Ford to Cut Operating Costs by $5 Billion, Salaried Work-Force by 1/3
15 September 2006
Ford Motor Company today announced plans to further reduce its North American capacity and work force, and to ramp up new product introductions as it accelerates its turnaround efforts.
Ford will cut its North American salaried work force by about a third and offer buyout packages to all Ford and Automotive Components Holdings (ACH) hourly employees in the U.S. The reductions will contribute significantly to reducing ongoing annual operating costs by about $5 billion. In addition, Ford will refresh 70% of its North American product lineup by volume by the end of 2008.
The steps we are announcing today are clearly needed to ensure the ultimate turnaround of the business in Ford’s biggest and most important market. Although the process has been under way for months, I have had a chance to review these actions and am convinced that they provide the sound, product-led underpinnings and cost reductions we will need to achieve our goals.
Turnarounds of this magnitude succeed when capacity and costs are aligned with a realistic expectation of demand.
—Alan Mulally, Ford CEO
We recognize that the competitive landscape and cost pressures have significantly challenged our traditional business model, and that recognition is driving more investment in small cars and crossovers, even as we continue to position ourselves to remain the truck leader.
—Mark Fields, Ford President of the Americas
The product steps outlined during the announcement are as follows:
70% of Ford, Lincoln and Mercury products by volume will be new or significantly upgraded from today through the end of 2008.
Ford is intensifying product development work through 2008 on creating new small cars and even more crossovers that will go on sale in the future. These vehicles will be based on the company’s global vehicle architectures, including B and C platforms not presently used in North America.
Ford will continue to invest in new gasoline, flexible-fuel, diesel, hydrogen and hybrid powertrains, including additional E-85 ethanol-powered and hybrid vehicles on the road by the end of 2008. Two out of every three Ford, Lincoln and Mercury vehicles will be offered with 6-speed transmission technology by the end of 2008.
Ford will introduce an all-new full-size crossover based on the Ford Fairlane concept. The seven-passenger vehicle for modern families goes on sale in 2008.
Ford will strive to maintain its leadership in the truck market with a new Super Duty pickup confirmed to go on sale in early 2007 and an all-new F-150 pickup confirmed to go on sale in 2008.
Ford will produce new Mustang derivatives each year to maintain its hold on the sports car market.
A new Lincoln MKS flagship sedan will go on sale in 2008.
Lincoln will continue offering the Lincoln Town Car.
Ford is cutting its manufacturing capacity to 3.6 million units by the end of 2008, down 26% versus 2005. Two more plants in addition to seven already announced will be idled and case production through 2008, for a total of nine.
Ford does not anticipate returning to full-year profitability in North American automotive operations before 2009.
The company expects the Ford and Lincoln Mercury US market share to be in the low 16% range at the end of this year. The company expects a further share decline as production of the Ford Taurus sedan and Mercury Monterey minivan ends in 2006 and production of the Ford Freestar minivan ends in 2007. The end of these vehicles will reduce the company’s sales to daily rental fleets.
Ford had held a 19.2% North American market share in 2003. The company is now targeting a 14% to 15% market share range going forward, with a focus on retail share.
Better hurry up with the more efficient B and C platforms launch in US.
Posted by: fyi CO2 | 15 September 2006 at 07:41 AM
Does this mean a future reduction of gas guzzlers on the roads and city streets.
Posted by: Harvey D. | 15 September 2006 at 08:27 AM
Harvey: It probably means fewer of them with the little blue oval.
Ford is quickly reaching the "stink of death" stage, where their problems have received so much mainstream media attention that they'll start impacting sales. Customers won't want to buy something as expensive as a car or truck from a company that they perceive "might not be around" (even if that perception is greatly overblown).
I really want to see Ford survive this mess and give Toyota, Honda, et al. all they can handle in terms of competition, but I'm growing less optimistic by the day that it will happen.
Posted by: Lou Grinzo | 15 September 2006 at 08:42 AM
n What it means is what I said before. When smaller cars come back into force the uaw is hosed. Ford cant make a profit on small cars MADE in america thas why they are expanding in mexico rapidly.
In the end when ford comes back to the us it will be fully automated factories with skeleton crews mostly around to maintain the bots.
Posted by: wintermane | 15 September 2006 at 08:43 AM
I agree with Lou.
Too much bad news is going to impact sales. Customers won't worry about Ford but they will worry about Ford dealers being close (and healthy) for those new five year warranties.
The new guy from Boeing is certainly in the loop on a decision this big. And I think it had to be done, Ford is past adjusting their lifestyle, they need surgery now.
Posted by: K | 15 September 2006 at 12:02 PM
The US economy is really gonna feel that 5 billion ripped out of circulation, the snowball effect will cause other corporations to do similar cutbacks.
Posted by: Erick | 15 September 2006 at 12:21 PM
1/3 of all salaried positions? Wow, I'm glad I didn't bother doing an internship and getting a job with Ford when they came by my school for an info-session several years ago.
Posted by: Patrick | 15 September 2006 at 12:39 PM
Well now, this should slightly reduce the number of illegal immigrants coming from Mexico! They should have plenty of new Ford jobs soon. [sarcasm]
Posted by: Patrick | 15 September 2006 at 01:11 PM
No mention was made of updating/replacing the Ford Ranger. For some reason this truck seems to keep getting overlooked for an update. I would have guessed that rising fuel prices would drive at least some interest into smaller trucks.
Posted by: Jeremy | 15 September 2006 at 04:26 PM
America looses when companies like Ford give up entire markets and say they cannot make a profit on a small car.
If it is labor cost preventing Ford from making a profit or even breaking even on small cars they have three choices... send the jobs overseas, loose the market or renegotiate with their unions something fairer.
Executive pay at Ford is crazy for a company loosing so much money and the concept of 'job banks' isn't helping. People need to be paid for a good job well done but the time has come and gone where we can GUARANTEE a job and pay for it even if its not needed.
Now we would not have this problem if Ford made better CARS. Where is the Ford Fusion hybrid we were promised? That could sell quite well if they made them in volume.
Posted by: hampden wireless | 15 September 2006 at 05:07 PM
hampden hit part of it. Watch the SEC filings for Ford over the next few years, especially executive pay, bonuses and benefits. The major cuts will mainly serve the rich executives' club continuing to become richer while cost reductions do nothing to improve the well being of the company. NAFTA continues to export American jobs and continues to reduce the quality of life for poor and middle income people in Mexico. All of the cost savings resulting from cheap labor are going to corporate executives or the elite that control the poor countries. Bottom line..this is rich mf-er's cashing in and selling out dedicated long term employees and loyal customers. It has nothing to do with improving the long term viability of Ford.
Posted by: john galt | 15 September 2006 at 06:32 PM
Thank God they will keep building the Lincoln Town Car! I can rest easier now.
Posted by: George | 15 September 2006 at 08:34 PM
The Lincoln Town Car is gonna get trounced by new offerings from GM and Chrysler. GM is way ahead on the move back to rear wheel drive and has better platforms for doing so. The LTC is based on a very old platform and its not going to be updated in the next few years.
Posted by: hampden wireless | 15 September 2006 at 09:09 PM
I think Ford should offer CNG as an option on all their V8's. They do it on the police spec CV so it's possible.
Oh, and work on cylinder deactivation on the 8's and 10's in their larger vehicles too, that would save a lot of fuel.
Hampden - it's lose with one 'o'.
Posted by: James | 16 September 2006 at 02:16 AM
If these guys can't figure out that they need to cut F150, Excursion and Expedition production and get a hybrid Fusion..there is no hope.
Posted by: SJC | 16 September 2006 at 06:37 AM
"Ford to Cut Operating Costs by $5 Billion, Salaried Work-Force by 1/3"
They could save $15 Billion by just going out of business.
Posted by: Dursun | 16 September 2006 at 08:46 AM
Dursun. You are probably the wittiest, most intelligent person ever to post on the internet.
Ever.
Posted by: James | 17 September 2006 at 07:58 AM
Dursun is the man!
Posted by: Mark | 21 September 2006 at 07:18 AM