants last year, are expanding their factories. Later this year, Toyota will open a new truck plant in San Antonio, and it is building another factory in Ontario.
Earlier this month, Nissan's chief executive, Carlos Ghosn, who became a management model for leading his company's successful turnaround during the last six years, said Nissan could expand its two-year-old factory in Canton, Miss.
While foreign automakers have hired some former Detroit workers, most of their workers have no automotive experience and were chosen through rigorous screening processes that stress physical endurance and a bent for working in teams.
With a smaller market share, Ford has its plants in North America operating at only three-quarters capacity, sparking the company's decision Monday to close assembly plants in Wixom, Mich., outside Detroit; Hapeville, Ga., outside Atlanta; and Hazelwood, Mo., a suburb of St. Louis.
Two more assembly plants will close, Ford said, although it did not name them. The auto company also is shutting a transmission plant in Batavia, Ohio, near Cincinnati, and analysts said they expected other Ford parts plants also would shut as the company decided which assembly plants would close.
Ford also is cutting one shift of workers at its plant in St. Thomas, Ontario, two hours west of Toronto. Ford's chief executive, William Clay Ford Jr., called the cuts "a painful last resort." But he said the company's plan contained "the vision and strategic focus to rebuild the business. With it," Ford said, "we will retake the American roadway."
Ford, who unveiled the earlier transformation program in 2002, shortly after he installed himself as chief executive, said that plan had achieved its goals but was not enough in the face of stiff foreign competition.
"We will not stand for business as usual," Ford said.
But the company held out hope for some workers, saying that it planned to create a new factory somewhere in North America to build small cars at a low cost. Ford executives declined to say when the plant would be built - or whether it planned to employ unionized workers in the United States or Canada.
The idea seemed an echo of GM's original intent with the Saturn Corp., whose plant in Spring Hill, Tenn., was meant to prove that American workers could build cars that could compete with Japanese autos.
In fact, Saturn's vehicles lured buyers away from Toyota and Honda in the early 1990s, when the cars were first on sale. But Saturn cars subsequently declined in popularity after GM decided to focus more attention on developing SUVs.
And although GM is trying to rejuvenate the Saturn lineup, it announced last year that it would close an assembly line at Spring Hill, placing the plant's long-term future in doubt.
Ford's announcement of the Way Forward plan on Monday ended weeks of speculation that it would eliminate some product lines. But on Monday, Ford declined to comment on specific vehicles. Shortly before it outlined the program on Monday, Ford said it lost $1 billion before taxes on its automotive operations in 2005, compared with a loss of $850 million in 2004. It posted a full-year profit of $2 billion, down from $3.5 billion in 2004, but its third consecutive annual profit. It has managed to keep making money because of good results overseas and the strength of its financial services division.
But in December, Standard & Poor's Ratings Services cut its rating on Ford's debt two notches deeper into junk, the same as S&P did at GM after it unveiled its restructuring plan.
S&P warned that Ford was particularly vulnerable to steps that GM might take to improve its market share, like the steep employee discounts it offered consumers last summer. But the ratings agency, which warned that GM could be forced to restructure under Chapter 11 protection, said it was not concerned that Ford would have to do so.
One reason, analysts said, is that the Ford family, which controls the company through a special class of stock, would do everything to prevent such a move.
On Monday, Ford's cousins Edsel B. Ford II and Elena Ford looked on as Ford invoked his great-grandfather, Henry Ford, in an effort to encourage Ford employees to be more innovative.
Ford recalled that Henry Ford built his first car in a shed behind his Detroit house, only to realize it was too big to get out the door. Instead, Ford said, his great-grandfather knocked down a wall to drive it out.
"We intend to remind people every day that if you want to build something that's never been built before, you may have to knock down a wall or two," Ford said.

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