Ford Motor today announced details of a plan to restore profitability to its automotive business in North America no later than 2008. Ford’s North American auto operations suffered a $3-billion drop in revenue compared to 2004, posting a $1.6-billion loss for 2005. (Earlier post.)
The plan outlines sharp cuts in capacity and employment, as well as investments in new products for the Ford, Lincoln and Mercury brands. As part of the latter initiative, Ford announced today that hybrid versions of the Ford Five Hundred, Mercury Montego, Ford Edge and Lincoln MKX will debut in the 2008-2010 timeframe.
The new hybrids will join the Ford Escape and Mercury Mariner hybrids, which are on sale today, as well as the Ford Fusion and Mercury Milan hybrids, which will debut in 2008. Overall, Ford Motor Company plans to build 250,000 hybrids a year by 2010.
Among the points of the plan as outline today are a reduction in production capacity by 26% (1.2 million units) by 2008, plus the elimination of between 25,000 and 30,000 manufacturing jobs from 2006 to 2012. These job cuts are in addition to the previously announced elimination of 4,000 salaried positions and a 12% reduction in officer ranks by the end of the first quarter of 2006.
Ford’s North American auto business had been profitable in 2004. Ford attributed the rapid decline to more and stronger competition in all segments, a faster-than-expected customer shift from traditional SUVs into other segments, significantly higher material and energy costs and other factors that resulted in lower market share and higher costs for the company.
The ”Way Forward” plan includes the following actions:
Clarification and differentiation of the Ford, Lincoln and Mercury brands.
A renewed commitment to design, safety and technology innovation to differentiate Ford Motor Company and its products in the marketplace.
New product investments—utilizing Ford’s global vehicle architectures and scale—to deliver more new products faster, including more crossovers, hybrid vehicles, new small cars, increased spending on Ford’s truck leadership and new “white space” products.
Material cost reductions of at least $6 billion by 2010.
A lean and flexible manufacturing system combined with capacity matched to demand. Capacity will be reduced by 1.2 million units or 26 percent by 2008, representing the majority of actions within the plan’s 2006-2012 period.
Plant-related employment is reduced by 25,000-30,000 people in the 2006-2012 time period, in addition to salaried personnel reductions and a reduction in the company’s officer ranks.
Ford will cease production at 14 manufacturing facilities by 2012, including a total of seven vehicle assembly plants. Ford will idle the following facilities through 2008:
- St. Louis Assembly
- Atlanta Assembly
- Wixom Assembly
- Batavia Transmission
- Windsor Casting
- Two additional assembly plants, which will be determined later this year
Ford expects a pretax financial impact of $250 million for hourly personnel separations and $220 million for fixed asset write-offs in 2006.
For 2006 as a whole, Ford is expecting another year of profitability from automotive operations outside of North America.